By Scott Hamilton
Sept. 20, 2022, © Leeham News: FedEx last week withdrew its previous financial guidance for the year on a revised analysis. Now, the company says, revenues will be about $500m less for air operations and about $300m less for ground operations.
The flagging global economy and higher costs are blamed. As a result, FedEx will be parking an unspecified number of airplanes and implementing cost savings initiatives.
But at the same time, the company is evaluating new aircraft freighters and potentially acquiring and converting used Boeing 777-300ERs to freighters.
In an interview on Sept. 15, the same day the financial forecasts were revised, Fred Smith told LNA that the airline is evaluating the 777-300ER aftermarket conversions and new airplanes offered by Airbus and Boeing.
The Boeing concepts include the proposed 787F and a freighter version of the New Midmarket Airplane (NMA). LNA revealed months ago that Boeing was studying both of these aircraft. Boeing already launched the 777-8F, another option for FedEx. Airbus has offered the A350F to FedEx. Smith said he’d like to see Airbus launch a new-build freighter version of the A321neo.
FedEx currently has five aircraft types in its fleet (the MD-10 was already scheduled to leave the fleet next year):
The 757, MDs, and A300 are approaching retirement ages in the not-too-distant future. The 767F and 777F are young aircraft. But ICAO emissions standards adopted by the international organization in 2017 mean the 777F and 767F won’t be able to be produced from 2028. The Federal Aviation Administration served notice this year it will adopt the ICAO standards.
Boeing already has a solution to replace the 777F. It launched the 777-8F program earlier this year. But the 777-8F is physically considerably larger than the 777F and smaller than the MD-11F.
FedEx, like UPS—another large operator of the 767F—eventually needs airplanes that fit within the ramp space footprint of the 767. This is problematic for the 787 and A350, which are dimensionally closer to the MD-11F.
Boeing has shown Smith concepts of the 787F and NMA-F. Neither program has been launched and internal studies at Boeing are competing the two ideas in a bake-off. Boeing CEO David Calhoun last week told Freight Waves the 787F is the leading candidate to replace the 767F. Calhoun also told Freight Waves “there is no NMA.”
Yet Smith has been shown the concept of an NMA freighter. LNA’s own market intelligence is solid. Finally, at the Boeing pre-Farnborough Air Show media briefings, Brian Hermesmeyer, the Senior Director, Freighter Customer Leader, acknowledged one is under study.
“We look at a lot of different things in development and how to make sure we have a good medium widebody solution. Are we looking at different freighter platforms in that space? Absolutely. Is the 787 one of them? That’s a natural place for us to look,” he said in an interview with LNA.
“We look at a lot of things. That’s about all I can say,” he said. Pressed specifically about the prospect of an NMA-F, Hermesmeyer said, “One of the things we always do is consider cargo in studying a new airplane family. You can be assured there are studies on any and all platforms when it comes to cargo. Whether or not it comes to fruition has everything to do with market dynamics.
Hermesmeyer said it was a “natural conclusion” to draw that the 787F and an NMA-F are the best new options to succeed the 767F.
Taking Calhoun’s words literally, there is no NMA today. And it’s always possible Boeing’s nomenclature has changed. The NMA was the last in a long line of alphabet names for various concepts. The airplane under study has significant differences from the NMA.
FedEx may, as an alternative, acquire converted 777-300ERs to replace its older freighters.
Smith told LNA there is hope the US government will grant an exemption for the continued production of the 767F since there is no replacement at this time. But he brought up a point that nobody else has talked about.
“If the US Air Force makes a second buy of the KC-46A [the tanker is based on the 767 platform], it’s very much in the national interest to have the fixed production costs spread over both the 767 freighter and the tanker,” he said. “That’s yet to be decided, of course.”
Given the lack of alternatives for the 767F, Smith said converting any more—of which there is little feedstock remaining—creates more emissions rather than less. Boeing, Smith said, has discussed with the FAA exempting the 767 “at least for domestic production.”
Smith said FedEx has seen concepts from Boeing for the 787F and the NMA-F. He labeled the concepts as “cartoons—that’s all they are at this time. I think both of them would be terrific freighters. The question is how much non-recurring expenses you have to put on the airplane to make the numbers work.”
Smith said the NMA-F would make sense. Its dual aisle design would take the same container as the 767.
The A350 is “a hell of a plane,” Smith said. Airbus “has briefed us on it over and over. It’s definitely a wonderful plane, it’s definitely something FedEx would consider in the future.”
The 777-8F is about the same size as the 777-300ER. Smith said FedEx will have a “significant interest” in all the planes. “As to which one we’ll end up getting…. The A350 is extremely efficient because it has a composite fuselage. The Boeing airplane has a great benefit because there is a lot of stuff that’s common to the 777F. The big issue with that airplane is that it is mainly a 787 cockpit. Could you get mixed fleet flying?”
The 777-300ER conversions may be a candidate for addition to the fleet. The -300ERs have an identical cockpit to the 777Fs in FedEx’s fleet.
Two -300ER P2F programs have an aft cargo door: IAI and Mammoth. The third program, from Kansas Modification Center, has a forward cargo door. Smith all but ruled out the forward door option as incompatible with FedEx’s ground handling system.
Smith said FedEx will decide in the next year or two what it will do about acquiring airplanes.