Amazon Secretly Building an Air Cargo Arm?
In 2013, right around the time that Amazon announced that Sunday delivery deal with the USPS, pundits were pointing out that Amazon had grown large enough and was shipping enough packages on a daily basis that pretty soon the internet retailer was going to have to either acquire FedEx or UPS – or build its own shipping company.
The truth of that conclusion was ultimately proved a few weeks later when failures on the part of UPS and other shipping partners during the holiday shipping rush left many customers without gifts under the tree on Christmas day.
A secretive new air transport company started operating out of an ex-DHL facility in Wilmington, Ohio earlier this year. No one knows who owns it, but Motherboard reports that "Aerosmith" is leasing four cargo jets from a couple different transport companies and running daily flights:
Through a contract like this, called a wet lease, airlines rent out their planes, crews, and maintenance and training teams to carry out projects and ship products for clients. The patchwork operation allows a company to move freight around the world without purchasing planes of its own.
The project is an air freight transportation operation flying four flights a day, Cunningham said. The hub-and-spoke operation is based out of Wilmington (ILN) with flights to and from four other confirmed airports: Allentown, PA (ABE), Ontario, CA (ONT), Tampa (TPA) and Oakland (OAK). Amazon has distribution centers about 20 miles from ABE and ONT and within 60 miles of TPA and OAK.
The destination airports have confirmed that flights are coming in from the Wilmington facility, but were unable to say what was on the flights. And as for who is leasing the Wilmington facility, no one is talking.
Paul Cunningham, a spokesperson for ATSG, the Ohio-based aviation holding company that operates the facility, has declined to say whether the company behind Aerosmith was Amazon, citing a nondisclosure agreement. “It is general consumer goods,” he said of the cargo being shipped. “I can’t be specific, we just receive the freight, load it on and move it. It’s not something that it’s obvious what it is.”
Very little is known about the specifics of the operations, but one thing we do know is that UPS, FedEx, and DHL have all denied involvement, while Amazon has neither denied nor confirmed its role. Amazon has only said that "We’ve long utilized air capacity through a variety of great partners to transport packages and we expect that to continue."
According to its FCC filings, Amazon spent $4 billion on transportation costs last year, out of annual revenues of close to $90 billion. That’s money Amazon could be saving by moving more of its logistics in-house.
Furthermore, a report from financial analysts at RW Baird found Amazon could generate $5 billion a year in revenues by investing in its own logistics services.
In short, the question today isn’t whether "Aerosmith" belongs to Amazon but what the retailer plans to do with it. For example, does Amazon plan to defray its operating cost by running a shipping company like UPS?
Amazon already has local delivery in much of the US, and they have that contract with the US Postal Service, so all they would need to deliver your packages for you would be a logistics backbone – like Aerosmith, for example.
Of course, 4 planes won’t get Amazon there; FedEx operates over 600 cargo jets (globally), so even if Amazon were focused on just the NA region they’re still going to need dozens of not hundreds of planes.
Just think: By this time next year the APS, the Amazon Parcel Service, could be delivering your stuff and offering to guarantee that it would arrive by Sunday.