Amazon starts flexing muscle in new space: air cargo

A cargo plane emblazoned with “Prime Air” descended from an empty sky at Lehigh Valley International Airport on Tuesday, ninety minutes from the bustle of New York City, loaded with crates of goods during the peak holiday shopping season.
 
It’s one of 40 jets leased by Amazon.com for a new cargo service to meet delivery demand from the retail giant’s customers. Exclusive payload data reviewed by Reuters and interviews with airport officials around the country show that Prime Air planes are flying nearly full, but with lightweight loads, taking away valued business from FedEx and United Parcel Service.
 
Expanding into transportation, from trucks to planes, is one of Amazon’s most important endeavours as it strives to lure new customers with fast shipping while keeping costs under control. The world’s largest online retailer is sending more packages, more often, and later in the day to serve its estimated 35 million to more than 50 million US members of Amazon Prime, a service that promises two-day shipping for $99 per year.
 
Bulky boxes with goods once purchased in stores, like toilet paper, are a revenue driver at UPS and FedEx. That’s in part because they now are charging customers increasingly by boxes’ volume rather than weight. Shipping its own big, light packages is helping Amazon dodge those rising fees.
 
To date, Amazon has only said it leased the planes to speed up shipping and to backstop cargo partners during the holiday season. FedEx and UPS have delivered items late for Christmas in recent years.
 
“Our own delivery efforts are needed to supplement that capacity rather than replace it,” Amazon spokeswoman Kelly Cheeseman told Reuters. She declined to comment on eluding cargo airline fees.
 
Amazon’s planes fly to at least 10 airports across the United States, supplying its warehouses nearby. Officials at four airports said Amazon’s flights are operating near capacity but landing with lower-than-average weight — meaning it is placing low-density shipments inside the jets.
 
Amazon aircraft on a monthly basis handled only between 37 per cent and 52 per cent of their maximum loads by weight, according to an analysis of cargo, capacity and landing data from the four airports, with supplementary information from tracking website FlightAware.com. By contrast, FedEx and UPS were at 53 per cent and 56 per cent capacity, respectively, according to US Transportation Department data for the year ended September 2016, excluding weight carried for free.
 
“You’re dealing with cargo that’s big in dimensions, but in pure weight it’s light,” said an airport ramp manager in California.
 
Airports in Tampa and Charlotte reported similar payload data for the carriers contracted by Amazon, but they did not specify whether the flights were full by volume or whether they were operated on Amazon’s behalf. A seventh airport outside Chicago said the planes were not full, though daily flights only started in October 2016, and Amazon likely is learning the market, transport experts said. The remaining airports did not comment.

Reuters