FedEx to face $175 million peak season hit following MD-11 groundings
The MD-11 fleet was grounded in late 2025 after an emergency FAA Airworthiness Directive mandated inspections for fatigue cracking in the left engine's pylon, which caused a recent crash.
FedEx warned investors that the emergency grounding of its MD-11 cargo fleet is expected to cost the company $175 million during the critical peak holiday shipping season.
The grounding of the MD-11 fleet, a measure taken in late 2025 after a fatal UPS crash in Louisville, Kentucky, is creating significant logistical strain for major cargo carriers, including FedEx and UPS. This grounding followed the November 4 crash, which claimed 14 lives and was attributed to fatigue cracking in the left engine's pylon.
Consequently, the FAA issued an emergency Airworthiness Directive. This directive mandates the inspection of all MD-11s and similar DC-10s for the same structural weakness before they are cleared to fly, directly impacting the operations of these key logistics providers.
“It’s very difficult to predict when the turn would come, but however, we are beginning to see some level of industry consolidation, especially in the truckload business, and while it takes a while to translate in the less than truckload, that process seems to have begun,” said Fedex.
FedEx Chief Financial Officer John Dietrich informed analysts that the company is incurring expenses to find replacement capacity. These costs, combined with the logistical hurdles of the grounding, are expected to weigh heavily on earnings for the current quarter ending in February.
"We expect meaningful headwinds in the second half from our MD-11 groundings, primarily in Q3," Dietrich said.
The MD-11 crisis is just one of several factors impacting FedEx's bottom line. The company is also navigating costs associated with the planned spin-off of its FedEx Freight trucking business, scheduled for next summer.
The company's revised outlook highlights financial headwinds, totaling $900 million in adjusted operating income year-over-year for the full fiscal year.
The anticipated impact is particularly sharp in the second half, with total headwinds projected at $600 million.
Furthermore, the revised outlook for the Freight division is considerably worse than previously expected. FedEx now forecasts a $300 million decline in adjusted operating income for Freight, which is triple the $100 million drop projected in September.
Despite the grounding, FedEx raised its full-year adjusted operating income midpoint scenario to $6.2 billion, a $200 million increase over its previous outlook.
