Amazon To Lease 20 Jets To Deliver Goods Faster

The online retailer has leased 20 cargo air crafts to deliver to its customers in one to two days.

Amazon will lease 20 cargo air crafts from the New York based airline Atlas Air, an agreement that will expand the emerging air force of the American E-commerce company by two times and could provide it a sizeable share in another air cargo company. The measure came just some months after the online retailer signed a similar agreement with Air Cargo Transport Services Group( ATSG)

The recent agreement indicates the scope and seriousness of the intention of the Seattle based organization to enter the logistics industry, as it’s rapidly growing shipment needs to surpass the capacity of conventional carriers like FedEx as well as UPS. It is quite necessary for the company to strengthen its transportation capacities as it bets on speedy delivery facilities to dominate conventional retailers as well as other online rivals.

The sales of Amazon grew at 28% in 2016’s first quarter, to $29.1 billion. Its delivery costs increased at a faster rate of 42% to $3.3 billion. While addressing a recent earning call, Chief financial officer of Amazon Brian Olsavsky stated the reason for the organization’s entrance in the logistics industry is to “serve our customers faster and faster delivery speeds.” The Seattle based organization does not aim to replace its current logistics affiliate UPS as well as FedEx, only to provide complementary support to them, he stated.

These  are “great partners, have been and will continue to be for the future. But we see opportunities where we need to add additional capacity and we’re filling those voids,” Brian said.  Nevertheless, a senior official of the air-cargo company aware of the deliberations inside the growing air-cargo division of Amazon believes that its longer game might involve developing a substantial local network that couldn’t only deliver its packages but of others as well.

During an earnings conference all on 5^th May 2016, CEO of Atlas William Flynn stated “DHL is very supportive of this transaction.” A spokeswoman of Amazon states the plane will be flown to support 2 as well as 1 day delivery for the rapidly growing Prime membership. The facility costs $99 per year and provides shipping and other benefits.

In its news release, the American airline stated it would fly the 767- 300 aero plane for the web retailer. The agreement also provides the company an option to purchase up to 20% of the common shares of Atlas over 5 years at a price of $37.50 per share.

50% of those warrants were given to the online trading platform operator while the deal was being signed, stated Altas executives in an earnings call. The residual will be given when the program gets entirely ramped up.