Yesterday, Seattle-based Amazon announced that it will shutter operations at Wilmington Air Park (ILN) in Ohio, and construct a new US$1.49 billion “centralized air hub” to support its Prime Air operations at nearby Cincinnati/Northern Kentucky Airport (CVG) in Hebron, Kentucky – just 110 km to the southwest. In parallel, CVG Airport’s board recently inked a fifty-year lease with Amazon that is expandable to 900 acres (365 hectares), giving Prime Air ample room to grow. But wait a minute, Wilmington Air Park had the potential to reopen a second runway – and expansion opportunities could have easily handled Prime Air’s future fleet of forty 767Fs; what else then, could be coming down the pipeline to prompt Amazon’s move to CVG?
Amazon has not disclosed when the move to CVG will occur, or why ILN is no longer sufficient. Dave Clark, Amazon senior vice president of worldwide operations, commented: “As we considered places for the long-term home for our air hub operations, Hebron quickly rose to the top of the list with a large, skilled workforce, centralized location with great connectivity to our nearby fulfillment locations, and an excellent quality of living for employees. We feel strongly that with these qualities as a place to do business, our investments will support Amazon and customers well into the future.”
ATSG CEO and President, Joe Hete added, “While we had hoped that Amazon would choose to expand the sortation and other logistics operations we manage for them here at the Wilmington Air Park and bring more jobs in southwestern Ohio, we certainly appreciate their confidence in our ability to support the development, launch and expansion of the dedicated air network that began here sixteen months ago. The fifteen Boeing 767 freighters we lease to and operate for Amazon, plus five more coming this year, make us proud to be a part of their growth, and we remain committed to support their efforts to delight Amazon customers around the world with exceptional service every day.”
We will add more detail as information becomes available, but for now we can point to a few of the puzzle pieces beginning to fit together.
In March 2016, Amazon Fulfillment Services, Inc., reached an agreement with Ohio-based Air Transport Services Group (ATSG) to lease twenty 767 freighter aircraft and have them operated on a CMI basis by ATSG’s subsidiary carriers. Two months later, in May 2016, Amazon signed a similar deal with Atlas Air Worldwide Holdings (AAWW). Additionally, both deals included warrants which offer Amazon ownership in each of the companies once certain commercial milestones are met. In summary, within two years, Amazon could have 40 767Fs, ownership in two ACMI leasing companies, and a huge air hub.
AAWW and ATSG subsidiaries have long had roots at both ILN and CVG. ATSG operates out of ILN, and affiliate, LGSTX Services currently operates the sortation facility at the airport. ATSG airlines ABX Air and ATI are also based at ILN, but operate at CVG in support of DHL as well. Atlas subsidiaries Polar Air Cargo and Southern Air operate out of CVG, and this is where things get potentially interesting. Polar and Southern fly in support of DHL’s international express business, with both domestic feeder service and daily flights to Asia and Europe from Cincinnati/Northern Kentucky Airport. Additionally, in 2016 DHL renewed its commitment to CVG when it expanded its aircraft apron to a 50-acres, with parking for 16 additional aircraft. Could this have factored into Amazon’s decision to co-locate at DHL’s major hub?
Cargo Facts would not be surprised if a partnership in some form emerged between DHL Express and Amazon. At this point, such a tie-up is pure speculation, but some cooperation could make sense. One possibility would be shared space on international and domestic flights operated for DHL. Southern Air already flies 737-400Fs to many secondary cities in the United States in support of DHL’s international operations, and space on some of those flights operated could be useful for Amazon. As could space on Polar and Southern’s flights to Asia, Europe, and the Middle East.
But, speculation aside, it is clear that Amazon’s Prime Air operation can no longer be written off as “fantastical”. If Amazon decides to compete directly with freight forwarders or global integrators, it will soon have the tools and technology to do so.
Update 2 February
While we are still awaiting comment from Amazon, it has been confirmed that the company signed a 50-year lease to operate at CVG Airport. Stay tuned for another update next week.