Amazon is leasing 20 Boeing 767 freighter planes, confirming reports that the company was negotiating a deal to lease planes to transport products and get them to customer homes more quickly.
According to Air Transport Services Group (ATSG), a leasing operator for planes, Amazon is leasing the planes through its fulfillment arm, Amazon Fulfillment Services. The duration of the 20 leases will be five to seven years.
"We offer Earth’s largest selection, great prices and ultra-fast delivery promises to a growing group of Prime members and we’re excited to supplement our existing delivery network with a great new provider, ATSG, by adding 20 planes to ensure air cargo capacity to support one and two-day delivery for customers,” said Dave Clark, Amazon senior vice president of worldwide operations and customer service in a statement.
Leasing a fleet of planes isn't surprising considering that Amazon has been making moves to own and manage shipping and distribution services instead of relying on others.
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Amazon currently relies on UPS, the U.S. Postal Service, and FedEx to deliver packages to customers’ doorsteps in a matter of days. But with the company’s expected delivery drones, new fleet of trucks, shipping cargo boats, and now planes, Amazon is slowly taking over these operations and relying less on the multinational shipping giants, and potentially avoiding delays caused by these companies.
For Amazon, the main benefit of owning the shipping network could be significant for its bottom line amid soaring shipping costs. The company spent over $8.7 billion on shipping in 2014, up from $6.6 billion in 2013. Creating a logistics service could dramatically lower those costs.
Similar to the way in which Amazon made its cloud computing arm AWS a business, Amazon could also decide to handle shipping for other companies and start competing with the shipping giants like UPS and FedEx.
But Amazon CFO Brian Olsavsky downplayed the e-commerce giant's shipping ambitions on the company's fourth-quarter earnings call earlier this year.
“We are adding more logistics to supplement existing shipping options, and it’s not meant to replace them. We’ve had to add some resources of our own to handle our capacity at peak," Olsavsky said on the call.
As part of the ATSG deal, the leasing company is also allowing Amazon to buy 19.9% of its shares for up to five years at $9.73 per share.