Mar 25, 2016

Amazon's Air Delivery Network

Company: Amazon

Service: Air delivery network

What It Is: Amazon executives have announced that the company will lease 20 Boeing 767s from Air Transport Services Group for five to seven years. The move is an expansion of last year’s pilot program, during which Amazon leased five freighters.

Aim: Amazon’s leasing initiative, according to company executives, is intended to ensure shipping capacity in the short term. Instead of relying on FedEx and UPS freighters to carry Amazon’s growing load of products, the company can now use its own fleet of planes to carry out deliveries. A longer-term goal for Amazon, however, is to create a new revenue stream from third-party delivery operations. Analyst Colin Sebastian sees the leasing program as “the first formal confirmation from Amazon” that it is committed to owning its own logistics chain—a move that would allow the company to compete directly with firms like DHS and FedEx.  

Our Take: Though investing in a fleet of planes to complete deliveries seems like a bold move, it’s not the first time that Amazon has thrown itself into new markets. The company has taken on industries as varied as cloud computing, gaming, media, entertainment, and home services—all with great success. In fact, air delivery could follow in the footsteps of its many other services: Time and time again, Amazon sets out to pursue in-house efficiencies only to discover that it has created a marketable product. Thanks to Amazon’s massive economies of scale, it’s hard to bet against any endeavor undertaken by the e-commerce giant—especially one that, if successful, will enable Amazon to utterly dominate the delivery sector.