FedEx Scales Down Operations: Retires One-Fifth of Boeing 757 Freighters

As part of a downsizing effort to better align the air fleet with slowing package demand, FedEx Corp. has permanently retired 22 Boeing 757-200 cargo aircraft. The company also reported fourth-quarter earnings that beat analysts' estimates on Tuesday. The integrated logistics company reported that the permanent deactivation of the 757 cargo planes and their seven engines resulted in an impairment charge of $157 million. A $70 million write-off for the retirement of 18 old MD-11 freighters and 34 related engines was included in the fourth-quarter results of the previous year. In the fourth quarter, FedEx permanently deactivated nine MD-11s, bringing the total number of aircraft removed from the fleet to 31. Since the older 757s use more fuel than other aircraft that FedEx operates—92 of which are still narrowbody freighters—they were deemed disposable. FedEx will no longer be the principal air cargo provider for the United States Postal Service by the end of September, following UPS's recent five-year contract win. Management expects volumes to remain near the contract minimum until then as the business transfers to UPS, but will subsequently reap considerable cost savings in the U.S. domestic network as it modifies operations to meet decreased aircraft requirements. The closure of the Postal Service division will also reduce operating income by $500 million in the current fiscal year. The airline's mainline fleet has fallen from 417 aircraft in fiscal year 2022 to 389, as more aircraft are retired than added. According to the company's most recent statistics, it expects to get two factory-built 777 freighters from Boeing in the next 12 months and 14 B767-300s over the next two years. For the quarter ended May 31, FedEx (NYSE: FDX) reported adjusted operating income up 5.6% to $1.9 billion, with a 1% increase in sales to $22.1 billion. This highlights the company's effectiveness in controlling costs despite soft market circumstances. FedEx had year-over-year revenue growth for the first time after six consecutive quarters of decline. The adjusted diluted earnings per share were $5.41. Adjusted operating profit for the year grew by 16%. Last year, the firm realized $1.8 billion in structural savings and expects to save another $2.2 billion through its transformation initiative in fiscal year 2025. FedEx revealed plans earlier this month to reduce the size of its European back-office and commercial workforce by 1,700 to 2,000 people, resulting in annual savings of $125 million to $175 million by fiscal year 2027. Management is also considering the role of FedEx Freight in the company's portfolio structure and ways to increase shareholder value. According to the statement, the corporation may consider spinning off its less-than-truckload division, among other options. FedEx Express' adjusted operating income fell $92 million, with