Confirming what local leaders had long suspected, Air Transport Services Group, Inc. said Wednesday it had reached agreements with Amazon Fulfillment Services Inc., an affiliate of Amazon.com Inc., to operate an air cargo network out of the Wilmington Air Park to serve Amazon customers in the United States.
ATSG’s Cargo Aircraft Management subsidiary will lease the 767s, which will be flown by the company’s subsidiary airlines-ABX Air, a Part 121 cargo airline, and charter carrier Air Transport International. The agreement sent shares of ATSG soaring 17% in trading Wednesday.
The duration of the 20 leases will be five to seven years; the agreement covering the operation of the aircraft will be for five years. “At our scale, supporting growth requires adding some of our own logistics capabilities”, said spokeswoman Kelly Cheeseman.
While Amazon presently depends on UPS, the U.S. Postal Service, and FedEx to fulfill orders, this latest move will allow the online retailer to really take matters into its own hands. The air transport company revealed that it has been using five aircraft as a pilot program with Amazon.
Many analysts see the deal as a move that will enable Amazon to assume greater control over its business and shipping costs. At the same time, Amazon has sometimes struggled to deliver packages on time during surges in sales, especially around the holidays.
In a related move, Amazon is to open two fulfillment centers near Manchester and Birmingham airports in the United Kingdom employing a total of 1,500 people.
A Wall Street Journal report explained that while it would likely take years for Amazon to establish its own delivery network, Amazon is a “major customer for both UPS and FedEx, helping drive volume growth at the delivery giants”. Head of French company La Poste said in a local newspaper last month: “Amazon is our biggest customer”. These cargo planes are quite efficient and are created to ensure smoother cargo handling while at the same time ensuring optimum load-hauling to bring down delivery cost. It is quite clear Amazon intends to significantly cut down the expenses involved in delivering the products it sells, and operating its own air delivery fleet is the fastest and cheapest way. Shipping costs is among one of the fastest growing expenses for the company, totaling about 12.5% of fourth quarter sales, compared to 10.9% a year ago