Amazon takes the plunge into air cargo

It’s happened. In what could be a nightmare scenario for express air carriers, Air Transport Services Group (ATSG) and Amazon have inked a deal whereby ATSG will now operate an air transport network for the online retailer in the United States.

The agreement, with Amazon Fulfillment Services, an affiliate of Amazon.com, includes the leasing of twenty 767Fs by ATSG’s Cargo Aircraft Management (CAM), which will be operated by ATSG’s airlines, ABX Air and Air Transport International. The deal also includes gateway and logistics services provided by ATSG’s LGSTX Services. The 20 leases are for the duration of five to seven years, and the agreement for the operation of the aircraft is for five years.

“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’s senior vice president of worldwide operations and customer service.

Additionally, ATSG has agreed to grant Amazon warrants for acquiring 19.9 percent of ATSG’s common shares at US$9.73 per share over the next five years, which was the closing price of ATSG stock on Feb. 9, 2016. ATSG stock jumped by more than 18 percent based on the news of this service.

Joe Hete, president and CEO of ATSG, confirmed that his company had been working closely with Amazon since last summer to test whether “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.”

In September 2015, ATSG launched what was known as “Project Aerosmith,” a trial express network from DHL’s former U.S. base in Wilmington, Ohio, for an unspecified customer that was long-suspected to be Amazon, but never confirmed until now.  Amazon is also building a one-million square-foot fulfillment center at Rickenbacker Global Logistics Park, near Columbus, Ohio, and an 800,000 square-foot fulfillment center in Etna, Ohio, along with three new data centers in the Columbus region.