Sign up for online retail news and stats delivered each week.
Amazon leases planes to take greater control of shipping and delivery costs
The company will lease 20 Boeing 767s from Air Transport Services Group.
According to a report in The Wall Street Journal, Amazon has secured a shipping partner in an attempt to take more control over its shipping and delivery costs. The company has relied heavily on third-party shippers such as UPS and FedEx, and this deal could be a prelude to building its own transportation and logistics network.
Amazon is reportedly going to lease 20 Boeing 767 planes from Air Transport Services Group. The WSJ article says that the partnership will allow Amazon to control and deliver up to 15 percent of its shipping and package volume.
Analysts believe the move is about cost savings but also about reliability. Numerous packages have been delivered late over the holidays during the past several seasons because shippers such as UPS and the US Postal Service were overwhelmed by volume. The late delivery of packages ultimately reflects on Amazon and its brand.
Amazon Prime memberships, which have been growing and may number up to 80 million globally, put additional pressure on logistics companies to deliver at accelerated rates. According to third-party estimates, Amazon paid more than $4 billion to shipping and delivery companies in the fourth quarter of 2015.
It’s not entirely clear whether the Air Transport Services Group leasing deal is the beginning of a larger Amazon logistics network or whether it’s simply to provide extra capacity as an insurance policy against problems with third-party shippers.
Amazon will now effectively be both a customer and a competitor of shipping services, both in the US and abroad. Amazon drone delivery, known as Prime Air, and Amazon Fresh are other examples of efforts to built an alternative transportation network. The company has also leased thousands of trailer-trucks that now carry the Amazon brand to more efficiently move goods between fulfillment centers.