Amazon.com Inc. is opening warehouses and dispatch centers in the United States at the rate of one every 24 hours. The ultimate goal is to ensure that virtually all of the products the company sells are just one van ride, and eventually one drone flight, away from customers’ homes. And yet, last week, Amazon announced it would buy 11 Boeing 767-300 aircraft for its air cargo division, mainly for the dispatch of products to Prime subscribers.
Despite creating algorithms to anticipate buyers’ needs and open all those warehouses, Amazon can’t deliver on its promise of one-day or two-day shipping to customers without an ever-growing fleet of expensive jets. That reality has become clearer since the pandemic sparked a surge in online shopping that has depleted the resources of United Parcel Service Inc., FedEx Corp., and the U.S. Postal Service, forcing Amazon to take actions.
Within the company, Amazon Air is sometimes seen as more of an expensive necessity than an asset. An organization determined to deliver orders quickly and efficiently would rather move products by truck than by plane, which costs up to seven times more. It doesn’t help that many of the planes Amazon flies are older models that emit more greenhouse gases than the newer, more fuel-efficient planes, undermining its newfound commitment to fighting climate change.
On the same day it announced the order for 767 jets, Amazon made 153 flights – the equivalent of one takeoff every nine minutes – between 40 airports stretching from Germany to Southern California, according to data from Plane Finder, a flight tracker. When the 11 newly purchased jets go live late next year, Amazon Air will have a fleet of 85 jets.
Expansion of the air cargo operation will add billions of dollars to shipping costs, which amounted to US $ 52,000 million in the 12 months ended in September. Although Amazon is one of the richest and most valuable companies in the world, it has historically operated at very low margins and invested cash in the business, which has at times caused consternation among investors who prefer to see the company focus on profitability.
How are the planes for Amazon shipments
The new 767 freighters have a list price of around $ 200 million, although airlines generally receive discounts. Aviation consultants estimate that Amazon could have paid just $ 10 million each for its latest planes. Converting them for cargo transportation cost about $ 14 million per plane, according to Laurent Rouaud, co-founder of Avworks Partners, an aviation consulting firm. Amazon, Delta and WestJet declined to disclose purchase prices.
If it wasn’t clear, Amazon’s decision to buy planes demonstrates the company’s long-term commitment to operating its fleet. Another milestone comes later this year, when Amazon’s $ 1.5 billion cargo terminal at the Cincinnati / Northern Kentucky Airport goes online, allowing the company to have more than 100 aircraft in a hub that is located to a day’s truck ride, or a much shorter flight, for most people in the U.S. That gives Amazon more options, which employees say is a recurring strategic goal across everything from offices and businesses temporary to suppliers of essential products.
Even as Amazon expands its air cargo division, CEO Jeff Bezos remains obsessed with his ultimate dream: to build a network so sophisticated that it can get almost anything to a customer’s door in 30 minutes or less. One day his vision will bring to life another airline, the Prime Now drone fleet.