(Updated 12:50 p.m. )
Amazon has officially entered the for-hire air cargo market, making capacity on its large fleet of cargo jets broadly available for the first time to freight forwarders and other businesses after previously providing airlift to a limited set of companies. The creation of a direct sales channel for heavy shipments beyond Amazon’s parcel ecosystem puts the e-commerce platform in position to challenge FedEx and UPS for a greater share of domestic airfreight.
Amazon (NASDAQ: AMZN) established its air logistics arm in 2016 to meet delivery commitments of one to two days for Prime members and drive customer satisfaction. Amazon Air, which relies on contract airlines to fly its leased parcel freighters, now has more than 100 aircraft in its fleet, several air sortation hubs, more than 250 daily flights and a route network that connects 54 U.S. airports.
The mega-retailer three weeks ago unveiled the Amazon Air Cargo website as a vehicle for advertising the airfreight product and booking shipments online. Shippers can tender freight as needed, reserve regular blocks of space or charter entire aircraft. Amazon is also offering air cargo service in Europe and India, where it operates more limited networks.
“Ready for takeoff! Amazon Air Cargo is now open for business serving domestic networks across North America, EMEA, and Asia. Built on the backbone of Amazon’s world-class logistics network, we’re ready to handle, transport, and deliver your goods safely, securely, and efficiently — on time, every day,” Amazon’s logistics unit announced on LinkedIn.
Amazon for years quietly sold space on its cargo jets to a handful of clients. Now it is fully externalizing the service to capitalize on excess capacity after working out the kinks for moving high volumes of third-party freight.
Handling containers with products of varying types and sizes alongside express small parcels that are routed to destinations through a highly automated conveyor sortation system increases operational complexity. There is no publicly available information about whether Amazon freighter aircraft fly full, but logistics practitioners familiar with the company said the air network has imbalances where select lanes have weak load factors. Revenue gained from wholesale air cargo can help offset overhead costs, they said.
Amazon’s 3-year-old superhub at Cincinnati-Northern Kentucky International Airport is a key part of the company’s ability to provide air shipping for customers outside the Amazon supply chain.
The new website allows Amazon Air to attract customers besides those using Amazon Prime, the electronic retailer’s paid subscription service, as it opens the door to full-scale airfreight service. The target audience includes logistics companies, online retailers and postal services.
“We’re always working to develop new, innovative logistics solutions that support Amazon customers. Amazon Air Cargo has been offering third-party shippers access to Amazon’s logistics network to deliver air shipments with speed and reliability since 2019, and we are excited to now expand the service to more cargo customers,” spokesperson Alexa Clark said in a statement to FreightWaves.
Amazon marketing states the carrier will haul all types of products, ranging from perishables, pharmaceuticals and oversized, to parcels and dangerous goods. Customers can access real-time supply and make cargo bookings by integrating their transportation management systems with Amazon’s reservation system.
The Loadstar was first to notice Amazon’s new effort to market air cargo shipping.
Amazon mostly operates Boeing 737-800 narrowbody and Boeing 767 medium widebody freighters but has added six Airbus A330-300 large cargo jets to the fleet in the past year. Small fleets in Europe and India are entirely Boeing 737-800s.
During the past two years, the retail giant has been more cautious about growing the air network as e-commerce sales normalized and it shifted to a regional fulfillment model that decreases reliance on air transport. Amazon Air has also mostly transitioned to a hub-and-spoke model that mirrors FedEx and UPS, with less point-to-point flying, according to researchers at DePaul University who monitor Amazon Air’s progress. The European network serves about 10 airports, down from a high of 13 three years ago.
The regional fulfillment strategy “has likely opened up spare capacity that it is now looking to deploy to third-party customers,” Morgan Stanley analyst Ravi Shankar said in a client note on Wednesday, reacting to this story.
Amazon Air follows integrator playbook
Amazon’s move toward offering wholesale capacity is a logical evolution for an integrated express carrier. FedEx, UPS and DHL Express for decades have offered wholesale capacity to outside shippers seeking a deferred delivery mode.
Satish Jindel, CEO of parcel shipping analytics firm ShipMatrix, said Amazon will now compete with FedEx and UPS for traditional domestic airfreight.
“UPS and FedEx, in addition to parcel, they move airfreight domestically for customers and freight forwarders. So they’re going to be an alternative to UPS and FedEx,” he said. “More importantly, they have the resources to deploy more aircraft if they are successful.”
The move to sell air cargo service is consistent with Amazon’s rollout a year ago of a stand-alone shipping service under which the retail-tech giant uses its independent drivers to provide pickups at warehouses and handle the shipments to final delivery. In early 2023, Amazon opened eligibility for Buy with Prime to all e-commerce merchants, instead of by invite only. The program allows online sellers, including those that do not sell on the company’s website, to offer Prime fulfillment services through their own online stores. The air cargo expansion also fits with a year-old global supply chain service, which involves picking up inventory from manufacturing facilities worldwide, booking the shipment with an ocean carrier, handling customs clearance and ground transportation, managing inventory replenishment, and making the final delivery. Supply Chain by Amazon leverages the company’s position as a bulk buyer of ocean freight capacity.
Amazon has been slow to expand the ground shipping beyond the initial 15 markets but will make a bigger push next year to do so, Jindel predicted.
Amazon’s success with third-party cargo will depend on the terms, conditions and pricing offered, because express carriers give their core business priority over forwarder cargo when space is tight, Brian Clancy, managing director of Logistics Capital & Strategy, told FreightWaves.
“The Achilles heel in that strategy is that whenever you have a volume surge the first thing that gets kicked off the aircraft is wholesaler cargo. If you say we can’t guarantee it [the shipment schedule], we have to roll it to the next day if we have an overload situation on certain lanes, the forwarders will throw up their hands and say I can beat that with point-to-point truck or I’ll give it to Forward Air and they’ll run it through their expedited less-than-truckload network,” the veteran consultant said.
Most forwarders tend to use express capacity for less urgent freight “because when the planes aren’t full, it’s the best value equation. You will get the best service with the highest on-time performance, assuming you can use the capacity consistently,” Clancy added.
He downplayed the potential effectiveness of commercializing Amazon Air in Europe, because it increasingly has become a trucking market, Amazon utilizes small 737-800 aircraft, and policymakers there are discouraging short-haul flights to meet strict carbon-reduction targets.
Meanwhile, FedEx is beginning to downsize its domestic, daytime freighter network after the expiration of a major contract with the U.S. Postal Service, part of a broader reorganization of the air network designed to reduce costs. The logistics integrator will continue to provide daytime service for other customers, but flight activity will be tailored to better maximize aircraft utilization, officials have publicly stated. The reorganization also involves segmenting express parcels to overnight flights and international deferred freight to daytime departures so that warehouse workers can focus on processing high-yield priority packages without the distraction of handling large pallets at the same time.
Click here for more FreightWaves/American Shipper articles by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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