News / Blow to express airlines as Amazon leases 20 767Fs and eyes ATSG share deal

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In what could be a blow to express airlines, Amazon has signed an agreement with Air Transport Services Group (ATSG) for the lease of 20 767Fs for five to seven years – although the agreement to operate the aircraft is for five years only.

Admitting that, as the market had speculated for some time, the aviation group has been working with Amazon since last summer, ATSG added in a statement that it had agreed to offer Amazon warrants to buy up to 19.9% of its common shares, over a five-year period, at $9.73 per share.

The deal could bode well for ATSG. Market sources have told The Loadstar that Amazon would actually want up to 60 767Fs over the coming years.

Currently ATSG has 32 767Fs via its airline ABX Air and four with Air Transport International. It has been operating five 767Fs for Amazon from its Wilmington, Ohio, hub.

The deal, agreed with Amazon Fulfillment Services, includes the lease of the aircraft from ATSG subsidiary Cargo Aircraft Management, their operation by the two airlines and  gateway and logistics services from ATSG’s LGSTX Services.

“We’re excited to supplement our 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,” said Dave Clark, Amazon senior vice-president of worldwide operations and customer service.

The move will be a blow to other US ACMI airlines, which were reportedly jostling for position to offer Amazon air cargo services.  However, ATSG, as the world’s largest owner and operators of 767Fs, was always going to be prime candidate.

“Since last summer, we have been working closely with Amazon to demonstrate that a dedicated, fully customised air cargo network can be a strong supplement to existing transportation and distribution resources,” said Joe Hete, President and CEO of ATSG.

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

While a document revealed by Bloomberg recently intimated that Amazon had plans to cut out third-parties in its supply chain, such as forwarders and the integrators, research by Barclays suggests that the e-tailer might not want to get into aircraft ownership and operations.

Simpler, then, to buy a share in the world’s (current) largest operator of 767Fs – the aircraft wanted most by both Amazon and its potential rivals, the express airlines.

FedEx currently operates 31 767s and has 30 on order.