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Originally published Monday, January 12, 2009 at 4:14 PM

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FedEx orders 15 new Boeing 777 freighters

Leading cargo carrier FedEx ordered 15 new 777 freighter aircraft from Boeing, despite the severe contraction now wracking the global air freight industry.

Seattle Times aerospace reporter

Leading cargo carrier FedEx has ordered 15 new 777 freighter aircraft from Boeing, the delivery company revealed in a regulatory filing Monday.

Amid a severe contraction in global air freight, the order is a bold move by FedEx — and welcome news for Boeing. The 777 freighter program is currently conducting flight tests from Boeing Field, with first delivery to Air France expected in the next couple months.

FedEx's order brings the sales total for the new jet to 88.

The FedEx deal is worth $3.75 billion at list prices. However, FedEx's filing with the Securities and Exchange Commission shows that the actual purchase price after discounts is about $2.8 billion over 10 years.

FedEx originally ordered 15 of the new widebody freighter jets back in November 2006, with options to buy 15 more. The newly announced deal converts those options to a firm order, and adds options to buy another 15 later.

The deal also defers the first deliveries by a few months. The first four freighters are to be delivered in FedEx's fiscal year beginning June 2009. Four more will be delivered in the following fiscal year, then three each year until deliveries are completed in fiscal 2019.

The large 777 freighter will be used to carry international air cargo, a market that declined steeply this past fall. The latest monthly data from the International Air Transport Association (IATA) showed a 13.5 percent year-on-year decline in November alone.

When FedEx released its latest quarterly earnings last month, management listed a series of moves aimed at reducing expenses by over $1 billion. The measures included staff reductions, suspension of 401(k) company matching contributions, a 20 percent salary cut for chief executive Fred Smith, up to 10 percent pay cuts for other senior executives, and a 5 percent cut for all remaining employees.

The additional 15 jets ordered by FedEx won't start being delivered until 2013.

Bob Dahl, managing director of Seattle-based consultancy Air Cargo Management Group, said the order signals long-term confidence in the air freight market.

"This order signifies that over the long term, (FedEx is) optimistic that the market is going to recover," said Dahl.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2009 The Seattle Times Company

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