FedEx anticipates MD-11 aircraft return in spring period

Core Insights - FedEx anticipates incurring $175 million in additional costs due to the grounding of its MD-11 air cargo fleet during the peak shipping season, with expectations that the prohibition will be lifted in the spring [1][4] - The company exceeded expectations for the fiscal year second quarter, driven by strong yields and volumes in its core package business, alongside ongoing savings from a multiyear streamlining initiative [2] - The grounding of 28 MD-11 aircraft on November 8 due to safety concerns resulted in a $25 million reduction in adjusted operating income for the quarter [3][7] Financial Impact - The grounding led to an immediate loss of 4% of FedEx's global air cargo capacity during the busiest shipping season, prompting the implementation of contingency plans to mitigate service disruptions [6] - The $25 million profit reduction in late November had a minimal impact on overall earnings, but significant challenges are expected in the second half of the fiscal year, particularly in Q3 [7] - Higher costs are anticipated in December due to the need for outsourced airlift during the peak season, exacerbated by the grounded fleet [8] Operational Adjustments - FedEx has redeployed larger aircraft, consolidated flights, adjusted maintenance schedules, utilized more domestic trucking, and hired third-party airlift to maintain shipment flows with minimal delays [6] - The company is facing operational inconveniences for pilots and impacts on airline operations due to these adjustments [6] Regulatory Context - The grounding was initiated following the discovery of structural fatigue cracks in the MD-11 aircraft, with safety inspections yet to be fully outlined by authorities [3][5] - The timeline for the return of the grounded aircraft to service is projected for the fourth quarter of the fiscal year, which runs from March to the end of May [4]