8-KMaterial Agreements

FEDEX CORP 8-K Report, Material Agreement (Jun 21, 2018)

Filed June 21, 2018For Securities:FDX

Summary

This 8-K filing from FedEx Corp. on June 21, 2018, primarily details significant aircraft purchase agreements between its subsidiary, Federal Express Corporation, and The Boeing Company. The agreements involve the purchase of incremental Boeing 777 Freighter (B777F) and Boeing 767-300 Freighter (B767F) aircraft, reflecting FedEx's ongoing strategy to modernize and expand its fleet for enhanced efficiency and reliability. These new agreements solidify FedEx's long-term fleet plans, with substantial firm orders and additional options secured for both aircraft types, extending delivery schedules well into the future. Investors should note the significant capital expenditure implied by these commitments and the stated conditionality tied to the Railway Labor Act for certain aircraft orders.

Key Highlights

  • 1FedEx Express entered into agreements with Boeing to purchase 12 incremental B777F aircraft and 12 incremental B767F aircraft.
  • 2The B777F aircraft are scheduled for delivery between fiscal years 2021 and 2025.
  • 3The B767F aircraft are scheduled for delivery between fiscal years 2020 and 2022.
  • 4Some of these new aircraft purchases are conditioned on FedEx Express and its employees remaining covered by the Railway Labor Act (RLA).
  • 5Following these agreements, FedEx Express now has a total of 24 firm orders for B777F aircraft and 69 firm orders for B767F aircraft.
  • 6FedEx Express also secured options for an additional 25 B777F aircraft and 50 B767F aircraft.

Frequently Asked Questions

The primary purpose of these agreements is to facilitate the purchase of new Boeing 777 Freighter and Boeing 767-300 Freighter aircraft. These acquisitions are aimed at modernizing and expanding FedEx Express's fleet to improve operational efficiency and reliability.

While the exact financial commitment is not disclosed in this 8-K, the agreements represent a significant capital expenditure for FedEx as they involve substantial firm orders and options for new, large cargo aircraft. Investors can anticipate these purchases will impact future capital spending.

The RLA condition means that certain aircraft orders are contingent upon FedEx Express and its employees continuing to be subject to the Railway Labor Act. A change in this status could impact the company's ability or obligation to purchase those specific aircraft, potentially affecting fleet planning and operational costs.

The deliveries are staggered, with B767F aircraft expected between fiscal years 2020 and 2022, and B777F aircraft expected between fiscal years 2021 and 2025. This phased delivery suggests a long-term fleet enhancement strategy.