FedEx Corp. says it faces an unexpected $175 million hit during the crucial holiday peak-shipping season after grounding its fleet of McDonnell Douglas MD-11 freighter aircraft - a disruption that has forced the logistics giant to scramble for alternative capacity and is expected to dent near-term profitability.
The announcement came on the company’s recent fiscal second-quarter earnings call, where FedEx executives detailed the financial fallout from the MD-11 groundings and broader operational challenges.
Chief Financial Officer John Dietrich told analysts the emergency fleet suspension - triggered after safety concerns surrounding MD-11 aircraft - is expected to shave about US$175 million off adjusted operating income this fiscal year, with the bulk of the cost arising in the peak demand period from mid-November through December.
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Dietrich said the timing of the grounding could not be worse, as demand for expedited delivery typically surges during the holidays. “It’s peak season,” he said, noting that outsourced airlift and ground transportation are more expensive and scarce at this time of year.
Operational Impact
With around two dozen MD-11Fs out of service, FedEx has been forced to reallocate cargo to other aircraft types, lease additional planes, and rely more heavily on third-party carriers and ground transportation to keep packages moving.
These stopgap measures come at a premium, especially during the holiday rush - a period that can account for a disproportionate share of annual profits for parcel carriers.
The grounding highlights vulnerabilities in air cargo networks that depend on a limited number of older, high-capacity freighters. The MD-11, a three-engine widebody aircraft that has served in cargo operations for decades, was widely used by FedEx to connect major hubs and support overnight schedules.
Financial Context
Despite the hit from the MD-11 disruption, FedEx reported stronger-than-expected quarterly earnings, with adjusted profit beating analyst forecasts thanks to robust demand for priority shipments and pricing improvements in some segments.
The company also raised the lower end of its annual profit outlook and reiterated plans for cost-cutting initiatives across its network.
Still, executives warn that the $175 million headwind - combined with elevated costs tied to the planned spinoff of FedEx Freight - will weigh on margins for the remainder of the fiscal year.
Looking Ahead
FedEx expects its MD-11 fleet to gradually return to service in spring 2026 after inspections and regulatory clearances, which should help ease capacity constraints going into the next peak cycle.
In the meantime, the company and its customers are navigating higher costs and logistics challenges as global e-commerce volumes remain strong.
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