The deal with ATSG gives Amazon 20 Boeing 767 jets on leases running five to seven years, which is typical in the air leasing world.
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While the lease will be provided by ATSG’s Cargo Aircraft Management (CAM), the aircraft operation will be handled by ATSG’s airlines – ABX Air and Air Transport International. “We’re excited to supplement our existing delivery network with a great new provider, ATSG”, said Clark.
Announced on March 9, the cargo arrangement had been rumored since December when The Seattle Times reported that Amazon was exploring its own delivery operation. In a media call earlier this year, Amazon CFO Brian Olsavsky said, “We are adding more logistics to supplement existing shipping options, and it’s not meant to replace them”.
This move will likely impact UPS more than FedEx, as the former does an estimated $1 billion worth of business with Amazon each year, but it will hit both major carriers, said Forrester analyst Sucharita Mulpuru-Kodali.
In conjunction with the commercial agreements, ATSG also has agreed to grant Amazon warrants to acquire over a five-year period up to 19.9 percent of ATSG’s common shares at $9.73 per share, based on the closing price of ATSG common shares on February 9, 2016. The air transport company revealed that it has been using five aircraft as a pilot program with Amazon.
In addition to competing with delivery providers such as DHL and UPS, Amazon seeks to gain ground in the grocery-delivery space.
This news comes at a time when Amazon has been front and center in regards to various reports suggesting it may increase its logistics and supply chain operations presence to meet high levels of demand as e-commerce activity continues to increase.
Amazon has quickly expanded the company’s distribution network as it seeks to reduce shipping costs, and speed up delivery to customers.
Given the ongoing efforts from the company, it is quite clear that it is working toward developing its own delivery network that would not just fulfill its own demand but also cater to others, acting as a competitor to its current partners.
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The retailer company already has several of its own white delivery vans with Amazon logo that delivers packages in large U.S. cities. “For these reasons, UPS provides strong customer value that is hard for any company to replicate”. As a result of this announcement, now Amazon is bringing more of its logistics in-house from supplier to fulfillment to delivery.
