Boeing Lands $6.6 Billion FedEx Deal as Freight Demand Grows

(Bloomberg) -- Boeing Co. landed a deal for 24 cargo aircraft from FedEx Corp. worth $6.6 billion as the revival in the air freight market continues to grow.

The package-hauler plans to add 12 of Boeing’s medium-size 767 freighters and 12 of the larger 777 cargo aircraft to its order book, the Chicago-based planemaker said in a statement Tuesday. FedEx is already the largest customer for both aircraft models.

Memphis, Tennessee-based FedEx has been using new aircraft orders to replace aging freighters, such as its three-engine McDonnell Douglas MD-11s, to improve fuel efficiency and reliability without adding much capacity to its air cargo fleet, said Chief Operating Officer David Bronczek on a conference call with analysts. That may change as demand for air freight begins to grow, he said.

“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.’’

After languishing for much of the decade, global air shipments rebounded strongly last year, spurred by online shoppers and strong trade. The trend has provided new lift to Boeing’s wide-body jet line-up, where freighter models include the 767 and jumbo 747 jetliner.

New Popularity

Boeing last month announced plans to bump up annual output of the 767 by 20 percent to 36 planes by 2020. The aging jetliner is gaining new popularity as a midsize freighter favored by the likes of Amazon.com Inc. and FedEx. That would be the third increase in the monthly production rate since early 2016 for a jetliner best known for opening transcontinental travel to twin-engine jets in the 1980s.

The freighter variant is the oldest model in Boeing’s current product lineup, dating to a 1993 order by United Parcel Service Inc. for 60 of the cargo jets. The first 767 freighter was delivered in October 1995.

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.

The 777 freighter has a list price of $339.2 million, while its 767 counterpart sells for $212.2 million. Boeing had already netted 28 orders this year for its factory-made freighters, worth $9.49 billion at list prices before the customary discounts.

To contact the reporters on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net;Thomas Black in Dallas at tblack@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren, Tony Robinson

©2018 Bloomberg L.P.