UPS and FedEx Strain as MD-11 Jets Stay Grounded
Peak Season Freight Shifts to Charters as Inspections Drag On
Key Takeaways:
- The MD-11 fleet was indefinitely grounded after a Nov. 4 crash that killed 14, forcing UPS and FedEx to seek alternative capacity during the holiday peak.
- FAA-ordered inspections of 167 jets and evidence of fatigue cracks have tightened air cargo capacity and pushed the couriers toward costly charters and network adjustments.
- The companies expect to return aircraft to service individually as they pass inspections, though a prolonged grounding could prompt costly plane purchases amid a shortage of available freighters.
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United Parcel Service Inc. and FedEx Corp. are working to secure enough freighters as they grapple with a ban on a pillar of their air-cargo fleets through the crucial holiday delivery season, and potentially beyond.
An indefinite grounding of the workhorse MD-11 jet is in place as investigators probe why an engine tore off a 34-year-old widebody just as it took off on Nov. 4. The resulting crash killed 14 people.
The grounding has drained capacity and complicated operations for the world’s largest package delivery companies just as shipping volumes surge for the peak period through Christmas. The crash also injected new uncertainty into planning for an aircraft that was already approaching the end of its service life.
“It’s creating a real capacity crunch for UPS and FedEx,” said Derek Lossing, founder of, a logistics consulting firm. “They will adjust their networks, but at the end of the day, they were planning on flying those aircraft.”
UPS has 26 MD-11s, about 9% of its jet fleet, which doesn’t include chartered planes. The 28 FedEx had in operation before the grounding accounted for roughly 4% of its in-service aircraft.
A preliminaryreportfrom U.S. safety investigators Nov. 20 found evidence of fatigue cracks in the structure that attached the turbofan to the stricken plane’s wing.
The Federal Aviation Administration isof all 167 grounded airplanes — a number that includes models similar to the MD-11 and applies to all operators of the jets. What’s still unclear: the measures MD-11 operators will need to take to inspect and repair the engine pylon so the aircraft can return to the skies.
“It’s going to take a while. This is an area that is not easily accessible,” said former FAA accident investigation chief Jeff Guzzetti, referring to where the structure is located on the aircraft.
Prior to the NTSB’s preliminary report, analysts expected that the scale of disruption should be relatively contained, given the couriers are well-versed in dealing with snarls from weather or geopolitical conflicts.
Smoke from the crashed UPS cargo jet near Muhammad Ali airport in Louisville, on Nov. 4.
Still, the grounding is pushing the couriers to turn to third-party charters to maintain operations, according to JP Morgan analyst Brian Ossenbeck. The outsourcing is likely to lead to higher costs for the companies.
“Protecting service during peak comes at a cost,” Ossenbeck said in a note to clients, adding that some express packages could be at risk of being slowed down.
A representative for UPS declined to speculate on potential additional peak season costs and said the company would provide an update in its January earnings report.
FedEx said it is cooperating with Boeing Co. and the FAA on inspections and declined to respond to questions about network disruptions.
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FedEx Chief Financial Officer John Dietrich earlier this month said that the company is deploying spare aircraft, adjusting maintenance schedules and shipping cargo in the bellies of commercial planes.
The company also expects to return the planes to service one by one, as they pass inspections, Dietrich said during a Nov. 11 investor conference. “It’s not like we’re waiting for the whole fleet to be inspected before concluding whether they can safely go back into service,” he said.
The MD-11 grounding isn’t expected to ruin Christmas because retailers already have inventory in place, said Satish Jindel, president of ShipMatrix, a logistics data firm.
“The public should not have any concern,” Jindel said. “Let them shop all they want.”
UPS has predicted its average daily peak volumes to be down year-over-year due in part to a planned pullback of its Amazon.com Inc. volume. Meanwhile, FedEx has said it is planning for “modest demand” during the holidays.
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A protracted grounding risks pushing the companies into the unenviable position of needing to buy planes to replace lost capacity when cargo jets are in short supply.
FedEx is exploring options for such a scenario and finding almost no replacement freighters available on the secondary market, either through passenger conversions or brand-new Boeing and Airbus SE models, a person familiar with the matter said. FedEx declined to comment on the matter.
UPS had retired two fully depreciated jets from service in the first nine months of this year and was planning to retire a third in the last quarter.
FedEx was on track to retire all of its 34 MD-11s by the end of 2032. The jets carried about 17% of FedEx’s traffic, down from 27% five years ago, according to Australia-based researcher.
The newest Boeing and Airbus freighters are running behind schedule. Airlines are hanging onto widebody jets to move passengers, leaving few to be converted to carry freight.
UPS and FedEx will get some relief from new cargo jets both are slated to receive from Boeing over the next two years.
Both couriers are able to tap into their truck networks to make up for some lost air capacity domestically. But finding dedicated replacement transportation on some international and long-haul routes is much more difficult.
FedEx and UPS can rely on a few dozen smaller Boeing jets in storage but not enough to make up for its widebody workhorse, said Frederic Horst, a managing director at Trade and Transport Group.
“The MD-11 generally seems to get very high usage in the weeks before Christmas – more so than other aircraft types,” he said.
UPS ranks No. 1on theTransport Topics Top 100 list of the largest for-hire carriersin North America ԻNo. 5on the TT Top 100 list of the largest logistics companies. It also ranks No. 4 on theTT Top 50 global freight companies list.
FedEx ranks No. 2on the for-hire TT100, No. 3 on the global freight TT50ԻNo. 43on the logistics TT100.
Cailley LaPara, Julie Johnsson and Siddharth Philip contributed to this report.
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