FedEx Seals Turboprop Deal Amid Strength in Airfreight Market
November 08 2017 - 6:37AM
Dow Jones News
By Robert Wall
FedEx Corp. is renewing part of its fleet of smaller cargo
planes in a deal valued at $1.3 billion at list price, amid an
improved outlook for the global airfreight market.
FedEx will buy up to 50 turboprop planes from European aircraft
maker ATR--a joint venture between Airbus SE, the world's No. 2
plane maker behind Boeing Co., and Italy's Leonardo SpA--the
Toulouse, France-based plane maker said Wednesday. The deal
comprises a firm order for 30 planes and options for 20 more, and
represents a boost for ATR in the U.S., the world's largest single
aviation market.
The delivery giant typically uses such turboprop planes--which
are slower and burn less fuel than their jet counterparts--to
transport packages between smaller cities and larger airports where
its big Boeing and Airbus jets operate.
The prospects for the airfreight market have improved in recent
months after a prolonged slump. WorldACD, which tracks the sector,
said air-cargo growth in September, the last month for which
figures are available, grew above 5% year-over-year for the 13th
consecutive month.
FedEx said in its latest quarterly earnings that sales at its
air-shipping Express division benefited from higher rates to ship
U.S. domestic packages and strong international package growth.
Though turboprop freight planes are typically modified passenger
models, FedEx in this case opted for a new design. The plane is
based on the European plane maker's 78-seat ATR 72-600 model, which
features a new cockpit and more powerful engines than earlier
versions.
FedEx Express Chief Executive David L. Cunningham said in a
statement that the company "worked with ATR to develop this new
aircraft, which include special features to help us grow our
business, especially in the airfreight market where shipments are
larger and heavier."
FedEx is expected to get the first planes in 2020. The aircraft
typically can carry around 8.3 tons of cargo, though delivery
companies are usually more focused on volume than weight.
"Our bet is that the freighter market is going to become much
more active than it has been," ATR Chief Executive Christian
Scherer said in an interview. Though much of the global demand will
likely remain for converted planes, he said FedEx's endorsement
could generate greater appetite for new planes as well as spur a
general increase in demand for freight planes.
ATR and Canada's Bombardier Inc. are the world's leading
producers of turboprop planes. Brazilian plane maker Embraer SA in
September said it had opened talks with potential airline customers
to gauge whether to re-enter the market for such planes, after
exiting it years ago to focus on jet-powered regional planes and
private jets.
The FedEx deal also is an important vote of confidence for ATR
in the U.S., which it has coveted for years. Passenger carrying
turboprops fell out of favor in the U.S. because passengers
generally preferred jets they viewed as more comfortable and
modern.
But ATR is starting to see demand rebound in the U.S. In
addition to the FedEx deal, the plane maker has said it had won a
preliminary 20-passenger-aircraft deal with Fort Lauderdale,
Fla.-based Silver Airways Corp.
"We have been absent in the U.S. for many, many years and this
marks our return," Mr. Scherer said.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
November 08, 2017 06:22 ET (11:22 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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