FedEx Profit From Air Cargo Threatened By Delayed Jets - Bloomberg
FedEx Corp.’s (FDX) plan to boost air cargo profit margins to 10 percent or more, partly by replacing junkyard-ready jets with more efficient models, will be challenged by a yearlong wait for the first of the new planes.
While the company can begin to revise routes and improve its network now, “many of the moves that will result in major cost savings will be dependent on the arrival of the 767s,” said David Vernon, a New York-based analyst with Sanford C. Bernstein & Co. “They are going to be a little bit hamstrung by the delivery of those aircraft.”
“The biggest risk is not to drop the ball and lose any customer efficiency,” Kevin Sterling, an analyst at BB&T Capital Markets in Richmond, Virginia, said in a telephone interview. “If they are doing this restructuring and take out too many planes too fast and cut back service levels, customers will be upset and go to” rivals such as Atlanta-based UPS and Deutsche Post AG (DPW)’s DHL express and freight business.