Continuing its relentless push into logistics to shore up carrier network capacity issues, Amazon has struck a deal with major air transport firm Atlas Air of Purchase, NY, leasing 20 of its Boeing 767-300 jets and taking up to a 30% stake in the company. Atlas is also a supplier of transport planes to UPS.
This follows the March news that Amazon was leasing 20 Boeing 767-300 cargo jets from Air Transport Services Group Inc., while at the same time taking a 20% stake in the Wilmington, OH-based company. An estimate at the time said the move expanded Amazon’s domestic air freight capacity by 15%. ATSG handles domestic air freight, while Atlas primarily deals with international shipments.
The lease with Atlas has a term of 10 years, while crew, maintenance and insurance agreements are for seven years, which can be extended to 10 years. Amazon will immediately take a 20% stake in Atlas, with options to purchase an additional 10%.
“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,” said Dave Clark, Amazon’s senior vice president of worldwide operations, in a statement.
Satish Jindel, president of ShipMatrix, said the move is all about Amazon planning for future growth north of 20% while reining in its massive shipping costs, which topped $11.5 billion in 2015, compared to shipping revenue of $6.5 billion.
“Their packages moving through UPS, FedEx or DHL by air are at the retail rate,” Jindel said. “This way (with Atlas) they’re getting the wholesale rate. They’re putting a network in place to handle that large growth, moving things at a higher volume (by air) so the per unit cost is lower.”
UPS and FedEx executives have said repeatedly they are not concerned about Amazon’s increasing logistics moves, which also include the purchase of thousands of trailers as well as plans for a global supply chain operation, saying the ecommerce giant remains a valued customer. But a significant expansion of air freight capacity – giving Amazon access to wholesale rates – begs the question of whether it plans to siphon off some of its dependence on the carriers and call more of its own shots.
“UPS continues to work with Amazon and many other ecommerce retailers to support their global logistics needs, with unrivaled scale, innovation and delivery density combined with an extensive transportation network serving more than 220 countries and territories,” a company spokesman said. “For these reasons UPS provides strong customer value that is difficult for any company to replicate.”
A spokesperson for FedEx said the company would not comment on the impact of the Amazon-Atlas deal.