The retail giant will not get packages delivery via its very own freight aircrafts.
After relying on package delivery companies for year, Amazon.com has finally announced plans of starting its own delivery network. Before getting the packages delivered through drones, the retail giant will be taking to the air a much bigger forms of transport. A deal between Amazon and Air Transport Services Group, an air cargo operator has been signed according to which the retailer will be leasing 20 Boeing 767 cargo planes.
The deal, announced March 9, 2015 will last between five to seven years. The jets that have been leased by the company can carry up to 88 tons of freight across the country. Following the deal, Air Transport Service Group’s stock went up by 16.65%.
This fleet of freight aircrafts is expected to ‘operate an air cargo network to serve Amazon customers all across the United States’ and with the help of this partnership Amazon will be able to ship as much as 15% of its orders, according to an analyst at Stephens, Jack Atkins. Presently, the retailer already has its own trucking fleet; with the help of these freight aircrafts the company will move further away from FedEx and UPS, and would not need to rely on them.
Joe Hote, the Chief executive officer of ATSG stated that the air cargo operator has been working with the e-commerce giant since last summer in an effort to serve it with a fully customized air cargo network. Amazon is aiming at reducing shipping costs; last year it spent over $11.5 billion on shipping cost which in comparison to the year before that was up by as much as 32% while in a two years’ time, the shipping cost has been up by 74%.
Despite that fact that the online shopping company reported an increase in sales as well as profits for the previous year, shareholders were concerned regarding the significant increase in the shipping costs. It has been looking at alternate ways to reduce shipping costs and speed up its delivery process. As per this effort, the company made an announcement in December, according to which it has introduced a fleet of thousands of trucks to speed up deliveries.
As per the deal signed between the two companies, Amazon will have a right to buy almost 20% of the air cargo operator. Outside package delivery services will still be used by the retailer, along with the U.S. postal service. This deal had a great impact on the shares of two of Amazon’s competitors, FedEx and UPS as their shares went soaring down after the deal was announced on Wednesday.
The reliance between Amazon and package delivery providers such as FedEx Corporation and UPS has been a long one as these companies have helped get packages delivered to the doorstep of the retailer’s customers. However, this reliance between the two have not always had positive results as many a times there have been cases where packages were undelivered especially during the holiday season.
No comments:
Post a Comment