I don’t want to come too much out of left field, but I don’t think Airbus would start a whole new production line for something that wouldn’t sell. The timing is just too good and it’s the perfect replacement aircraft for the MD. Airbus SE needs the world’s two major cargo outfits to buy in. So for those reasons, I think there will be orders for the 350 even though the rumors of the all Boeing fleet. But that order would need to be placed soon (2024?) to get enough aircraft at one time to be beneficial. I don’t think it will be one-for-one with the MD, but definitely 20+.

First A350F off the production line

My 🔮 is cracked, but if I had to hazard a guess, it’d be MD-11 is 5-7 years, Airbus is 8-10, 757 is 10+. Proper, efficient modern replacement aircraft availability is the real story. There’s a lot of gaps with just a fleet of 777 and 767.

 

Richard Smith quoted today that the MD11 will be gone at the end of FY28. So May 2027. 4 years.

 

They didn’t reveal anything in regard to fleet plans other than retiring the md11. Raj completely dodged the question about it in the Q&A along with others.

 

Just to add, fleet plan is irrelevant when it comes to contract negotiations.

 

Analyst: "How do you explain this estimate of a 40% reduction in fuel cost as a part of DRIVE, especially with current global turmoil around oil prices" (paraphrasing)


Raj: "By flying less"


Richard Smith had hit some fuel savings talking points in his part of the event. Mentioned increasing the use of single-engine taxi and managing vertical flight path to save fuel. Other things that are obvious are a switch to our more fuel-efficient fleet and the retirement of the MD-11. Even with those factors, 40% was an alarming number in my opinion. I wonder how much further they think this block-hour reduction can go with the network integration. I guess we'll get an idea when they release the realignment bid...crew costs were estimated to be reduced by 140 million from DRIVE as well.


My guess is we will be in 4a2b or flirting with it for the next year or two, but I would think with age 65 retirements it won't be cost-effective to furlough and generate all the training. Stagnation for a year or probably two and then things work themselves out and we start hiring again as the seniority list dwindles too low. Gotta stay staffed for peak and the air freight industry in general is expecting volumes to increase back half of 2023.


Good turn out for the picket but since no strike vote has taken place looks like none of analysts or media cared from what I can tell. Not a single question about the pilot contract in the Q&A. They don't feel like we are a credible threat and I feel today could have been much more impactful with a pending strike vote by the crew force.


I don't know why I typed all this up but I watched the webinar today and this was my take on it.

 

*Senator Lindsey Graham has entered the chat*

 

I was able to watch 5Apr DRIVE update yesterday. Overall, the scripted coronation of Team Raj's realignment brilliance fell flat for me. When pressed for specific details on the 3Q earnings call, all questions were deferred to 5Apr. When specific questions where asked in Q&A on 5Apr, presenters bristled and deferred to a series of meaningless bumper sticker phrases - drive, streamline, efficiency, consolidate, etc. Only a few nuggets stood out:

- Opening slide with standard legal statement hugely deflates any data that follows: "We can say anything we want, but we won't be held legally accountable if things change". Got it, so we're about to wade through some BS.

- Intro video (and all other videos) do not line up with the wounded bird act at NMB negotiating table. It's fun to watch the dichotomy of Raj - he must tapdance to show efficiency/positive trends for shareholders, and must simultaneously show an empty wallet for the NMB. Realistically, both cannot be true. So which will it be? My bet is he wants to be the prolific CEO who re-imagined FedEx after 50 years. Might be better to close out that pesky pilot contract soon, it's just a distraction.

- John Smith, Ground Czar - spoke a bit on moving freight on trains v trucks. I guess I never considered us moving FedEx freight on trains, as FedEx doesn't own any trains to my knowledge. John also repeats the mantra "one van for one neighborhood" several times. During the Q&A, one brave reporter brings up "the elephant in the room" in a question directed at Raj - How will you consolidate your trucks and still work outside the RLA? Raj bristled hard at this, mumbled an unintelligible sentence, and the rest of the team on stage did not take the bait. Awkward silence until next question. Which is a shame, because it's a really good question. In the name of keeping Ground contractors separated and bargaining separately, Corp has accepted decades of inefficiencies with multiple trucks stopping at the same address. So the question still remains - can Corp bring trucks under one umbrella while staving off another union on property? Mechanically, how would that even work? Sure looks like things are humming along over at UPS, aside from the upcoming summer of love with the Teamsters.

Side note, it's sad funny that the FedEx management team won't utter "UPS" at these investor calls. Like saying the word 3x will summon Bloody Mary. Or maybe like Ohio State saying "the team up north". A bit immature, but hey, I guess we're dealing with the massive egos of CEO/CFO/etc.

- Richard Smith mentioned MD-11 sunset date by the end of FY28 (May 2028). So 5 years of a slow MD drawdown, taking first big cut of MD crew force in next system bid. R Smith also mentioned express vs deferred freight - express freight on purple tails, deferred freight on "global partners". Scope keeps bubbling to the top of my priority list with every Corp news release. I sure wish I was paying more attention to scope years ago when we started negotiations. This is my first contract, guess I'm learning as I go along.

Not sure that removing Express and Ground from the sides of all the planes & trucks is going to move the needle for streamlining the business. The team referenced data analytics repeatedly to select mode and frequency of delivery, but I'm not sure how much smoke was in front of those mirrors. Seems like we should have been looking at data metrics the whole time, not just recently. The devil will be in the details, as always.

I see a couple others suffered through the full "CSPAN" briefing as well; thanks for sharing your thoughts.

 

I mentioned in another thread to look at UPS fleet numbers and pilot numbers to see the future here at fedex. Its that simple. They are our largest rival who has better yields and a completly unionized work force. If they can do it with 3500 pilots so can we.

Biggest question I havent heard addressed yet. Who will drive the one truck per neighborhood, that fedex express courier or that guy hired last week by Bubba who owns a few routes he bought from fedex ground…

 

absolutely correct. People that think this is just posturing during negotiators haven’t been here very long or are just plain ignorant. No, they did NOT do this in the last few Section 6 negotiations. Yes, things are changing dramatically - Fred uses to think decades , Raj is a quarter guy - just trying to keep his job and DE shaw and gang want NOTHING but increases stock performance.

 

great summary. Biggest error in history of negotiations may have been NC offering this absurd performance based annual pu increase AND thereby delaying any possible strike vote. It ain’t gonna be pretty folks.