Online retailer is leasing 20 freighter jets to help speed up fulfilment and delivery.
As Amazon strives to steal customers away from its brick-and-mortar competitors, it has launched a number of new initiatives including testing taxis for same-day delivery; testing restaurant delivery services; moving into the Home Services marketplace; and testing drone delivery. Now, ‘Amazon has made good on reports that it would develop its own freight capabilities, finalizing a lease on 20 Boeing 767 freighter jets from Air Transport Services Group Inc.
Joe Hete, President and CEO of ATSG, explained, “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. We are excited to serve Amazon customers by providing additional air cargo capacity and logistics support to ensure great shipping speeds for customers.”
The move comes as customers are demanding more from their online shopping experiences, including low or no shipping fees and speedy delivery of orders.
The agreement includes 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 20 leases are for five to seven years, while the agreement for operation of the aircraft is 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.
The move is a clear sign that Amazon is working diligently to rein in soaring shipping costs that threaten to take a serious toll on the e-retailer’s bottom line. Amazon has also bought thousands of trailer trucks and has registered as an ocean freight forwarder, according to a listing with the U.S. Federal Maritime Commission, moves that it says serve its own fulfillment needs rather than attempt to compete with United Parcel Service and FedEx.
But the online giant has also recently moved into deliveries for third parties lately, creating a buzz over what Amazon really intends. According to Robert W. Baird & Co. analyst Colin Sebastian, Amazon is capable of making delivery a revenue-generating aspect of its business. “They have the opportunity to disrupt this market and generate a lot of revenue,” Robert W. Baird & Co. analyst Colin Sebastian told the Seattle Times last month.
Meanwhile, Morgan Stanley analyst Brian Nowak doesn’t even think that Amazon will end up delivering all of its own packages, reports the Financial Times, stating that Amazon's new jets might just help it decrease the skyrocketing fulfillment costs associated with Prime membership and the two day free shipping that comes with it. Amazon’s delivery costs rose 37 percent year-over-year in Q4 to $1.8 billion, and are growing faster than its revenue, which increased 22 percent to $35.7 billion in the same period.
