The express carrier said it would take a $276 million charge to retire some airplanes. Cowen’s Helane Becker and team consider the impact:

FedEx announced they will permanently retire 15 aircraft and 21 related engines. The retired aircraft are part of their fleet modernization and capacity management program.

FedEx will remove 7 MD11s (12 engines), 3 A300s (3 engines), 4 A310s (3 engines) and 1 MD10 (3 engines).

The company will recognize a $246MM charge as a result of the retirements. FedEx also announced they adjusted the retirement schedule of 23 additional airframes and 57 engines and will recognize a $30MM cash charge as a result of the adjustment. This announcement helps to bring the discussion back to the company’s $1.7 Bn Express profit improvement plan, which has fallen out of focus since announcing the acquisition of TNT. Management continues to remain on track to return Express to a 10% margin by the end of 2017. One of the major components of their profit improvement plan is fleet modernization. The company has stated in the past every MD10 replaced by a B767 adds ~$10MM to the bottom line (maybe a little less than that now with lower jet fuel prices).