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Boeing 767 Removed From Life Support

Stocks in this article: BA FDX UPS

The recent FedEx order reflects new thinking on fleet allocation by the shipper, which decided to slow deliveries of 777s to devote its capital resources to more rapid 767 deliveries. As a result, MD-11s that had been slated for domestic service will stay longer on international routes, while the new 767s fly domestic routes.

"The original plan was to bring in 777s and push the MD-11s in the domestic fleet and retire the MD-10s, and that had a very good return," FedEx CEO Fred Smith said in the company's Dec. 15 earnings call. "When the 767 was selected for the U.S. tanker mission and Boeing decided to keep the airplane in production, we looked at that and bringing it in to the middle" between narrow bodies and larger wide-bodies.

"Replacing the MD-10s was a higher return than the 777s and it pushed the MD-11s, if you will, back into the International system," Smith said.

"767s have stayed in service a lot longer than many people thought they would because of delays in the 787," he added.

>>FedEx Forecast Backs Up Fed's Outlook

Boeing worked with FedEx "for months" on the schedule adjustment, says Boeing Commercial Airplanes CEO Jim Albaugh in an interview with Bloomberg. He said the order enables Boeing to keep its 787 production line operating "in the out years."

For FedEx, delivery of the 27 new 767-300F will begin with three planes in fiscal 2014, followed by six per year in 2015 through 2018. They replace aging MD10s that have 30% less fuel efficiency.

Delivery of the 777s will be delayed slightly. Instead of adding six aircraft in fiscal 2013, FedEx will add four. Instead of seven in 2014, FedEx will add two. Additional delays are projected for 2015 through 2018.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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