Online retail and logistics giant Amazon (NASDQ: AMZN) on Tuesday publicly confirmed its first-ever purchase of aircraft for its in-house cargo airline after previously building a fleet based on leased aircraft and outsourced freight transportation. Owning aircraft gives Amazon Air an additional level of control over its network, designed to meet service commitments for ultra-fast package delivery.
Amazon said it has purchased 11 Boeing 767-300 aircraft — seven from Delta Air Lines and four from Canadian carrier WestJet. The planes will be operated by third-party carriers.
Amazon is taking advantage of the glut in relatively new used aircraft caused by airlines shrinking their operations to compensate for huge drops in travel business and financial losses due to the coronavirus pandemic. Last summer, Delta retired seven Boeing 767-300s and in its October earnings report announced plans to accelerate the retirement of its remaining 49 B767s, part of a larger strategy to simplify and modernize its fleet.
WestJet removed its four 767 aircraft from service last year. The planes were used to set up the airline’s widebody service to Europe, which has since transitioned to Boeing 787 aircraft, spokeswoman Morgan Bell said.
Amazon said the four midsize jets from WestJet are undergoing conversion to freighter configuration and will join Amazon Air’s network this year. The ex-Delta aircraft will enter service with Amazon in 2022.
“Our goal is to continue delivering for customers across the U.S. in the way that they expect from Amazon, and purchasing our own aircraft is a natural next step toward that goal,” said Sarah Rhoads, vice president of Amazon Global Air. “Having a mix of both leased and owned aircraft in our growing fleet allows us to better manage our operations, which in turn helps us to keep pace in meeting our customer promises.”
The new aircraft put Amazon on pace to operate more than 80 aircraft by 2022.
Amazon has been aggressively building its fleet to keep up with red-hot e-commerce business and close the gap with integrated express carriers like FedEx, UPS and DHL. Last year, Amazon began phasing in a dozen leased 767s from Air Transport Services Group (NASDQ: ATSG) through 2021, with pilots and other air services provided by subsidiary Air Transport International.
E-commerce has experienced double-digit growth for several years, but tripled in volume since the coronavirus pandemic began last March because of demand from stay-at-home consumers avoiding physical stores during the pandemic and using money previously spent on services and experiences for merchandise. Retail analysts say online sales in North America were up 30% during the holiday season. The effect has pulled forward e-commerce growth by three years and has been a key reason North American air cargo volumes have recovered from the downturn compared to other regions.
Aviation website Cargo Facts first reported in September that Amazon.com Services took ownership of its first plane from WestJet and reported the Delta deal a week ago based on a review of the Federal Aviation Administration’s aircraft registry.
Amazon Air’s expansion in the past year has extended beyond its traditional North American base and the fleet.
In November, Amazon launched its first-ever air hub at Leipzig/Halle Airport in Germany. Other regional air operations opened by Amazon Air last year include at Lakeland Linder International Airport in Florida, John F. Kennedy International Airport, San Francisco International Airport, Chicago O’Hare International Airport, Richmond International Airport in Virginia, Austin-Bergstrom International Airport in Texas, Luis Muñoz Marín International Airport in Puerto Rico, Kahului Airport and Kona International Airport in Hawaii, Los Angeles International Airport and Louis Armstrong International Airport in New Orleans.
Amazon is scheduled to open a large West Coast hub in San Bernardino, California, early this year and its $1.5 billion national hub at Cincinnati/Northern Kentucky International Airport this summer.
Amazon doesn’t have an extensive ground network like FedEx (NYSE: FDX) and UPS (NYSE: UPS), so it uses its aircraft to connect city pairs the same way a trucking company would and operates a limited hub-and-spoke air network. But the company’s logistics strategy is constantly evolving and could emulate that of FedEx and UPS over time.