According to a new report from researchers following Amazon’s air logistics operation, the retail giant’s private cargo aircraft expanded flight activity by 31% in the last year, with much of the expansion recently taking place in Europe to support the company’s e-commerce operations.
The increase in European flight activity occurred as Amazon (NASDAQ: AMZN) began to expand its domestic air network and position Amazon Air to potentially handle third-party freight in addition to its current focus on fast inventory replenishment for warehouses and fulfillment centers. Amazon has also focused flight scheduling in narrower bands at its Cincinnati and Wilmington, Ohio, hubs in the last six months, and has begun to deploy turboprop planes to reach smaller areas.
“Its annual growth in flight activity is likely to hover around 20 percent -24 percent, which, while slightly slower than in the recent past, is still impressive considering that Amazon Air is well over twice the size” it was two years ago, according to a report from DePaul University’s Chaddick Institute for Metropolitan Development.
Amazon Air could have more than 100 planes in its fleet by the end of the year, and it is on schedule to have 200 planes in its system by 2028. The authors also speculated on a potential strategic change to huge, intercontinental freighters to handle direct imports for Amazon’s retail business.
Europe’s expansion
According to the Chaddick researchers, Amazon Air now operates more than 38 flights each day, servicing eight cities in Europe with a mix of own-registered aircraft and flights using aircraft belonging to transport partners.
Amazon uses contractors to fly its freighters, the majority of which are registered to Amazon and bear the recognizable light blue “smile” insignia. The Chaddick team uncovered virtually identical flight itineraries for off-brand planes operated by partner airlines on Amazon’s behalf by examining data from 4,500 takeoffs and landings from flight-tracking sites during a six-month period. These are airplanes that do not work for Amazon full-time but are used to supplement the dedicated fleet.
ASL Aviation Holdings, based in Dublin, manages Amazon’s freighter fleet throughout Europe. Amazon Air’s intra-European flight activity increased from eight to 18 flights per day between August and March, with ASL-registered aircraft performing up to two dozen equivalent daily flights. According to earlier corporate remarks, ASL took receipt of an anticipated seven 737-800 aircraft converted to pure freighters last year, allowing for the enhanced tempo.
According to the researchers, the most Amazon activity was detected in Cologne-Bonn Airport in Germany and Paris Charles de Gaulle Airport.
Amazon is expanding its network.
According to the data, Amazon boosted flight activity by 14.3 percent in the last six months to 187 flights per day, excluding lift provided by air cargo partners. Package flights are up 31% on an annual basis. In the United States, combined flight activity fell to 13% as a result of Amazon’s usage of leased aircraft and slower growth of partner flights than in Europe. The majority of the new flights connect to the hubs at Cincinnati/Northern Kentucky International Airport (CVG) and Wilmington, as well as regional hubs in Seattle, San Bernardino, California, and Fort Worth, Texas.
The number of flights between Canada and the United States has remained consistent at around 16 per day.
Amazon’s expansion places 73 percent of the US population within 100 miles of an Amazon Air airport, up from around 70 percent last summer and 60 percent a year earlier.
Amazon Air now has 88 all-cargo planes in its fleet, 15 more than in August, with around two-thirds of them being Boeing 767s. The majority of the remaining planes are 737-800 narrowbody jets. Silver Airways, a tiny passenger airline, began operating five ATR72-500 turboprops for Amazon last October.
In North America, the airline now serves 47 airports, up from 41 in August. Silver Airways provides shuttle service between Fort Worth Alliance Airport and Albuquerque, New Mexico, Des Moines, Iowa, Omaha, Nebraska, and Wichita, Kansas.
The turboprops typically enable next-day package delivery, departing in the middle of the night and returning before daybreak, according to the research, although departure timings for larger aircraft vary based on inventory needs within the network.
Amazon, like other importers, employs international maritime and air services to get produced items into its distribution system, but it has the size to command vendor capacity. According to Cargo Facts, Amazon is considering purchasing huge Boeing 777-300 and Airbus A330-300 freighters after they are converted from a passenger configuration to handle more of its intercontinental shipments.
“We believe that considerable transoceanic flying is on the horizon, owing to the rising supply chain issues confronting practically all retailers and the sheer scope of Amazon’s logistical requirements.” Bringing more transoceanic ships “in-house” will give it greater control over its supply chain, according to the research. “Changes to its supply chain will be incremental and will most likely take the shape of experiments to assist Amazon in assessing the advantages and costs.” We expect the airline will gradually expand into transoceanic flights over the next two years, most likely with a dozen or fewer planes, but the longer-term could see considerably more strong growth.”
Amazon already owns a stake in Atlas Air Worldwide (NASDAQ: AAWW) and Air Transport Services Group (NASDAQ: ATSG), both of which fly international routes for other customers.
Next-day hub?
According to the Chaddick article, Amazon looks to be moving toward a more hub-centric approach, with flights arriving and departing at times calibrated to enable fulfillment at important times of day, similar to how FedEx Express and UPS operate. However, Amazon has not significantly diverted traffic to feed its new “superhub” at CVG, which is now running at only a fraction of its promised capacity of 100 flights per day.
CVG and Wilmington Air Park complement each other, with most aircraft arriving in Cincinnati about lunchtime and departing at midnight in Wilmington.
Amazon now runs nine flights per day to Chicago Rockford International Airport, down from sixteen a year ago. The authors of the paper, led by Chaddick Director Joseph Schwieterman, hypothesized that the reduction was due to decreasing reliance on airport tenant UPS to assist connect its network and likely diversion to Chicago O’Hare airport because it is closer to numerous Amazon warehouses in the metropolitan region.
Amazon Air does not appear to play a significant role in Amazon’s Fulfillment by Amazon warehouse and distribution business for third parties, but its expansion may result in more direct competition with FedEx and UPS. According to the Chaddick assessment, Amazon is capable of handling second- and third-day delivery from a single point anywhere in the United States but would require air support to achieve next-day delivery.
According to the analysis, a shipper who tenders a load at 7 p.m. in Cincinnati could have the packages delivered the next afternoon or early evening to locations in all of the 25 largest U.S. metropolitan regions, with next-day delivery covering 90 percent of the U.S. population.
Amazon claims that by adding a half-dozen airports to its network, it will be able to give second-day delivery to the whole U.S. mainland.
The findings are mitigated by the fact that, unlike FedEx and UPS, Amazon is not prioritizing the integration of its hubs to facilitate late-night airplane-to-airplane transfers. Because the corporation has yet to transition the majority of flight activity at its major hubs to late-night schedules required for proper sorting, it is unable to offer universal next-day delivery to third parties having inventory in Cincinnati. Currently, only around 30% of flights depart between 11 p.m. and 6 a.m., the peak hours for FedEx and UPS flights. And it appears that Amazon is not collaborating with DHL Express, which has an adjacent hub at CVG, to facilitate the development of a large-scale third-party next-day delivery network.
“We anticipate Amazon to pursue a larger share of the delivery business handled by FedEx, UPS, and the United States Postal Service that does not include sales on its online platform.” We do not expect the corporation to announce any ambitions to enter the consumer-to-consumer market anytime soon. This would necessitate both large-scale investments in parcel-collection facilities and a shift in Amazon Air’s business model.
“Instead, it will focus on providing business-to-consumer delivery for companies that can stock inventory at multiple locations or require only second- or third-day delivery – while prioritizing enhancing overnight and same-day delivery options for Amazon Prime subscribers,” according to the Chaddick report.
