FedEx plans to retire 24 aircraft and shortened the depreciable life of 54 older aircraft, as the parcel giant works to align its U.S. domestic air cargo capacity with slowing demand.
The retirement of 18 Airbus A310-200s and six Boeing MD10-10 aircraft will reduce the Memphis, Tenn.-based company’s fleet by roughly 3 percent, according to Stifel Nicolaus, a financial services firm. The permanent grounding of the aircraft is in addition to the retirement of five Boeing 727-200 aircraft in the fourth quarter of fiscal 2012 and the planned retirement of 21 B727 aircraft in fiscal 2013.
FedEx said the majority of the 24 aircraft are already parked. The actions will result in an after-tax impairment charge of $84 million in the fourth quarter.
“Along with the decisions to retire these 50 aircraft, we are also developing detailed operating and cost structure plans to further improve our efficiency," said David Bronczek, FedEx Express president and CEO. "We expect to provide additional information on these plans in the fall."
The plan to retire aircraft suggests demand has declined significantly since the fiscal third quarter when FedEx doubled profit to $521 million on record holiday package shipping. North American airlines in April cut cargo capacity by 2.9 percent and carried 6.4 percent less freight than a year ago, according to the International Air Transport Association.