With the fight for ocean cargo space expected to plague supply chains for the foreseeable future, Amazon is reportedly investing further in its air freight capabilities to circumvent the problem.
Amazon is considering onboarding long-range cargo jets and hiring its own flight crews to directly transport goods from overseas, namely China, according to a Bloomberg report.
The report indicates that Amazon intends to acquire 10 Airbus A330-300 airplanes and an unspecified number of converted cargo versions of the Boeing 777, nicknamed the 777-300ERSF, which would enter service in 2022. It’s unclear where Amazon would acquire the planes and whether they would be purchased or leased, Bloomberg said.
An Amazon representative declined Sourcing Journal’s request for comment.
About 75 percent of facilities that produce Amazon-branded products such as private brands and devices are located in the APAC region, with the majority based in China (46 percent), India (14 percent), and Vietnam (4 percent), according to a recent Oppenheimer research note. The majority of the manufacturing and transportation operations within these regions were disrupted in some way due to the Covid-19 pandemic, illustrating the need for more visibility—or in Amazon’s case, autonomy—over the supply chain.
Even when those products exit their origin country, they often end up stuck at ports for days at a time, putting a business’s inventory at risk, even for a massive operation like Amazon. As of Wednesday, vessels at the Port of Los Angeles, for example, wait at anchor for an average of 11.5 days before being unloaded, according to the gateway’s Signal platform.
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Air freight transport is traditionally much more expensive than its seafaring counterpart, which ultimately prevents many retailers from going this route even during supply chain disruptions. But in the case of Amazon, the e-commerce giant has never been one to pinch pennies on fulfillment and logistics, spending $17.7 billion in shipping costs in the first quarter alone.
Whether the long-range plans come to fruition or not, Amazon has made a concerted effort to bolster its domestic air capabilities throughout the pandemic.
While Amazon was flying 80 flights a day in May 2020, this number has since doubled to 164 per day as of August 2021, according to researchers with DePaul University’s Chaddick Institute for Metropolitan Development.
In November last year, as peak holiday demand continued to rise amid the pandemic, Amazon launched its first major air hub at Leipzig/Halle Airport in Germany. In the U.S., the company opened various smaller regional hubs at several airports including John F. Kennedy International Airport, San Francisco International Airport, Chicago O’Hare International Airport and Los Angeles International Airport.
This year, the e-commerce giant finally centralized its domestic air transport network. In August, Amazon jumpstarted operations at its own Air Hub after the Kentucky facility spent two years under construction. The 800,000-square-foot sortation building, located at the Cincinnati/Northern Kentucky International Airport, serves as the central hub for Amazon Air’s U.S. cargo network, facilitating the rapid transport of customer packages across the nation.
The Oppenheimer note estimated that approximately 70 percent of the U.S. population now lives within 100 miles of an Amazon Air airport, up from the 54 percent that did in April 2020. With this in mind, the addition of more jets would be a massive game changer for Amazon, not just from bypassing various ports, but also skipping much of the intermodal transportation process that has seen delays due to labor shortages.
Amazon first began building its current 75-plane fleet, which is flown by private contractors, in 2016. The majority of flights by company-owned planes are between U.S. airports, with the fleet comprising mid-sized Boeing 767 aircraft. A 777 jet would hold nearly 25 percent more goods than the 767 models currently do, Bloomberg reported.
The tech titan’s expansion, like many of its other significant logistics investments, also takes aim at rivals UPS and FedEx. Both carriers’ stock dropped briefly on the news before rebounding to prior trading levels.
Amazon already purchased 11 Boeing 767 jets to kick off 2021, with seven of the aircraft set to enter its air cargo network in 2022 after they’ve been refurbished.
Amazon’s fleet is currently flown by third-party contractors, including Atlas Air Worldwide Holdings Inc., Air Transport Services Group Inc. and Sun Country Airlines Holdings Inc., and operates almost exclusively in North America and Europe.
For international flights, Amazon charters planes to air ship products to the U.S.—a practice the business began last year when it flew in personal protective equipment (PPE) from factories in China. The operation, which is separate from Amazon Air, also ferries products for other companies.