FedEx satisfied with 777F despite deferrals

Washington DC
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FedEx Express president and chief executive David Bronczek says the carrier is satisfied with its newly-acquired 777 Freighter, despite the carrier's decision to defer and convert several orders for the aircraft type.

"It's the best introduction of any plane that we've ever had, bar none," says Bronczek, speaking late on 10 October from FedEx's investor meeting in Memphis.

FedEx is seeing reliability of between 99.2 and 99.3% on the aircraft, he adds. The carrier received its first 777F three years ago.

FedEx now operates 21 Boeing 777Fs, and added nine to its network in its shipping network in the last 15 months, says Michael Ducker, executive vice president and chief operating officer for FedEx Express.

The carrier is largely using the 777F to replace the aging McDonnell Douglas MD-11. Among its benefits are improved fuel burn, payloads and range, as well as allowing customers to see later pick up times for cargo. However, the carrier is positioning it to service priority shipments, which are slowing.

"Customers in key markets have been shipping less with lower demand for priority services," said Bronczek to investors earlier that day, adding that it could be some time before cargo carriers see a recovery.

The carrier plans to operate 43 777Fs when deliveries are finished. In June, it converted four for delivery in FY2016 and 2017 to 767-equivalent purchase value. It made the decision due to capacity requirements in a global economy that has failed to rebound. Before this, FedEx delayed of a number of the aircraft type in December 2011.

Despite this, FedEx says the move to modernise its fleet with the Boeing 767 freighter in addition to the 777 has allowed it to be flexible with capacity in a volatile financial environment.

"We were able to push off some of the 777s, because we really didn't need to add capacity given the different market circumstances that we've described to you in the intercontinental business," said FedEx chief executive Frederick Smith, addressing the audience late Wednesday from the investor meeting. "We think that's probably going to remain the case for the next several years given the difficulties in Europe, and China, and the slow growth we've described."

The carrier is continuing to add 777 routes to its network, says Ducker. Next month FedEx will be launching a direct route from Taipei to Memphis, he says.

Last week a new 777F replaced an MD-11 flying from London Stansted to Newark with one that flies directly from Milan to Memphis after originating in Munich. That flight has an 80% load factor, says Ducker.

FedEx unveiled a plan this week in Memphis to achieve $1.7 billion in annual cost improvements by FY2016. It says that $300 million will come from modernizing its aircraft fleet.