Amazon Airlines?

Amazon AirlinesIt looks like “Amazon Airlines” is on its way.

During a conference call in early November, following publication of Air Transport Services Group’s third-quarter results, CEO Joe Hete commented on the subject of managing express networks for customers, saying: “The trial ACMI express network that we launched in September for a US customer has been performing well. It started with two of our 767s and a sort operation here in Wilmington and will grow to five aircraft next week.”

Since that time, ATSG has declined to comment further, but there is increasing speculation – not just in the air freight and express industry but also in the investment community and the tech media – that the mystery customer is e-commerce giant Amazon.

Several weeks before ATSG announced the trial express network, Cargo Facts presented the case that Amazon was considering a major move into the transportation and logistics business. You can read our analysis here, but the gist of it is that Amazon is already deeply involved in both contract logistics and ground transportation on its own behalf, and that a move to develop its own air operation might well be in the cards.

With that in mind, think about Mr. Hete’s comment for a minute. ATSG is conducting a trial for a customer – a trial now involving up to five 767 freighters and a US sortation hub. What kind of customer considers five widebody freighters and a sortation hub “a trial”? If this is just the trial, what will the full project look like if it goes ahead? How many customers are there that could even begin to think about setting up their own full-scale US express network?

Consider also the routes being flown: The new ATSG air network currently serves four destinations daily from its Wilmington hub:

  • Lehigh Valley (ABE) in eastern Pennsylvania
  • Dallas/Ft. Worth (DFW) in Texas
  • Ontario (ONT) on the eastern outskirts of Los Angeles
  • Tampa (TPA) in Florida.

All four of these destinations are within 90 minutes trucking distance of key Amazon regional sortation centers: Swedesboro, NJ (Philadelphia) and Middlesex, NJ (New York/Newark); Dallas, TX (Dallas/Ft. Worth); San Bernardino, CA (Los Angeles Basin); and Davenport, FL (Orlando); .

Separately, or not, Amazon recently announced that it was in the process of adding two fullfillment centers outside Columbus, Ohio, The first, a 1 million-square-foot facility at the Rickenbacker Global Logistics Park, just 50 miles from ATSG’s Wilmington hub.  is expected to be operational by third-quarter 2016. The second, only slightly further away, will be an 800,000-square-foot center, in the town of Etna, Ohio.

So, is Amazon setting up an own-controlled air express network, managed and operated by Air Transport Services Group? We do not know for sure, but Amazon spent over $4 billion on transportation last year, much of it with UPS but also with other express and postal providers, so an urge to cut costs by developing its own air network is not surprising. And if it did develop such a network, ATSG is an obvious choice as a partner. ATSG’s Wilmington hub is the home of the massive sortation center set up for DHL when the German integrator made its failed attempt to penetrate the US domestic express market, and ATSG has both the fleet and the hub-management experience to do the job.

Conclusive evidence? No, but it certainly points toward a conclusion that Amazon is setting up – at least on a trial basis – an overnight air express network to support its e-commerce business.

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One Comment

  1. Would you kindly let me the contact (email address, contact person etc) of Amazon Airlines and Amazon Logistics

    Best regards and Thanks,
    TL.Jiang

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