MD-10's Going Away Sooner
12-18-2019, 01:30 PM
#51
Gets Weekends Off
Joined APC: Feb 2007
Position: FO
Posts: 3,032
Originally Posted by PW305
Thank you. Seems to be a rather ‘fantastical’ way to describe the ongoing fleet replacement cycle.
Like this guys question from the earnings call transcript.
Operator
Our next question today will come from Scott Group with Wolfe Research.
Scott Group -- Wolfe Research -- Analyst
Hey, thanks. Afternoon, guys. So, Fred, I want to ask, we've got record low margins, I think, here and I heard you talk about restricting hiring but why are we talking about more drastic cost and headcount reductions. I know it's may be different, but it strikes me that some of the rails are cutting headcount 10%, 15% without severance costs. Do we have any opportunity to do anything like that. And then, just separately, I know you talked about Express profits improving next year. Do you have any visibility on Ground profits for next year?
Frederick W. Smith -- Chairman and Chief Executive Officer
Well, I'll have to ask Alan if he is prepared to make a forecast for FY '21, but -- which I doubt because he hadn't forecasted to me if he had, but the reality is, to your first question, the rails are not even a remotely comparable business to FedEx. It's essentially a business of maintaining tracks and automating to the extent possible, you have an OR of 60%. It's not labor-intensive. It's getting less labor-intensive than when you follow the precepts of Hunter Harrison and smart railroading or whatever [Indecipherable] calling, that's what's allowing the precision railroading. That's what's allowing the rails to lower their cost. They are quasi-monopolies, certainly in the geographic areas and certainly to particular customers. So, I don't know that rail is significant.
The second part about this business is, we are, in many ways, spoke to our customers for long-term relationships and if you walk away from customers and disadvantage them and if you break the morale of your troops by not investing in service quality that has long-term deleterious effects. That certainly has been a consideration in Europe for mentioning in TNT.
So, of course, we could have done some more drastic things, but I think at the end of the day, the focus on the short-term financial results are only based on what we see for the fourth quarter into '21 and the strategies we're exercising. We have not decided to go down that road. Now, maybe, somebody else feels differently about that, but I don't think you can keep the purple promise laying all thousands of people and I think that's one of the considerations again we've had in Europe is to make sure that people over there we acquired with TNT were fairly treated. We're invested in delivering that kind of FedEx service.
Our next question today will come from Scott Group with Wolfe Research.
Scott Group -- Wolfe Research -- Analyst
Hey, thanks. Afternoon, guys. So, Fred, I want to ask, we've got record low margins, I think, here and I heard you talk about restricting hiring but why are we talking about more drastic cost and headcount reductions. I know it's may be different, but it strikes me that some of the rails are cutting headcount 10%, 15% without severance costs. Do we have any opportunity to do anything like that. And then, just separately, I know you talked about Express profits improving next year. Do you have any visibility on Ground profits for next year?
Frederick W. Smith -- Chairman and Chief Executive Officer
Well, I'll have to ask Alan if he is prepared to make a forecast for FY '21, but -- which I doubt because he hadn't forecasted to me if he had, but the reality is, to your first question, the rails are not even a remotely comparable business to FedEx. It's essentially a business of maintaining tracks and automating to the extent possible, you have an OR of 60%. It's not labor-intensive. It's getting less labor-intensive than when you follow the precepts of Hunter Harrison and smart railroading or whatever [Indecipherable] calling, that's what's allowing the precision railroading. That's what's allowing the rails to lower their cost. They are quasi-monopolies, certainly in the geographic areas and certainly to particular customers. So, I don't know that rail is significant.
The second part about this business is, we are, in many ways, spoke to our customers for long-term relationships and if you walk away from customers and disadvantage them and if you break the morale of your troops by not investing in service quality that has long-term deleterious effects. That certainly has been a consideration in Europe for mentioning in TNT.
So, of course, we could have done some more drastic things, but I think at the end of the day, the focus on the short-term financial results are only based on what we see for the fourth quarter into '21 and the strategies we're exercising. We have not decided to go down that road. Now, maybe, somebody else feels differently about that, but I don't think you can keep the purple promise laying all thousands of people and I think that's one of the considerations again we've had in Europe is to make sure that people over there we acquired with TNT were fairly treated. We're invested in delivering that kind of FedEx service.
12-18-2019, 05:50 PM
#52
Banned
Joined APC: Jun 2018
Posts: 1,838
Originally Posted by magic rat
Right from the earnings call:
Longer term by fiscal '22 year end, the replacement of 159 A310 and MD-10 aircraft will be complete. This will lead to a significant reduction in the corporation's ongoing capital expenditures on both an absolute basis and percent of revenues from FY '23 forward.
And....
Additionally, we're permanently retiring our fleet of 10 A-310s. The reduction in flight hours would allow us to temporarily park 14 aircraft by the end of fiscal year '20. We will also permanently retire another 29 aircraft over the next 30 months
And...
I think you have any idea how big 8% reduction of flight hours is, but it's tremendously large. We're not going to grow our fleet. We're just replacing it. We're tightening it up and reducing flight hours.
Longer term by fiscal '22 year end, the replacement of 159 A310 and MD-10 aircraft will be complete. This will lead to a significant reduction in the corporation's ongoing capital expenditures on both an absolute basis and percent of revenues from FY '23 forward.
And....
Additionally, we're permanently retiring our fleet of 10 A-310s. The reduction in flight hours would allow us to temporarily park 14 aircraft by the end of fiscal year '20. We will also permanently retire another 29 aircraft over the next 30 months
And...
I think you have any idea how big 8% reduction of flight hours is, but it's tremendously large. We're not going to grow our fleet. We're just replacing it. We're tightening it up and reducing flight hours.
12-18-2019, 07:17 PM
#53
Gets Weekends Off
Joined APC: Apr 2007
Posts: 909
Originally Posted by Noworkallplay
Are you sure you are reading the transcript correctly or maybe the article you are reading is mis quoted because we don't have 159 A310 and MD-10 aircraft. Not even close. We have 10 A310 aircraft and all but 3 have been temporarily parked on and off for the past 4 years.
12-18-2019, 07:24 PM
#54
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Joined APC: Feb 2007
Position: FO
Posts: 3,032
Originally Posted by Noworkallplay
Are you sure you are reading the transcript correctly or maybe the article you are reading is mis quoted because we don't have 159 A310 and MD-10 aircraft. Not even close. We have 10 A310 aircraft and all but 3 have been temporarily parked on and off for the past 4 years.
The one quote above talks about “completing” the replacement and not starting it.
12-18-2019, 10:17 PM
#55
Gets Weekends Off
Joined APC: Apr 2013
Posts: 1,622
Originally Posted by Noworkallplay
Are you sure you are reading the transcript correctly or maybe the article you are reading is mis quoted because we don't have 159 A310 and MD-10 aircraft. Not even close. We have 10 A310 aircraft and all but 3 have been temporarily parked on and off for the past 4 years.
Originally Posted by magic rat
Yup. Downloaded transcript and copy/paste.
12-19-2019, 09:23 AM
#56
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Joined APC: Nov 2017
Posts: 2,099
MD-10's Going Away Sooner
Originally Posted by PurpleToolBox
Not only that, I went back and listened to Fred’s comment and he explicitly said one hundred and fifty nine aircraft. I thought perhaps the transcript was wrong. But it isn’t.
Maybe he misspoke and meant 39 were going to be parked by fiscal year end ‘22. Thirty nine is the exact number when you add the A310s and MD10s together. And if you look at the published fleet plan, that’s exactly what’s happening, parking of all A310s (already done) and the rest of the MD-10s by the end of ‘22. It also corresponds to other executives comments on the parking of the 10 A310s and the future parking of the 29 MD10s.
“Additionally, we are permanently retiring our fleet of 10 A310s. The reduction in flight hours would allow us to temporarily park 14 aircrafts by the end of fiscal year '20. We will also permanently retire another 29 aircraft over the next 30 months.“ Raj Subramaniam
“FedEx Express recorded asset impairment charges of $66 million related to the permanent retirement of 10 Airbus A310-300 aircraft and 12 related engines. The company is continuing to evaluate if additional aircraft retirements are warranted.” Alan Graff
I would bet money he misspoke. He misspoke on the last call as well when it came to fleet numbers. He is getting up in age.
Last edited by FXLAX; 12-19-2019 at 10:06 AM.
12-19-2019, 11:01 AM
#59
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Joined APC: May 2006
Position: Excessed WB Capt.
Posts: 1,063
Originally Posted by DirtyPurple
Where are the 2x 747s mentioned on that slide?
https://www.airplaneboneyards.com/southern-california-logistics-airport-victorville-boneyard.htm
12-19-2019, 11:28 AM
#60
Gets Weekends Off
Joined APC: Apr 2013
Posts: 1,622
Originally Posted by MEMA300
Both are parked in Luxembourg.
https://flightaware.com/live/flight/OOTHB
Last edited by PurpleToolBox; 12-19-2019 at 11:45 AM.
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