Amazon has agreed to lease 20 cargo planes from Atlas Air Worldwide on Thursday, just two months after announcing a similar deal with another aircraft-leasing company.
The announcement, made through Atlas Air's press office, includes the lease of 20 Boeing 767 freight aircraft and support for crew, maintenance, and insurance.
It also gives Amazon the right to buy up to 20% of Atlas Air's common shares, with options to acquire an additional 10% of the shares.
The deal could last seven to 10 years and will go into effect in the second half of 2016. Combined with the flight-leasing deal announced in March, Amazon will have at least 40 cargo planes in operation within the next couple years.
Atlas Air shares jumped nearly 30% after the announcement, while Amazon shares remained roughly flat.
The announcement is the latest in Amazon's move to ramp up its own delivery network. The e-commerce giant has made a series of moves over the past year, including the purchase of thousands of its own trailer trucks and a French delivery company, that make its shipping ambitions clear, while it continues to rapidly expand its Prime same-day and two-day delivery services.
"We continue to believe the natural step for Amazon is controlling more of its own transportation and logistics, including additional air cargo and other transportation/operations, as these are almost a necessity to continue the rapid expansion of Prime and Prime Now," Baird Equity Research's Colin Sebastian wrote in a note Thursday.
Growing shipping ambitions
Some people believe Amazon's end goal is to build up its own shipping network that will allow it to bypass current delivery partners, like UPS and FedEx, and even provide shipping services to other sellers.
But Amazon has played down that speculation, pointing out its logistics expansion is only intended support the current partners' fill capacity.
"The reason we add logistics capability and transportation capability is so we can serve our customers faster and faster delivery speeds and we've needed to add more of our own capacity to supplement our carriers and our partners," Amazon CFO Brian Olsavsky said in its last earnings call. "They're still, again, 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."
Baird Equity Research's Sebastian doesn't buy it. He believes Amazon wants its own shipping network, especially given its rising shipping costs, and wants to ultimately build a FedEx-like delivery business that gives Amazon a new market opportunity worth $400 billion.
"We believe Amazon will offer transportation and logistics services to third parties. While we understand the skepticism surrounding the potential of third-party logistics, precedent suggests Amazon has larger ambitions beyond the ATSG and Atlas Air announcements," Sebastian wrote in the note.
"Moreover, we estimate a $400 billion+ market opportunity for Amazon in delivery, freight forwarding, and contract logistics, of which even a small slice could prove material for Amazon."
