FedEx will reduce flight hours by more than 10% and park more aircraft this quarter because of continued low demand for parcel and freight shipping, executives said Thursday.
An 8% cut in aircraft utilization, sidelining nine cargo jets and downsizing to smaller aircraft on certain routes helped the integrated express logistics provider generate $1.2 billion in year-over-year savings during the 2023 fiscal third quarter. The cost reductions, along with mass layoffs, offset 45% of total revenue declines, said CEO Raj Subramaniam during an earnings briefing.
The air and international unit was the major contributor behind lower revenue and income at FedEx Corp. (NYSE: FDX). FedEx Express generated 8% less revenue and adjusted operating income plunged 81% year over year.
“We are highly focused on taking permanent costs out of the system and remain on track to generate permanent savings of $1 billion this fiscal year,” Subramaniam said. A more aggressive readjustment of the air network is a key part of the effort, he added.
Additional steps to remove fixed expenses this quarter include the phase out of the MD-11 fleet, which has served as flex capacity, and leaning more on the FedEx Ground network for domestic parcel shipments. Nine MD-11s exited the fleet during the third quarter and six more are slated for retirement in the current quarter.
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Bob
They are going to try to move freight today Ground. But they know they are walking on tin ice because Ground are contractors and they can’t touch a pakg that is coming in a Fedex Express plane because of the Railroad act that because Grounds are not employees they are contractors. That’s why the threat to outsource flown in pakgs. It’d note going to work