Amazon leases Boeing aircraft to better control deliveries

In leasing several Boeing aircraft, Amazon is making a play towards taking more control of its shipping and business costs.

Amazon has taken several steps this year to bring delivery of its wares in-house, and it took another one today.

On Wednesday, the Air Transport Services Group (ATSG) announced that it had inked a deal for the online retail giant to lease 20 Boeing 767 freighter aircraft.

“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. “We are excited to serve Amazon customers by providing additional air cargo capacity and logistics support to ensure great shipping speeds.”

The leases will last between five to seven years, according to ATSG. The agreement also gives Amazon the opportunity to purchase up to nearly 20 percent of ATSG stock, at $9.73 per share. That’s a 17.3 percent discount off ATSG’s Tuesday closing price of $11.77 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 announcing the deal. 

Many analysts see the deal as a move that will enable Amazon to assume greater control over its business and shipping costs. By relying less on standard carriers like FedEx or UPS and building out its own delivery hub, Amazon will be able to make deliveries even cheaper and more streamlined. That could mean up to $5 billion more a year in earnings for the retailer, according to an October 2015 report by financial analysts at RW Baird.

Amazon has also been experimenting with drones for its Prime Air delivery service. But while Amazon has said that it fully intends to launch Prime Air in the near future, it has not given exact specifications as to when. Amazon faces many logistical and technical challenges, meaning drone delivery services for the general public could still be far into the future.

In the meantime, Amazon continues to aggressively expand its in-house delivery capabilities. In January, the company announced that it will be finalizing its purchase of French shipping company Colis Privé by this coming April. In 2014, the company purchased a stake in UK shipping firm Yodel. That same year, Amazon began discussions with Boeing on leasing some of its 767s for use in deliveries.

In addition to competing with delivery providers such as DHL and UPS, Amazon seeks to gain ground in the grocery-delivery space. In 2013, AmazonFresh launched for customers in Seattle, California, and New York State. The service is similar to those offered by Peapod or FreshDirect. Last month, The Seattle Times reported that Amazon has partnered with UK grocer Morrisons to provide home delivery of groceries to consumers in Britain.