FedEx orders 8 new B777Fs on positive outlook

FedEx recently reached agreements to purchase eight new Boeing 777 freighter aircraft and two used 777 freighters, which will be phased in during calendar years 2026 and 2027.

“These modern and fuel-efficient aircraft were purchased at attractive prices and will help us manage our fleet for the long term while still upholding our FY26 commitment to approximately $1 billion of aircraft capex,” John Dietrich, Executive Vice President and Chief Financial Officer, FedEx said in the analysts call after announcing Q3 results.

“Given that these new planes are highly efficient and will retire our older, more maintenance-intensive fleet over time, I’m confident that aircraft capex in the immediate years beyond FY26 will remain in the area of $1 billion. We’ve continued to manage and rationalize the size of our jet fleet, including retiring some of our older aircraft over the last several years.

“This is consistent with our go-forward strategy to prioritise revenue quality and grow in the premium segments of the market. We’ve retired 20 MD-11s over the past three years and now expect to retire the remainder of the MD-11 fleet by the end of FY32 versus our prior FY28 target. This extension of some of these aircraft will help us ensure network flexibility while minimizing aircraft capex.”

FedEx now operates 471 aircraft including 37 parked aircraft, according to data from planespotters.net.

Dietrich reiterated that all investments are focused on return on invested capital, “which is now also included in our executives long-term incentive compensation…I haven’t been here all that long but I did some homework on the last 777 orders and they were all the way back in 2018.

“So, it’s been a while since we ordered new airplanes. And these airplanes are particularly attractive. In fact, I’d say they’re coveted assets because they’re the last — the eight new ones, I’m not talking about the two used ones with the eight new ones. They’re the last of the current model of the 777 freighter to be produced by Boeing, and we acquired them at very attractive prices.”

Dietrich, who was the President and Chief Executive Officer, Atlas Air before joining FedEx in 2023, had acquired the last four 747s produced that turned out to be one of the best financial acquisitions for Atlas Air.

“Our decision was really informed by both our MD-11 retirement plans as well as our growth projections for the international freight market. I think it’s important to remember that not only has it been a while since we ordered 777s but we permanently removed 31 aircraft at the end of FY24, which were nine MD-11s and 22 757s. So, it’s a combination of incremental versus replacement capacity.

“With regard to the MD-11s and the kind of push to the right of those retirements, that was done for business reasons. Due to our international economy growth, we’ve made the decision to extend those to FY32. Those assets are mostly depreciated but have some useful life left in them and can support our profitable growth strategy. So if the demand environment doesn’t pan out, we also have the ability to accelerate any retirements on MD-11s.

“Right now, given the demand that we’re seeing out there and particularly in the international economy growth, we elected to extend the life of those aircraft.”

Q3FY2025 results
FedEx reported a two percent increase in revenue at $22.2 billion for the third quarter ended February 28, 2025 while net income declined to $0.91 billion from $1.09 billion in the same period last fiscal.

Federal Express segment operating results improved during the quarter, driven by cost reduction benefits from DRIVE, higher base yield, and increased U.S. and international export volume, says an official release.

"These factors were partially offset by higher wage and purchased transportation rates as well as the expiration of the U.S. Postal Service contract. "FedEx Freight segment operating results decreased during the quarter due to lower fuel surcharges, reduced weight per shipment and fewer shipments, partially offset by higher base yield."

2025 and beyond
Raj Subramaniam, President and Chief Executive Officer, FedEx said the company is on target to reduce more than $4 billion in structural costs by end of FY25 versus FY23.

“With Network 2.0, Tricolor, and other initiatives, we are transforming our networks and making them more efficient and differentiated aided — enabled by the latest technology. So, as I look ahead, we have a better, more flexible cost structure that can create significant value as you probably profitably expand the markets where we compete, and benefit from significant leverage with the industrial economy returns to growth. And these are some of the very powerful reasons that I feel very confident in the future of FedEx.”