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FedEx Buys Boeing 757s From United to Cut Fuel Costs

FedEx Corp. (FDX) said it agreed to buy 14 Boeing Co. (BA) 757 passenger jets from United Continental Holdings Inc. (UAL) and convert them into freighters, part of a plan to save on fuel costs with newer, more efficient planes.

The package-delivery company will take possession of the narrow-body jets this year through 2015, and the March 8 agreement includes an option to purchase another 16 of the planes, FedEx said today in a regulatory filing. The Memphis, Tennessee-based company also has 70 767s and 777s on order, according to the filing.

FedEx began buying 757s in 2007, as passenger airlines began shedding them, to phase out its older Boeing 727s, echoing a shift already under way at United Parcel Service Inc. (UPS) The used 757s, which Boeing stopped building in 2005, are cheaper than new models and still provide a class of planes that can carry 20 percent more freight while burning a third less fuel than the three-engine 727s.

Freighter conversions take about three months to complete and can cost about $5 million per plane. FedEx didn’t disclose the price of its deal with United. The airline owned 56 Boeing 757s as of Dec. 31, according to a filing.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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