Amazon (AMZN) - Get Report today announced a deal with Air Transport Services Group (ATSG) - Get Report to begin operating its own air cargo business to help support its fast delivery of packages to customers.
The announcement follows months of rumors about Amazon's air cargo plans as the company ramps up its logistics efforts across every aspect of transportation, including ocean freight and trucks.
Amazon's air cargo plans were first reported in November by Motherboard, which suggested that Amazon was testing the program out in Wilmington, Ohio. Then in December, The Seattle Timesreported that Amazon was having discussions with several air cargo companies to lease 20 Boeing 767 jets.
Turns out the rumors were true.
"Since last summer, we have been working closely with Amazon to demonstrate that a dedicated, fully customized air cargo network can be a strong supplement to existing transportation and distribution resources," Joe Hete, President and CEO of ATSG, said in a statement.
As The Seattle Times reported, Amazon will be leasing 20 Boeing 767 freighter aircraft from ATSG for five to seven years, and the operation of the planes will also be provided by ATSG for five years.
On top of that, Amazon has been granted the right to acquire up to 19.9 percent of ATSG's common shares over the next five years at $9.73 per share.
"We offer Earth's largest selection, great prices and ultra-fast delivery promises to a growing group of Prime members and we're excited to supplement our existing delivery network with a great new provider, ATSG, by adding 20 planes to ensure air cargo capacity to support one and two-day delivery for customers," Dave Clark, Amazon senior vice president of worldwide operations and customer service, said in a statement.
The realization of this deal marks yet another move in Amazon's seeming strategy to build up its own logistics system and rely less and less on traditional carriers like UPS (UPS) - Get Report and FedEx (FDX) - Get Report .
"We believe this is yet another indication of Amazon's desire to internalize many services once reserved for traditional [transport and logistics] couriers/freight forwarders (i.e., UPS/FedEx), in particular, routes where Amazon's fulfillment network density/scale make such undertakings profitable, such as East Coast-West Coast air routes (for airfreight loads) and densely populated metropolitan areas (for last-mile parcel delivery)," Baird analyst Colin Sebastian wrote in a note in December in response to The Seattle Times report.