News / Amazon Air takes its foot off the expansion accelerator as market slows

Amazon has cut its operations at Cologne-Bonn significantly © Tobias Arhelger

In another signal that e-commerce is hitting the buffers, the growth of Amazon Air’s fleet and network has slowed significantly over the past six months.

The e-commerce behemoth has already taken steps to shrink its warehouse footprint to match a slower-than-anticipated market.

After a disastrous summer, FedEx is reducing flight frequencies and temporarily parking aircraft, but Amazon Air has not scaled back its flight operations, although momentum has clearly slowed.

According to the Chaddick Institute for Metropolitan Development at DePaul University, which has been tracking developments at tAmazon’s freighter offshoot, its flight activity between March and September grew by a mere 3.8%, drastically down from the 14.3% pace registered between last October and March.

Amazon Air has been running 194 flights a day, up from 187 back in March. Over the period, its fleet of 767 and 737 cargo aircraft has remained static, at 77/78.

“Amazon has taken the foot off the accelerator,” commented Joseph Schwieterman, professor of public service management and director of the Chaddick Institute.

On the ground, it actually shifted into reverse this summer, cancelling warehouse projects and closing some facilities, and in July walked away from plans for a $432m air hub at Newark’s Liberty International Airport.

While air activities have not declined, the anticipated move into transpacific flights seems further away than ever. With transpacific flows from Asia on the wane, such a move is highly unlikely, especially since Amazon has been struggling to contain logistics costs, which rose 25.5% last year. For the second quarter, Amazon posted a net deficit of $2bn.

Amazon Air’s operations have grown in some spots, retreated in others, noted Mr Schwieterman. They increased in Europe, Florida and in the US mountain states, while decreasing at other points like Seattle, Portland and Cologne.

The German airport saw a drop in average daily flights from 5.8 to 0.9. On the other hand, daily flights at Leipzig rose from 3.2 to eight. At Milan, they increased from 3.2 to nine. Mr Schwieterman sees these two as emerging focal points in the company’s developing European network, where he anticipates further expansion.

New flights in the US (El Paso and Las Vegas) were designed to fill gaps in market coverage, and have now put 73% of the US population within 100 miles of an airport served by Amazon Air.

However, the biggest expansion in the US has played out at Cincinnati-North Kentucky Airport (CVG), which clocked up 71% growth in flight activity, from 26 daily flights to 44. Including flights by contractor airlines, activity there is now 60 flights a day.

The cluster of CVG and nearby Wilmington now accounts for 21% of Amazon Air flights, up from 14% six months ago, which indicates that this is emerging as a true hub for the company. Cincinnati is also the North American hub for DHL, which has been working with Amazon.

Mr Schwieterman sees one impetus for the rise of CVG: Amazon’s move in April to court third-party parcel traffic by offering merchants not selling on the Amazon platform the use of its free next-day delivery and returns to subscribers to its Prime programme. This positions Amazon more as a competitor to FedEx and UPS for third-party parcel shipments, he believes.

CVG is increasingly resembling an integrator hub, reinforced by the addition of a set of evening arrivals and after-midnight departures that have facilitated transfers between aircraft. This also positions Amazon for next-day deliveries from its warehouse network in Indiana, Kentucky and Ohio.

However, none of Amazon’s moves suggest a push to establish morning deliveries, indicating that it is not targeting the B2B market, at least for the time being.

Mr Schwieterman expects further expansion at CVG, with at least six more night-time flights there in the next six months.

While the adjustments in the network over the past six months indicate that Amazon has adapted to the slowdown in the market, he still sees scope for future expansion.

“Long-term growth still looks robust,” he said.