Amazon to Start its very on Fleet of Boeing Aircrafts

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.

Amazon Plans To Acquire Colis Prive To Take On UPS and FedEx.

The retail company is planning to acquire the French delivery package service in an effort to start its on delivery process rather than relying on external parties.

A report published in the Seattle Time highlighted that Amazon is all set to start its package delivery service, as it is on its way to acquire Colis Prive, a French package delivery firm. According to the report, the retail giant will be purchasing a 75% stake in the delivery firm.

The e-commerce giant is going all out to change the face of retail, as it adds the distribution aspect into its logistics sector. The deal is expected to be finalized and carried out in the first half of 2016.

The initial theory that emerged in the past regarding Amazon’s own delivery service turns out to be true as this acquisition news surfaced. It is believed that this would only strengthen the company further as it makes an effort to build its own distribution service, according to Colin Sebastian, an analyst at Baird.

Sebastian added that the ecommerce organization would be using this for its in-house distribution services along with making deliveries to third-party companies. Representatives from Colis Prive also said in an interview with a French newspaper that it will continue to build its ‘commercial portfolio’ and will not only distribute its services to the retailer.

This acquisition has been a part of the plan to take on its rivals UPS and FedEx, although it will be a while till it manages to emerge as a strong competitor in the delivery industry. Almost 25% of the French company is already owned by Amazon.com, now it is aiming at acquiring the rest of the 75% as well.

Presently, the online retailer has been relying on UPS, FedEx or DHL for its deliveries to reach its customers. In the near future, it plans to have delivery drones and its own fleet of trucks. Thus, it is safe to say that in time, it will not be relying much on third party delivery services.

On the other hand, the retail giant is working on leasing 20 Boeing 767 jets for transportation purposes of its products and getting them delivered to various customers. 

Amazon stock, at this point, is being traded at $617.74, which indicates an increase of 1.76%. Towards the high end, the share price was seen at $619.85 and the lower-end was seen at $598.57. Amazon reported earnings per share of $0.69 with price to earnings ratio of $896.11. The 52-week high of the e-commerce company is $696.44 and 52-week low is $285.25.