Air Transport Services Group (ATSG) Inc., the aircraft leasing and air cargo transportation provider, today announced today agreements with Amazon Fulfillment Services, Inc., an affiliate of Amazon.com, Inc. to operate an air cargo network to serve Amazon customers in the United States.
News of Amazon's tie-up with ATSG follows months of speculation that the online retail giant has been trialling its own air freight operation in the US and Europe with a view to operating it on a scheduled year-round basis with a dedicated fleet of aircraft.
Analysts argue that Amazon has been moving in this direction in order to avoid delays from carriers such as UPS which have struggled to keep up with the rapid growth of e-commerce.
“Since last summer, we have been working closely with Amazon to demonstrate that a dedicated, fully customized air cargo network can be a strong supplement to existing transportation and distribution resources,” said Joe Hete, President and CEO of ATSG.
“We are excited to serve Amazon customers by providing additional air cargo capacity and logistics support to ensure great shipping speeds for customers.”
The commercial agreements will include the leasing of 20 Boeing 767 freighter aircraft to Amazon Fulfillment Services, Inc. by ATSG’s Cargo Aircraft Management (CAM), the operation of the aircraft by ATSG’s airlines, ABX Air and Air Transport International, and gateway and logistics services provided by ATSG’s LGSTX Services.
The duration of the 20 leases will be five to seven years; the agreement covering operation of the aircraft will be for five years.
“We offer Earth’s largest selection, great prices and ultra-fast delivery promises to a growing group of Prime members and we’re excited to supplement our existing delivery network with a great new provider, ATSG, by adding 20 planes to ensure air cargo capacity to support one and two-day delivery for customers,” said Dave Clark, Amazon senior vice president of worldwide operations and customer service.
In conjunction with the commercial agreements, ATSG also has agreed to grant Amazon warrants to acquire over a five-year period up to 19.9% of ATSG’s common shares at US$9.73 per share, based on the closing price of ATSG common shares on February 9, 2016.
Additional information about these agreements will be provided in a Form 8-K that ATSG expects to file with the U.S. Securities & Exchange Commission later this week.
