Supply-Chain Obsession Is a Prime Day Gift for Amazon Air
Amid a global scramble to regain control over supply chains, the e-commerce giant’s rapidly growing fleet of aircraft could bring it into more direct competition with FedEx and UPS
By Jon Sindreu
Amazon’s cargo airline currently makes an average of 187 flights a day, compared with 85 in May 2020. / PHOTO: JEFFREY DEAN/BLOOMBERG NEWSThere is nothing like a pandemic and a European war to highlight the value of logistics.
Amazon. com’s growing fleet of planes shows that it is investing hard to deliver—probably at the expense of FedEx, FDX 2.42% UPS UPS 3.05% and DHL.
Amazon’s cargo airline currently makes an average of 187 flights a day, compared with 85 in May 2020, according to a biannual analysis led by Joseph Schwieterman, a professor at DePaul University, published late Tuesday.
Since the Covid-19 crisis started, e-commerce purchases have skyrocketed and a lot of belly-hold space in planes has been removed.
Many airfreight companies have seized the opportunity to grow and, as this column predicted in early 2020, Amazon has taken the lead.
It now has more than 80 jets—less than DHL’s 202, UPS’ 289 and FedEx’s 474 but a lot more than the 50 it had at the start of 2020.
Even that may be an underestimate.
Amazon doesn’t operate its flights, instead relying on partners such as Air Transport Services Group.
Mr. Schwieterman believes that the real in-service fleet figure may be above 110 planes.
Some partner flights don’t sport the Amazon Air tail but, based on their routes, he thinks they are probably still servicing the e-commerce company.
This seems to be a feature of its European push, which started in 2020 through a collaboration with Ireland’s ASL Airlines.
He estimates that daily flights in Europe have grown from 8.2 on average last August to three dozen now, with these “shadow flights” amounting to some two-thirds of the total, up from a handful.
Having previously leased its planes, Amazon started buying some last year as a flood of parked jets entered the secondhand market and freighter conversions surged.
It has also taken equity stakes in ATSG and has warrants on the stock of Atlas Air.
This strategy of building extra flexibility and control may herald more encroachment on the territory of FedEx and UPS.
Amazon already provides some “third party” services to companies, and could soon start competing head-to-head in business-to-consumer deliveries.
“It’s more than a baby step in their delivery system: It’s a strategic move that opens the door to a whole new set of revenue sources,” Mr. Schwieterman said.
Even after spending heavily on its own vans, trucks and warehouses, Amazon still relies on traditional logistics firms to deliver a lot of packages, which makes for a strained partnership.
But the company hasn’t used its planes much to compete directly with the likes of UPS.
It typically flies inventory between warehouses on daytime flights, with a focus on two-day delivery.
There are clues that this may be changing.
Routes seem increasingly designed not just to align with warehouse needs but also to close geographical gaps.
The report estimates that 73% of the U.S. population is now within 100 miles of an Amazon Air airport, versus 54% in May 2020.
Late flights from Amazon’s Wilmington Air Park hub, as well as the addition of ATR 72 turboprops to the fleet last year, also point to an ambition to match the fleet to consumer schedules.
Next-day delivery often involves smaller planes making overnight trips.
Media reports suggest that long-haul Boeing 777 and Airbus A330 planes could also be incorporated into Amazon’s fleet.
They could potentially be used to source products from manufacturers across oceans.
A rule of thumb among business academics is that companies have good reason to buy a supplier when sourcing a product is subject to a lot of uncertainty.
With uncertainty today pervading the entire global supply chain, Amazon’s logistics ambitions seem ready for takeoff.
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