FedEx restructures air network for gains

FedEx, the global delivery giant, has announced a series of changes to its air network that will aim to improve its efficiency, reliability and profitability.

The company said it will save about $700 million annually by 2024 through the following measures:

– Retiring 81 older and less efficient aircraft engines from its fleet, including 47 MD-10s, 13 MD-11s, 14 Boeing 757s and seven Airbus A300s.

– Accelerating the delivery of 30 new Boeing 767 freighters and six new Boeing 777 freighters, which will replace the retired aircraft and provide more capacity and lower operating costs.

– Reducing its domestic flight hours by about 8% by optimizing its flight schedules and routes, using more direct flights and reducing feeder flights.

– Expanding its use of belly capacity on its passenger airline partners, such as Delta Air Lines and United Airlines, to carry more cargo on domestic and international routes.

– Enhancing its hub operations by investing in automation, technology and infrastructure upgrades, such as adding more sortation systems, conveyors and scanners.

FedEx said these changes will help it meet the growing demand for e-commerce and express delivery services, as well as reduce its fuel consumption, emissions and maintenance costs.

“These strategic actions will enable us to operate a more efficient air network that is aligned with our customers’ needs and our long-term financial goals,” said Raj Subramaniam, president and chief operating officer of FedEx Corp., in a statement.

The company said it expects to incur about $450 million in noncash asset impairment charges and about $150 million in cash charges related to employee severance and contract terminations as a result of the restructuring.

The restructuring is part of a broader initiative by FedEx to improve its profitability and competitiveness, which also includes increasing its prices, expanding its services and offerings, and streamlining its organizational structure.

FedEx reported a net income of $892 million for the quarter ended Nov. 30, 2021, up from $560 million a year ago. However, it also lowered its earnings outlook for fiscal 2022 due to higher costs and labor shortages.

FedEx operates the world’s largest cargo airline, with more than 650 aircraft serving more than 375 airports in over 220 countries and territories. It also has a fleet of more than 180,000 vehicles and employs more than 600,000 people worldwide.

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