Days after FedEx CEO Frederick Smith dismissed the Amazon threat to its business during the company’s earnings call, Amazon announced an expansion of its two-year old Amazon Air operation which will now add ten 767-300 dedicated Amazon cargo aircraft to its fleet. The planes are being leased from existing partner, Air Transport Services Group, Inc. (ATSG), which Amazon had previously tapped back in 2016 for 20 Boeing 767 freighter aircraft.
Before today’s announcement, Amazon’s air fleet operations had 40 total aircraft in use, as it took delivery of the 40th Boeing 767 cargo plane in November. Now it will grow to 50.
The 40 aircraft today are flying in and out of gateway operations at over 20 airports, and play a significant role in how Amazon is able to make good on its promises of fast, two-day shipping for Prime members, Amazon says.
The 10 new planes from ATSG will join Amazon’s fleet over the course of the next two years.
Amazon will also open a new Regional Air Hub in 2019 at Fort Worth Alliance Airport, followed by the opening of the Air Hub at the Cincinnati/Northern Kentucky International Airport in 2021. Amazon had previously announced openings of a gateway operation in Wilmington, Ohio in 2019, as well as an expanded operation in Rockford, Illinois, the company noted.
“Our customers love massive selection and fast delivery, and the Amazon Air capacity we are building enables Prime delivery speeds for customers from Seattle, Washington to Miami, Florida,” said Dave Clark, Senior Vice President of Worldwide Operations at Amazon, in a statement about the fleet’s expansion. “By expanding the Amazon Air network through our partnership with ATSG we’re able to ensure we have the capacity to quickly and efficiently deliver packages to customers for years to come,” he said.
The news of the Amazon Air deal comes days after a Seattle Times story reported ATSG would acquire 20 of the used 767s being retired by American Airlines over the course of next three years. The passenger jets would be converted to freighters, and it seemed likely Amazon would be the main customer.
However, ATSG had declined to name Amazon as a client at the time of the original reporting.
ATSG may not be the only one looking to buy more planes for Amazon. In November, Amazon’s other fleet partner, Atlas Air, was reported to be shopping around for around half a dozen more aircraft, too.
FedEx had downplayed Amazon’s threat only days ago, with CEO Frederick Smith telling investors, “We don’t see them as a peer competitor at this point in time.”
He pointed out that Amazon Air’s network was set up to move inventory within the Amazon system – like not-in-stock and low-turn products, as well as forward-stocked items for third-party customers who can’t duplicate inventory at every place. That means it’s scheduled differently than systems set up by FedEx or UPS, Smith explained.
Smith also said FedEx had not seen impact from Amazon Air, in response to a question from Merrill Lynch analyst Ken Hoexter. “Our numbers do speak for themselves as we are seeing significant volume growth across our U.S. domestic parcel business,” he said.
The exec additionally blamed the company’s problems not on Amazon’s threat, but on “bad political choices.”
“I’ll just conclude by saying, most of the issues that we are dealing with today are induced by bad political choices. I mean, making a bad decision about a new tax, creating tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state owned enterprise initiatives in China, the tariffs that the United States put in unilaterally,” Smith told investors. “So you just go down the list, and they’re all things that have created macroeconomic slowdown,” he said.
