Boeing wins big freighter jet order as FedEx bets on continued air cargo recovery
Reaping the benefit of a worldwide recovery in air cargo, even amid fears of a global trade war, Boeing on Tuesday announced a big order from air package delivery specialist FedEx Express.
FedEx ordered a dozen 777 freighters, for delivery between fiscal 2021 and 2025. While that’s too late to help fill out empty delivery airplane slots on the assembly line in Everett between now and the introduction of the new 777X model in 2020, it will help bolster production in the early, slow-production years of the 777X.
In addition, FedEx ordered a dozen 767 freighters for delivery between fiscal 2020 and 2022, vindicating Boeing’s decision to increase production of that jet by 20?percent from 2.5 to 3 jets per month beginning in 2020.
The combined 767 and 777 order for 24 wide-body aircraft is valued at $6.6 billion using Boeing’s list prices. However, market pricing data from aircraft valuation firm Avitas indicates that the real value, after standard discounts, is no more than $2.8 billion.
The April move to hike the 767 production rate was triggered by a strong recovery in the air cargo market over the past two years.
Boeing is well placed to take advantage because it enjoys a monopoly in mid-size and large cargo aircraft with its 767, 777 and 747 freighter jets. Rival jet maker Airbus focuses on passenger planes almost exclusively and offers no competition for any of those cargo planes.
The boost from FedEx follows one from rival package carrier UPS, which in February ordered 18 jumbo jet 747-8 freighters plus four 767 freighters.
Amazon, which has acquired 40 used 767 freighter jets for its Amazon Air service, is considered a potential future customer for new 767s.
The FedEx order brings Boeing to more than 50 wide-body freighters sold so far this year, compared to 11 sold in all of last year.
Recent fears of a potential trade war between the U.S. and major trading counterparts – including China, the European Union and Canada – have raised concern that the air cargo recovery could falter. Indeed, the most recent monthly data released by the International Air Transport Association (IATA) indicates a slowdown.
Last year, air freight demand worldwide grew 9?percent. In February, the growth rate was 7 percent. In March, it slowed to 2 percent, IATA said.
Still, the FedEx order is a vigorous bet by the U.S. freight carrier that global trade will not be restrained long-term.
David Cunningham, chief executive of FedEx Express, called the order “another positive step in our fleet modernization program as we add more efficient, lower emission aircraft to our global fleet.”
Kevin McAllister, chief executive of Boeing Commercial Airplanes, said the order is “a big vote of confidence in Boeing’s market-leading freighter family and the long-term outlook for air freight.”