[EXCLUSIVE] Amazon building its own overnight airfreight operation, sources say

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Source: Public.Resource.Org

Amazon.com Inc. is creating a logistics operation that will include overnight air operations in the US domestic market, potentially including the acquisition of at least 20 freighter aircraft, Cargo Facts has learned.

Currently, Amazon ships most of its parcels through United Parcel Service, FedEx, and the United States Postal Service. The change to an inhouse logistics venture would seismically change the airfreight industry, as the majority of new air cargo activity around the world has come from e-commerce companies — and much of it from Amazon, in particular.

Last quarter, Amazon had net sales of about $25.4 billion, and a total of $100.6 billion in the previous 12 months. Amazon’s sales are growing at an annual rate of 18%, according to the company. Amazon’s market capitalization stands at about $316 billion.

Amazon’s efforts are ongoing and fluid, but sources tell Cargo Facts that the world’s largest e-commerce company by revenue is negotiating for the acquisition of perhaps 20 767 widebody freighters from The Boeing Company. By considering the ownership of a fleet of aircraft Amazon is signaling that it will take in house at least some of the massive logistics and shipping services currently provided to it by UPS, FedEx and USPS.

Amazon did not respond to a request for comment. FedEx did not respond to the substance of our request for comment. According to a UPS spokeswoman, “We don’t comment on speculation about Amazon, who continues to be a valued customer.” Cargo Facts has requested comment from USPS.

David Vernon, an analyst at Bernstein Research who tracks the shipping industry, has estimated that USPS handled 40% of Amazon’s volume last year — or almost 150 million items. UPS, meanwhile, is estimated to handle 20% to 25% of Amazon shipments, while FedEx is said to ship 15% to 20% of Amazon’s annual load, according to the equity research firm.

Cargo Facts subscribers can read additional details on Amazon’s plans here.

64 Comments

  1. WOW! I wonder if the new/pre-owned B763s will be all white or will they have a brand new Amazon livery? Or will it be called Amazon at all?

  2. This move on the part of Amazon is probably a long-term strategic move. If they make it work internally (+ considering the difficulties UPS, FED EX and USPS have had the past few years at this time of the year), Amazon ‘sees’ long term market opportunities. Add drones to the picture, which Amazon has been ‘developing,’ you can visualize their long term thinking. UPS, FED EX and USPS may have a new competitive neighbor.

  3. Interesting, the options are endless – Amazon Web Services – started with them having built a huge capability in computing they didnt fully need all of the team – so they started selling off and are now the biggest supplier of cloud services out there by a factor of 10. Could they also bring some innovation to the shipping business I wonder.

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  10. Bill Jackson says:

    This sounds like a de-bottlenecking operation, to prepare planeloads of labelled goods and deliver them to Fedex/USPS/UPS and overseas to their local delivery hubs. Can also be used for inshipped bulk goods.
    Removing this kink in the shipping process fits a fleet of 20 of these planes employed as shuttles.

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  31. Iñigo Salazar says:

    I think that the “best case” scenario for Amazon is to lease entire cargo flights from UPS or FedEx. That way, they will have a greater capacity to direct their own air services, without having to invest in operating their own fleet. Companies like UPS and FedEx can operate scaled-up suppy-chain logistics operations in far more efficient capacity compared to what Amazon can do now. It certainly is not in Amazon’s best interest to plonk in massive amounts of resources to start end-to-end logistics from scratch.

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  47. Maid sense. My Contention has been that Amazon is really a supply chain company. They provide everything needed between the manufacturer and the consumer. They provide both branded and white label services that allow you to run your own site, market through their site, warehouse, ship, bill, etc. You can solely use Amazon or pick and choose the capabilities you need. The physical transport is their one obvious omission.

    However, I expected it to come as a merger/bid for either UPS or FedEx.

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  49. Have read another rumor in Nov about Amazon possibly taking over the old DHL hub at Wilmington Air Park in Ohio using rented planes. Plenty of recent chatter supporting this idea, fwiw

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  57. SMM-Aviation says:

    With it with come all the baggage/overheards. Post-holders, certifications, training, maintenance, etc. It will be interesting to see what will come out of it.

  58. I think u will see Amazon own the planes for strategic security, then contract operators much as the DHL model in CVG.

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  61. I think that Amazon could be gearing up to buy some regional parcel companies. Regionals cover most of the population centers of the USA, would just need a more reliable way of moving packages from hub to hub. For remote destinations, could use USPS to deliver, like RPS, the predecessor of FEG did before they achieved 100% USA coverage. Others like Avon Cosmetics have tried this, but did not have Amazon’s resouces. IF anyone can make a 3rd delivery company a winning proposition, Amazon can!

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