Despite being highly vulnerable to geopolitical uncertainties, the global air cargo business seems to be unperturbed by the growing trade war concerns. Albeit slowing down modestly in the recent months, the sector has maintained its recovery momentum so far this year proving the skeptics wrong.
Shipping giant FedEx (FDX) this week complemented its robust fourth-quarter results, which topped Wall Street predictions, by placing orders for two dozen cargo planes with Boeing (BA). As per the agreement, Boeing will sell 24 widebody freighters valued around $6.6 billion to FedEx, which has embarked on a fleet replacement program, taking a cue from the consistent growth of cargo traffic.
The aircraft maker will be adding the new orders – for a dozen each of the medium-sized 777 and the larger 767 cargo planes, to its backlog after meeting certain contingencies. It is expected that Boeing will deliver the 777 freighters between 2021 and 2025, and the 767s in the 2020-2022 period.
As per the agreement, Boeing will sell 24 widebody freighters valued at around $6.6 billion to FedEx
Statistics indicate that air cargo movement increased 10% globally in 2017, a trend that is expected to continue in the current year and beyond. Boeing has received orders for as many as 50 widebody freighters since the beginning of the year, including those from FedEx.
“This repeat order is a big vote of confidence in Boeing’s market-leading freighter family and the long-term outlook for air freight,” said Boeing CEO Kevin McAllister. The company said it is on track to start delivering the early models of the revamped 777X series within two years. The growing market, combined with lack of enough competition from Airbus in the cargo aircraft segment, has prompted Boeing to ramp up its production targets for the current year.
In February, the Illinois-based Boeing had received orders for 22 new jet freighters from FedEx’s rival United Parcel Services. Meanwhile, the company sees a potential customer in Amazon (AMZN) in the coming months, for its mid-sized cargo planes.
Boeing’s stock gained nearly 1% in early trading Wednesday, after ending the last session lower by around 4%. FedEx shares closed Tuesday’s regular session down 2%, despite the company reporting above-consensus earnings for the fourth quarter.
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