Amazon takes $132m stake in US air cargo partner ATSG

Investment reported to give e-commerce giant almost 20% ownership of Air Transport Services Group, which operates a major part of its rapidly growing air freight network in the US.Amazon has taken a more than US$130 million minority stake in its air cargo partner Air Transport Services Group (ATSG), which operates a substantial portion of the e-commerce giant’s rapidly growing air freight network in the US.

According to a US Securities filing yesterday by ATSG, Amazon has exercised warrants that will allow it to purchase about 13.5 million shares in the company, a deal valued at almost US$132 million.

Separately, Amazon has also acquired approximately 865,000 shares of ATSG, with no cash exchanging hands, the filing noted.

The purchases are subject to the approval of the US Department of Transportation (DOT).

Amazon has owned warrants in ATSG since 2016 when it signed an agreement to lease 20 Boeing 767s from the Wilmington, Ohio-based operator, one of its earliest moves in building up a freighter fleet.

US media reports quoted ATSG’s chief financial officer, Quint Turner, who said that if DOT approval is granted, Amazon will own about 19.5% of the company.

The reports also highlighted that if Amazon leases more aircraft and exercises all its warrants, the company could own as much as 39.9% of the cargo carrier, citing ATSG’s annual report.

Additionally, Bloomberg quoted comments made by ATSG’s CEO, Rich Corrado, on a conference call last month in which he said that the company anticipated operating 46 aircraft for Amazon by the end of this year, up from 33 at the end of 2020.

Atlas Air agreement

Amazon also holds warrants to acquire shares in Atlas Air Worldwide Holdings Inc. and Sun Country Airlines Holdings Inc., two other US-based companies which operate freighters on behalf of Amazon Air.

At the start of this year, Amazon announced the acquisition of 11 Boeing 767-300s, its first-ever aircraft purchases a further step in the fast-track expansion of its freighter fleet to a backdrop of sustained strong growth in e-commerce – given added impetus by the lockdowns triggered by the COVID-19 pandemic.

Last month, a study published by DePaul University’s Chaddick Institute for Metropolitan Development in Chicago concluded that Amazon Air “is positioned for sustained growth in the next six months” and “now has a significant presence on two continents (the US and Europe).”

“The airline now regularly makes an average of 140 flights daily, and we expect that number to grow to more than 160 by June 2021.  If it reaches this milestone, Amazon Air will have approximately doubled in size in the 13 months between May 2020 and June 2021,” it said.

A previous study issued by the Institute in May 2020 had focused on growth forecasts for the Amazon Air fleet with the number of aircraft possibly reaching 200 by 2028. This compares with around 70 aircraft currently, which is expected to increase to more than 80 next year.

Source: Lloyd’s