Confirmation That Amazon Will Lease U.S. Air Cargo Lift Capabilities
Yesterday, business media officially confirmed in action what Supply Chain Matters and other online fulfillment focused social media sites had been predicting, namely that Amazon will reduce its sole dependence on traditional parcel carriers for air and surface transportation and logistics fulfillment.
Air Transport Services Group (ATSG) confirmed a deal for Amazon Fulfillment Services to lease as many as 20 ATSG owned Boeing 767 aircraft for air cargo transportation needs.
Supply Chain Matters initially echoed reports that ATSG was possibly piloting air cargo services for what was, in the fall, speculated to be Amazon. The program initially involved two 767 aircraft which was expanded to 5 aircraft in November. The pilot program was to run through this month.
With the new announcement, Amazon has seriously upped its commitment toward supporting its own domestic air cargo support operations, shuttling inventory and shipments among its U.S. customer fulfillment centers. A fleet of 20 large size aircraft provides considerable lift capacity as well as next-day or two day delivery capability. Once more, with the agreement, ATSG has granted Amazon warrants for acquiring up to 19.9 percent equity ownership in the leasing firm.
According to reporting by The Wall Street Journal, Amazon has taken such steps to reduce its reliance on traditional parcel delivery services firms such as FedEx and UPS and to build out its own network of last-mile delivery services. An Amazon spokesperson indicated to the WSJ that the ATSG deal will help further develop its Amazon Prime delivery services.
The new ATSG deal reinforces remarks from Amazon CFO in February when the online retailer formally reported financial results. The CFO essentially disclosed that those existing parcel delivery providers could not handle Amazon’s delivery service commitments this pas holiday season. In mid-January, a Seattle Times report indicated similar speculation, reporting that Amazon would begin competing directly with longtime parcel partners in a matter of weeks.
As the WSJ noted in this week’s report, Amazon branded delivery vans have already made their presence among large U.S. cities and suburban locations. This author has made multiple spotting’s of such delivery vans in the Boston area.
While Amazon is not disclosing any plans to implement similar leasing of air freight services to support international fulfillment needs, we would speculate that expansion is just a matter of time, depending on the learning from U.S. deployment. The Seattle Times report in January indicated that sometime in the first quarter, Amazon was expected to acquire the 75 percent interest the e-retailer owns in French parcel delivery company Colis Prive to add to its prior 4.2 percent interest in UK parcel delivery company Yodel in 2014.
As noted in our prior Supply Chain Matters commentaries, Amazon is a company that thinks and executes boldly, and the pieces of its industry disruptor strategy are once again becoming more visible. In addition to air lift capability, we provided our readers with visibility to the leasing of hundreds of Amazon Prime branded semi-trailers.
The implications for B2C / B2B online fulfillment are significant and industry teams need to keep a keen eye out for opportunities as well as threats. On the one hand, Amazon could become a longer term option for online parcel delivery fulfillment. On the other, its continued juggernaut and dominance of online retail fulfillment from shopping discovery through last file fulfillment will present considerable market threats.