Dive Brief:
- UPS has retired its MD-11 fleet after a deadly November crash featuring the aircraft model and a subsequent grounding of the fleet, the company announced in Q4 earnings results Tuesday.
- MD-11s made up about 9% of UPS' air fleet prior to their retirement, with the aircraft primarily being used domestically, per Cirrus Global Advisors. Much of the MD-11 capacity will be replaced with Boeing 767 aircraft over the next year or so, UPS CEO Carol Tomé said in an earnings call.
- UPS incurred a non-cash, after-tax charge of $137 million after writing off the MD-11s. "We believe these actions are consistent with building a more efficient global network positioned for growth, flexibility and profitability," EVP and CFO Brian Dykes said on the earnings call.
Dive Insight:
After UPS moved to ground its MD-11 fleet, the carrier made operational adjustments to keep volume flowing during the peak season despite reduced capacity.
"Specifically, we repositioned some aircraft from other parts of the world to the U.S.," Dykes said. "We increased the amount of volume we moved on the ground, and we leased additional aircraft to meet capacity demand."
UPS incurred about $50 million in incremental lease costs to secure capacity after the MD-11 fleet grounding, the CFO said. The added costs also contributed to UPS' cost per piece increasing 8.9% year over year in its U.S. segment.
The carrier plans to reduce its reliance on leased aircraft as it introduces 18 new Boeing 767 aircraft into its fleet over the next 15 months, according to Dykes.
"The 767s are scheduled to come in through the course of the year, with five in the first half and 10 in the second half, and then we'll have three in 2027," he said.
FedEx also grounded its fleet of MD-11s in November after the crash, but the carrier expects the aircraft to return to the air in the near future. As of December, the company's financial outlook accounts for MD-11s to return to service in its fourth quarter, which runs from March 1 to May 31.
