Amazon Planning a $1.5B Air Hub in Kentucky

Fresh off news of its patent for a flying drone-served distribution center and starting up its own ocean shipping from China, Amazon now plans to build a $1.5 billion air hub at the Cincinnati/Northern Kentucky airport in Hebron, KY to handle distribution of its fast-growing ecommerce orders, especially at peak season.

This is part of a grand plan to eventually handle shipping and distribution not only for itself but for other retailers, many analysts and observers believe, bringing it further into competition with UPS and FedEx. Amazon and the carriers deny this, stating they continue to enjoy strong, mutually beneficial relationships, although Amazon CEO Jeff Bezos has made cagey remarks about the cost of using them.

At the same time, Amazon has been handing off more of its business to lower-cost regional carriers, according to a report in Forbes.

“Given the company’s ambitions to control a greater portion of the supply chain over time (and hence more control over the customer experience), we believe this move foreshadows significant further investment in air-cargo logistics infrastructure,” said Baird equity research analyst Colin Sebastian in a recent note. “Amazon currently has 11 fulfillment centers in Kentucky alone, with at least 13 fulfillment centers within a 150 mile radius of the CVG facility, and as such, the hub should have sufficient density to generate per-unit cost savings.”

The new air hub facility will cover about 2 million square feet, according to Dan Tobergte, CEO of the Northern Kentucky Tri-County Economic Development Corporation, as quoted in the Wall Street Journal. Ground will be broken as soon as permitting is secured, and Amazon says the facility will employ about 2,000 workers.

As for the ocean shipping component, Amazon has begun handling transport of goods from Chinese sellers bound for its distribution and fulfillment centers in the U.S., essentially acting as its own freight forwarder and taking business away from major shipping lines like Maersk and Hanjin.

MCM Musings: The sheer magnitude of Amazon’s ongoing shipping and logistics investments and plans – trucks, planes, airfields, ocean freight and warehouses – seems beyond the scope of its own order volume, as large as that is. While Amazon will certainly never reach the level of the vast networks of vehicles and facilities controlled by UPS and FedEx, it can certainly cause them some pain by siphoning off major retail clients.

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