Amazon Wants to Add Twenty 767s to Its Delivery Operation

(The Seattle Times/TNS) -

Amazon.com is negotiating to lease 20 Boeing 767 jets for its own air-delivery service, cargo-industry executives have told The Seattle Times.

The online retail giant wants to expand its own cargo operations to avoid delays from carriers such as United Parcel Service, which have struggled to keep up with the rapid growth of e-commerce.

“Amazon is pretty fed up with the third-party carriers being a bottleneck to their growth,” Robert W. Baird & Co. analyst Colin Sebastian said.

That has led Amazon to consider handling more of its own delivery. A senior aircraft-leasing company executive familiar with Amazon’s plans said the company has approached several cargo-aircraft lessors to line up the planes.

Leasing 20 jets would be a significant expansion of an Amazon trial operation out of Wilmington, Ohio, operated by ATSG on Amazon’s behalf, sources said. A cargo-industry source said Amazon expects to go beyond the trial run and start a larger air-cargo operation by the end of January.

Amazon declined to comment on the development of an air-cargo operation.

The trial at Wilmington is limited. CEO Joe Hete said in a November conference call that ATSG is using five 767s flown by the company’s subsidiaries Air Transport International and ABX Air for a customer he declined to name.

Airplane-tracker Flight­Aware.com shows the two carriers are flying about five times a day from Wilmington to Dallas; Tampa, Fla., Ontario, Calif.; and Allentown, Pa. Amazon has warehouses near each of those airports.

From Nov. 1 through Dec. 17, the two ATSG carriers flew 219 flights with 767s from Wilmington. In the comparable period in 2014, the carriers flew just seven 767 flights from Wilmington.

The additional jets Amazon is negotiating to lease would likely operate out of Wilmington Air Park, a former cargo hub that had fallen into disuse.

According to ABX, main decks of its 767s can accommodate up to 19 pallets, each measuring 88 by 125 inches at the base.

Because Amazon doesn’t have an Air Operator’s Certificate, which it needs to fly airplanes commercially, it would have to turn to cargo-jet lessors to launch the business.

Leasing newly built Boeing 767F jets runs $600,000 to $650,000 a month, according to industry experts.

Used converted freighter jets, which Amazon will likely have to launch the cargo business, cost about $300,000 to $325,000 per month to lease.

Amazon is working to avoid the debacle of two years ago, when the end of year shopping crush overwhelmed UPS, causing many Amazon customers to get packages after December 25. Those delays led Amazon to refund shipping charges and offer customers $20 gift cards.

“This is more of a warning shot across the bow of the express industry,” said Ned Laird, former managing director of Seattle-based consultancy Air Cargo Management Group, who is retired. Amazon is saying: “’We’re not getting what we need,” Laird said. We’ve told you what we need. We’ll go elsewhere for now.’”