It’s no secret that Amazon, Alibaba and other major suppliers are turning more and more to mastering their own logistics movements.
This is especially noticeable with Amazon who has inked a deal with Atlas Air whereby the U.S. freight carrier will operate the aircraft and in turn, Amazon is allowed to acquire up to 20 percent of Atlas Air Worldwide Holdings (AAWW) common shares.
Is this a wise move for the air freight industry?
Will present air cargo operators see this move as a short- or medium term danger to their own cargo flows?
Possibly yes, as much of the internet ordered goods being increasingly supplied through e-commerce companies was until now being moved on traditional cargo routes.
Alibaba, with their massive presence and relatively safe control of the Chinese market, have successfully entered into deals with various Chinese carriers, the largest been SF Express, for exclusive carriage of their goods.
Again, it’s no secret that Alibaba wants to expand outside of China and has recently made a major takeover foothold in Singapore by taking a stake in SingPost in order to control the South-East Asian market (CargoForwarder Global report April 2016).
Will Amazon end up in control of Atlas Air?
Not in the short-term, but what plans do they really have to operate their own controlled freighter fleet?
Looking at the planned Atlas-Amazon deal - one can assume that it is a win-win situation for both.
At least, for the present time!
An interesting deal as Titan Aviation Leasing, an AAWW subsidiary will lease twenty passenger converted B767-300s to Amazon. These will be operated by Atlas Air for Amazon for a seven year period on a so called CMI contract which includes crew, maintenance and insurance. The deal includes a further three-year extension to the contract.
But what happens after ten years of successful operations?
It is very interesting to see that Atlas Air Worldwide Holdings has agreed to Amazon being able to acquire up to twenty percent of AAWW’s common stock over a five-year period at a price said to be around $37.50 per share.
A further 10 percent share acquisition is also agreed between both parties over a seven year period and at the same $37.50 per share. This 10 percent increase is however subject to Amazon and Atlas adding more than the present 20 aircraft into future operations.
So - assuming that all goes well within the coming decade, Atlas and Amazon will operate well over twenty dedicated freighters with Amazon having (at least) a thirty percent share in the large American all-freighter carrier.
What plans would Amazon have for other continents?
The Atlas deal is meant solely for U.S. domestic transport on behalf of Amazon.
Europe is also an important and large market for the e-commerce giant.
So, why not tie up there with a partner along the lines of the Amazon deal?
Who would be in their sights?
Cargolux, AirBridgeCargo or even Lufthansa Cargo? Who knows!
All speculation at the present time, but surely other cargo operators are getting worried about Amazon and Alibaba moves in this direction as it will ensure a dilution of their cargo revenues in the future if expansion plans of the pair move into other world markets.
Amazon puts pressure on European logistics
There is quite some unrest within the European logistics community at Amazon’s recent decision to offer itself as a third-party logistics provider on the continent.
This move is essentially aimed at offering retailers in Europe access to Amazon’s warehousing and controlling networks.
Who wins, who loses?
What Amazon terms as a Pan-European Fulfillment by Amazon (FBA) program, is being seen by other logistics enterprises as a direct ambition to position themselves further into logistics at the cost of other companies by offering retailers space in their facilities for storage and delivery by Amazon of their goods.
The ball is definitely rolling and there is no stopping the new direction being put into action by the giant e-commerce set-ups.
But, who will be the losers or the winners within the present transport supply chain in the next five to ten years? Time will tell.
John Mc Donagh