Amazon just showed us how serious it is about building its own transportation and delivery network. Earlier this month, the tech giant said that it bought 11 jets from Delta and WestJet airlines in order to boost its growing delivery network and get orders to shoppers faster.
This is the first time purchasing its own planes for delivery purposes. Over the past couple of years, Amazon has been leasing planes to build its fleet.
“Our goal is to continue delivering for customers across the U.S. in the way that they expect from Amazon, and purchasing our own aircraft is a natural next step toward that goal,” said Sarah Rhoads, vice president of Amazon Global Air, in a press release.
Amazon.com Inc. is opening warehouses and shipping hubs in the U.S. at the rate of about one every 24 hours. Creating algorithms to anticipate shoppers’ needs and opening all those warehouses aren’t enough for meeting the one- and two-day shipping pledge to customers without an ever-expanding fleet of pricey jets.
That reality has become clearer since the pandemic fueled a surge in online shopping that has strained the resources of UPS Inc., FedEx Corp. and the U.S. Postal Service — forcing Amazon to pick up the slack.
The four WestJet planes are being converted to cargo jets and will join the Amazon Air fleet this year, while the seven Delta planes will be added in 2022 after their conversion, Amazon said.
“Having a mix of both leased and owned aircraft in our growing fleet allows us to better manage our operations, which in turn helps us to keep pace in meeting our customer promises.” Said Sarah Rhoads.
Seattle-based Amazon has been working to deliver most of its packages itself and rely less on UPS, the U.S. Postal Service and other carriers. Besides its fleet of planes, Amazon has also built several package-sorting hubs at airports, opened warehouses closer to where shoppers live and launched a program that lets contractors start businesses delivering packages in vans stamped with the Amazon logo.
The expanded air-cargo operation will add billions of dollars to already hefty shipping costs that amounted to $52 billion in the 12 months ended in September. Though Amazon is one of the wealthiest and most valuable companies in the world, it has historically operated on razor-thin margins and plowed cash back into the business, sometimes to the consternation of investors who’d rather see the company focus on profitability.
“It is significant that Amazon has purchased the aircraft, as opposed to leasing carriers, as it should lead to lower overall lifetime costs, greater control over the speed, reliability and quality of service, and accelerate its aim of cementing the brand as a genuine player in the competitive world of air freight,” said Michelle Mooney, a reporter at Logistics Manager.
The company was recently given approval by the Federal Aviation Administration to operate as a drone airline in the US. The approval will give Amazon broad privileges to “safely and efficiently deliver packages to customers,” the agency said. The certification comes under Part 135 of FAA regulations, which gives Amazon the ability to carry property on small drones “beyond the visual line of sight” of the operator.
Amazon added that while the Prime Air fleet isn’t ready to immediately deploy package deliveries at scale, it’s actively flying and testing the technology.