FedEx to ground more planes as profits come under pressure
21 / 06 / 2023
Express giant FedEx will ground more aircraft after both revenues and operating income declined during its fiscal fourth quarter of the year due to “demand weakness and cost inflation”.
In a results call, FedEx Corporation president and chief executive Raj Subramaniam said that the company had retired 18 aircraft, including 12 MD-11Fs, during the quarter ended May 29 and there were plans to “take out” another 29 aircraft from scheduled flying during the coming fiscal year.
Flight hours during the fiscal fourth quarter were down 12% compared with last year, he said.
The move comes as FedEx Express saw its fourth-quarter revenues decline 13% year on year due to demand dynamics and yield pressure.
FedEx chief financial officer Mike Lenz said that the plan had been to reduce its fleet when the supply-demand constraints experienced in recent years eased.
“We continue to reduce the transpacific and transatlantic flying to match demand, and we’ll continue to lean into that as well as utilising the flexibility of capacity in the market,” he said.
The company is in the midst of a cost-saving initiative that it hopes will reduce annual costs by $4bn by June 2024.
As well as reducing its aircraft numbers, the company has also reduced its headcount by 29,000 and closed facilities.
In the fourth quarter, revenues at the express division were down 12.8% year on year to $10.4bn while operating income was down 51.5% against a year earlier to $430m.
Overall FedEx revenues for the quarter – including its ground and freight segments – were down 10.1% to $21.9bn and operating income fell 21.8% to $1.5bn.