Amazon will soon have a dedicated fleet of 40 freighters flying its goods across the USA to speed up deliveries.
Within the next two years, the e-commerce giant will have 20 B767-300 freighters operated by cargo airline Atlas Air along with 20 B767s operated by US cargo carrier ATSG, giving it substantial in-house air capacity and further potential to switch volumes away from UPS and FedEx.
ATSG, the DHL Express partner for domestic US flights, is already operating five B767s for Amazon under five-year leases and will gradually ramp up these operations so that all 20 planes are in operation by 2017.
Yesterday, Atlas Air parent company Atlas Air Worldwide Holdings (AAWH) announced long-term commercial agreements with Amazon, including the operation of 20 B767-300 converted freighters for Amazon on a CMI (crew, maintenance and insurance) basis by Atlas Air, as well as dry leasing by its Titan Aviation leasing unit. The dry leases will have a term of 10 years, while the CMI operations will be for seven years (with extension provisions for a total term of 10 years).
Operations under the agreements are expected to begin in the second half of this year and ramp up to full service through 2018. This means that both ATSG and Atlas will be flying for Amazon ready for the 2016 peak season, including the Black Friday/Cyber Monday period and the Christmas season.
Moreover, Amazon has also gained options to buy up to 20% in AAWH over the next five years in connection with the lease of the 20 planes, and a further 10% over the next seven years, based on certain conditions. The e-commerce firm has similar options to buy up to 20% of ATSG shares.
“We are excited to begin a strategic long-term relationship with Amazon to support the continuing expansion of its e-commerce business and to enhance its customer delivery capabilities,” stated AAWH President and Chief Executive Officer William J. Flynn. “We appreciate Amazon's confidence in our capabilities, global scale and operating excellence.”
Dave Clark, Amazon's senior vice president of worldwide operations, added: “We are excited to welcome a great provider, Atlas Air, to support package delivery to the rapidly growing number of Prime members who love ultra-fast delivery, great prices and vast selection from Amazon.”
Atlas Air Worldwide, which recently acquired smaller cargo airline Southern Air, is a leading global provider of outsourced aircraft and aviation operating services. Its carriers, Atlas Air, Southern Air, Titan and Polar Air Cargo, operate a large fleet of Boeing freighters for diverse customers, including DHL Express.
Just last week, Amazon CFO Brian Olsavsky emphasised to analysts on the company’s Q1 results call that its ongoing logistics expansion, including the creation of a subcontracted air fleet, is to support rapid deliveries, and to complement the capacity of partners such as UPS and FedEx.
“The reason we add logistics capability and transportation capability is so we can serve our customers faster. We've needed to add more of our own capacity to supplement our carriers and our partners. They're still, again, great partners, have been and will continue to be for the future, but we see opportunities where we need to add additional capacity and we're filling those voids,” he commented.
