Two Boeing 747-8 freighters recently purchased from Qatar Airways won’t join the UPS fleet for nearly a year. The move comes even as UPS adjusts its air network to align with lower volumes.
Chief Financial Officer Brian Newman disclosed on the company’s Jan. 30 earnings briefing that UPS (NYSE: UPS) acquired the large cargo jets from Qatar Airways, as the world’s largest cargo airline – not including the express parcel carriers – moves to an all-777 fleet. Atlanta-based UPS said in its 2022 annual report last February that it had committed to buy two used jumbo freighters but did not identify their source.
UPS expects to bring the used 747-8s into service sometime between the end of the year and early 2025, spokeswoman Michelle Polk said by email. The transition period is impacted by the need for modifications to standardize the aircraft to UPS specifications and paint them with the UPS color scheme.
It also stems from the fact that one of the 747-8s is still operating for Qatar Airways Cargo, according to Flightradar24. The tracking site shows the freighter departed Hong Kong for Doha, Qatar, on Thursday.
Newman linked the deal to UPS’ fleet modernization and effort to retire aging MD-11 freighters in favor of more efficient, cleaner-burning aircraft. Polk added that the 747-8s were also acquired because they provide needed capacity on certain international corridors.
UPS Airlines currently operates 28 Boeing 747-8 freighters, the largest such fleet in the world.
The integrated logistics provider phased out six MD-11s last year and one in January, bringing the active fleet to 35. The retirement schedule was moved up when international parcel and freight demand began to contract in mid-2022 from the heights of the COVID crisis. Management has said it plans to retire eight more MD-11s this year and the type will be replaced by 28 factory-built 767-300 cargo jets previously ordered from Boeing.
The MD-11 and 767 are both widebody aircraft, but the 767 is smaller.
Although the 747-8 has one more engine than the tri-jet MD-11, it still provides better fuel efficiency on an equivalent payload basis, according to UPS.
The GEnx engine on the 747-8 is about 15% more efficient than the CF6 that is prevalent on UPS’ MD-11 fleet, according to GE. Mike Stengel, a principal at Aerodynamic Advisory, said the remaining Pratt & Whitney 4000 engines that power the fleet are assumed to be comparable to the CF6 in fuel efficiency since the engines were developed around the same time.
The 747-8’s payload is about 45% greater than that of the MD-11, “so the unit economics still probably favor the 747-8 freighter even with the extra engine. The 747-8 also offers 600 to 700 miles more range” and is likely much more reliable, Stengel said.
The two 747-8s from Qatar Airways Cargo are about 7 and 11 years old. UPS’ MD-11 fleet ranges in age from 23.5 years to nearly 33 years.
The acquisition of two large freighters comes even as UPS reduces flight schedules and temporarily parks some aircraft to save money during the shipping downturn.
UPS’ flight activity in December and January was down 16% year over year, according to research by Morgan Stanley. The company has said it doesn’t expect volumes to pick up until the second half of the year.
In the fourth quarter, UPS reported declines in both domestic and international parcel volume from the prior year. International average daily volume was down 8.3%, with export oriented parcel volume down 5.9%. Revenue fell 7.8% to nearly $24.9 billion. Net income was more than halved to $1.6 billion.
Qatar Airways fleet
Qatar Airways Cargo currently operates 27 Boeing 777 freighters. It recently let go of two Boeing 747-400s that were leased as well as some Airbus aircraft. A Qatar Airways executive recently said at a Cargo Facts event that the airline is quickly transitioning to simplify the fleet around the 777, the trade publication reported.
Qatar Airways is the launch customer for the next-generation 777X freighter from Boeing, with an order for 34 aircraft.
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