Atlas Air to fly 737-800Fs for Amazon in the U.S.

The operator of the 737-800BCFs joining the Amazon Air fleet was revealed this morning to be Atlas Air Worldwide Holdings’ subsidiary carrier, Southern Air. According to an 8-K filed with the US Securities and Exchange Commission, five 737-800Fs will be placed into service for Amazon this year. 

Atlas said in a statement that Amazon will lease the aircraft “from a third party,” and Southern Air will provide CMI operations for at least five and up to twenty total 737-800Fs. Though Atlas did not reveal the third-party operator, we reported last week that the first Boeing-converted 737F joining Amazon’s fleet (32882, ex-China Southern) will be leased from GECAS.  

The deal with GECAS marks Amazon’s first foray into leasing agreements with lessors other than ATSG’s leasing subsidiary, Cargo Aircraft Management, or Atlas’ Titan Aviation Leasing. Currently, there are few lessors other than GECAS with access to sufficient 737-800 feedstock to fulfill Amazon’s operational scale requirements. 

To return to Atlas’ announcement today, the initial CMI agreement will run for ten years, with an option for Amazon to extend the agreement by another three years. Amazon may also place up to fifteen additional 737-800Fs in service with Southern Air by 31 May, 2021.

As is typical of Amazon’s agreements for ACMI and CMI operations, Atlas has granted Amazon incremental warrants that give Amazon the option of acquiring up to 39.9% of Atlas’ common shares, up from a potential 30.0% under the companies’ previous agreement.  The new warrant has an exercise price of $52.90 per share, up from the $37.50 per share under the 2016 agreement, and can be exercised through 27 March, 2026. 

Regarding the 737-800 conversions, Amazon’s first aircraft was converted at the STAECO facility in Jinan, China. Sources familiar with capacity there indicate that GECAS aircraft will likely tie up conversion lines there at least through the first quarter of 2020. Cargo Facts believes the majority of these convesions are bound for Amazon. If Amazon exercises options for fifteen additional -800BCFs (bringing the e-tailer’s potential fleet size to eighty-seven, following December’s ATSG deal), 737 NG conversions would be off to a roaring start, despite concerns over feedstock availability exacerbated by the 737 MAX groundings.