Dive Brief:
- FedEx Express permanently retired 18 aircraft last quarter, part of cost cutting measures the company is taking as revenue for the unit dropped 13% last quarter, according to a June 20 earnings call.
- The company plans to take another 29 aircraft out of scheduled flying in FY2024, nine of which will also be permanently retired, President and CEO Raj Subramaniam said.
- With flight hours down 12% in Q4, “we continue to reduce the Trans-Pacific and Trans-Atlantic flying to match demand, and we'll continue to lean into that as well as utilizing the flexibility of capacity in the market,” EVP and CFO Mike Lenz told analysts.
Dive Insight:
FedEx has been making progress toward rightsizing its air network to better match its operating costs to lower demand. Last quarter, FedEx delivered a $2 billion YoY reduction in operating costs, in part due to “more effectively matching flying with demand,” the CEO said on the call.
The fourth quarter also marked the first period of the fiscal year in which “flight hours declined more than the underlying volumes,” Subramaniam told analysts, as it gets more aggressive about aligning costs with volume.
FedEx has been pushing operations cuts for months, slimming operations in its Express unit in Q3 to accommodate for declining demand, including reducing flight hours by 8%, grounding nine aircraft and downgauging on certain routes.
Although the company continues to ground aircraft, FedEx is still proceeding with its modernization strategy as it adjusts to a shifting air cargo landscape. For instance, FedEx is currently phasing out its MD-11F aircraft and retired 12 MD-11 freighters last quarter.
Instead, FedEx is opting for a more modern, agile and flexible freighter fleet. The carrier introduced use of the Cessna 408 SkyCourier in January, which can transport containerized cargo and features a large cargo door for easy loading and unloading.
