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Aviation: Amazon, the new name in air cargo

Amazon Air, the US cargo carrier dedicated to moving some of Amazon.com's express parcels, has just signed up to lease 10 more Boeing 767-300Fs, increasing its fleet to 50 aircraft. The additional jets will be delivered over the next two years as they are sourced from the commercial aircraft market and converted into freighters.

There's a bit of an unnoticed revolution currently taking place in the world of air freight - unnoticed by consumers that is, but much more on the radar of the world's cargo airlines. It all started three years ago when global e-commerce giant Amazon.com signed deals with air cargo specialists - Air Transport Services Group (ATSG - owner of cargo airlines ABX Air and Air Transport International / ATI) and Atlas Air. The arrangements resulted in ATSG's Cargo Aircraft Management subsidiary and Atlas Air each acquiring 20 used Boeing 767 aircraft to be converted into freighters and dedicated to moving Amazon packages around the USA. The 767s are owned by ATSG and Atlas, but leased to Amazon Air for seven years and flown by ATI, ABX Air and Atlas.

Amazon Air will lease ten more 767-300Fs over the next two years, increasing its US-based fleet to 50 units. (Amazon.com)

Once the first aircraft were converted for their new roles, Amazon Air (initially Amazon Prime Air) launched services from a hub at Cincinnati / Northern Kentucky International Airport. With 30 aircraft already online - and now 20 more to come - the network extends to more than 20 airports across continental USA including Baltimore, Chicago Rockford, Dallas / Fort Worth, Denver, Houston, Miami, Minneapolis, Sacramento and Seattle. Amazon has since received options to purchase up to 19.9% of ATSG stock, while the Cincinnati hub will be expanded to handle as many as 100 aircraft by 2025. There are also rumours doing the rounds that suggest Amazon Air will expand its operations - and US network - to include Boeing 737-800 sized freighters within the next year or two.

Amazon.com is a master of supply chain management, and moving its air distribution in house will bring it savings of between $1bn and $2bn - or 3-6% of its total delivery costs - per year. Having its own airline are likely to reduce Amazon's delivery costs for two day deliveries by around 25% per package. The firm currently relies on FedEx Express to lift 19% of its volume and UPS for 14%. But with 30 of Amazon Air's first 40 aircraft already flying, its business with the two global express logistics is already down by 2-3%. The drain could reach 10% by the middle of the next decade when the additional aircraft are online.

What about Europe?

The rapid growth of Amazon Air in the USA got The Aviation Oracle wondering - will we soon be seeing Amazon Air aircraft in Europe? Some casual observers have speculated that the firm's 767s could soon be winging their way across the Atlantic, but that seems unlikely. The air operation's primary purpose is to support priority and two-day deliveries to customers, and very little of that market is transatlantic. Of course the establishment of a direct Amazon air link between the USA and Europe could change all that but it is an expensive way to move small consumer goods. Bulk supply chains from producers direct to the two continents are already well established and rely on more cost effective surface transport.