Freight Courier FedEx Increases Cargo Aircraft Order by $6.6 Billion

Boeing Co is securing a new order from the express freight courier giant, FedEx. The package-hauler is waiting on an existing order of 59 aircraft, but is now locking in a deal for a further 24 as a result of increased air freight demand in 2017.

The purchase, which will cost the multinational shipping company $6.6 billion, will see Boeing deliver 12 medium-size 767 freighters and 12 of the larger 777 cargo aircraft. Up until now, FedEx has been purchasing newer more fuel-efficient aircraft to replace older freighters. As such it has not been adding much capacity to its fleet.

Replacing Old with New Won’t Increase Capacity

Replacing its three-engine McDonnell Douglas MD-11s with Boeing freighters may improve reliability and fuel efficiency, but it won’t increase the current transportation capacity. FedEx Chief Operating Officer David Bronczek, however, doesn’t rule out a change in strategy in response to a renewed demand for air freight.

“We’ve added very few incremental planes along the years here,” he said. “On the other hand, if we continue to see strong growth like we’re seeing now we could use them to add capacity.” FedEx is already the largest customer for Boeing’s 767 and 777.

Rising Online Shopping Trends and Courier Quote Demands

International air freight saw a significant boost last year, which was good news for the industry following years of flagging performance. The increase in air shipments can largely be attributed to a rising online freight and shopping trend as well as strong global trade.

Boeing Responding by Increasing Aircraft Output

Boeing plans to boost monthly production of the 767 for the third time since early 2016. Currently 30 of these planes are being produced per month and now the plan is to increase this figure to 36 planes per month by 2020, according to an announcement by Boeing last month.

In the 1980s the jetliner showed the world that transcontinental travel for twin-engine jets was possible and nearly 30 years later is still going strong as a medium sized freighter. Favoured by Amazon.com Inc and FedEx it seems that the ageing model is only increasing in popularity. The first 767 freighter was delivered in 1995.

Business is Booming for Boeing Co

The larger Boeing 777 freighter costs $339.2 million and the middle of the range 767 has a list price of $212.2 million. So far this year, Boeing has already received 28 orders for these two models, a total of $9.49 billion before the usual discounts. This doesn’t include the latest FedEx deal which is still in the final stages of negotiations, pending “certain contingencies”.

The deal for the new aircraft will be added to Boeing’s orders and deliveries website once “certain contingencies” have been met, Boeing said. FedEx already is awaiting deliveries of 53 of the 767 freighters and 6 of Boeing’s 777 cargo planes. The planes are headed to FedEx Express, the company’s main package delivery business, which flies freight planes all over the world.