In its first quarter results, UPS has confirmed that it has taken an impairment charge on its entire fleet of 44 DC-8 aircraft, including related engines and parts. Earlier than expected retirement of the DC-8s will make UPS’s air fleet the most modern, fuel efficient and noise compliant in the industry. Retirement of the 40-year old fleet is a reaction to the downturn in the global economy, and is an attempt by UPS to mitigate losses though the rest of 2009. It is thought the last DC-8 will be retired by May 31, 2009 instead of the originally scheduled date of 2013.
An impairment charge is a specific reduction on a company’s balance sheet that adjusts the value of its goodwill. Due to accounting rules, a company must monitor and test the value of its goodwill, to determine if it is overvalued. If it is, the company must issue an impairment charge on its balance sheet, to take into account the reduced value of the goodwill.