Earlier this week, FedEx exercised options on an 15 additional 777 freighters just three weeks after a regulatory filing stated that the cargo company was deferring delivery of its first 777F until FY2010. Though this simultaneous deferral and expansion of the order provides an illuminating glimpse into the thinking of the cargo giant. International air cargo traffic fell 13.5% in the month of November last year. Giovanni Bisignani, IATA's general director called the drop, "Shocking."
Air cargo, it appears, is a canary in a coal mine, setting off alarm bells for the rest of the global economy. Put simply, if people aren't buying, good aren't moving. This, of course, prompts a larger discussion as to whether or not air cargo traffic is a leading or trailing indicator of global economic health. Either way, it's dropping...fast.
Though if we assume that air cargo is an indicator of the health of the global economy, then the FedEx order might just shed some light on where the world's economic future lies. The initial deferral of FedEx's first four 777Fs in FY2009 is an unsurprising move, but adding 15 more for delivery between FY2011 and FY2019 is a clue to what the company sees as a decade of robust global air cargo growth. Whether this happens or not is just reading tea leaves, but FedEx has put its money where its mouth is. Maybe we should listen.
FedEx 777F Delivery Calendar FY2009-FY2019
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | Total | |
| Original 15 | 4 | 10 | 1 | 15 | ||||||||
| Deferred | 4 | 10 | 1 | 15 | ||||||||
| Deferred+15 | 4 | 4 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 1 | 30 |
on January 14, 2009 5:28 PM | Reply
I am pretty sure the dates you give are based on fiscal years. The first 777F for Fedex is due September 2009 post strike
on January 14, 2009 5:38 PM | Reply
You are correct, sir. That's fiscal year not calendar year. My point still stands though. :-)
Thanks for the correction.
Best,
Jon
on January 14, 2009 5:53 PM | Reply
From your 'Deferred +15" line of the chart, it looks to me like FedEx changed from an expansion of capacity model (10 deliveries in 2011) to a multiyear retirement of older inefficient DC-10-10s (4 deliveries in 2011, 3 per year until 2018.)
My canary says "cut operating costs shrink capacity for the forseeable future."
on January 15, 2009 4:46 AM | Reply
It could be a combination: reitirement of DC-10s if there is no growth, keep them flying, if there is.
However, payload, range and numbers don't match for the DC10-10s to be replaced on a one by one basis.