FedEx to end US express air shipments for Amazon

Memphis-based group to focus on ‘serving the broader e-commerce marke.

FedEx said it has made the “strategic” decision not to renew FedEx Express’ US  air shipment contract with Amazon.com,“as it focuses on serving the broader e-commerce market.”

It did not go into further detail on the reasons for the move which comes as the online retailing giant’s own air network in the US develops apace in terms of both aircraft and hubs.

Market analysts have regularly warned of the competition posed by Amazon Air to integrators such as UPS and FedEx, a threat the Memphis-based group has consistently played down.

FedEx underlined that its decision does not impact any existing contracts between Amazon.com and other FedEx business units or relating to international services.

It added: “As previously disclosed, Amazon.com is not FedEx’s largest customer. The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3 % of total FedEx revenue for the 12-month period ended December 31, 2018.

There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the US by 2026. FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space. We are excited about the future of e-commerce and our role as a leader in it.”

Meanwhile, Amazon’s own air cargo footprint in the US continues to expand rapidly.

Last month, Amazon broke ground on a new 3-million-sqft air cargo hub at Cincinnati/Northern Kentucky International Airport. First announced early-2017, the $1.5 billion facility is scheduled to open in 2021, lead to the creation of 2,000 jobs and help “get you your packages faster,” said CEO Jeff Bezos at the ground-breaking ceremony.

“That’s a big deal,” he added. “We’re going to move Prime from two-day (delivery) to one day and this hub is a big part of that. I’m super excited about that.” The hub will have parking space for 100 planes.

Also in May,  local media reported that Amazon was poised to invest $100 million at Lakeland Linder International Airport (LAL) in Florida.

As part of a 20-year deal, Amazon will develop facilities on a 110-acre parcel of land leased from the airport. The project makes provision for the construction of a 225,000 square foot air cargo facility and a seven-jet cargo hangar at LAL.

Over the next couple of years,  Amazon will also gain access to more aircraft while also increasing its equity stakes in the leasing operators supplying it with freighters, Atlas Air Worldwide (AAWW) and Air Transport Services Group (ATSG).

In a filing  earlier this spring to the US Securities and Exchange Commission (SEC), AAWW said that it had entered into an ‘amended’ agreement with Amazon in which AAWW subsidiary Southern Air will provide crew, maintenance and insurance services (CMI) to Amazon using Boeing 737-800 series aircraft.

The filing added: “Five aircraft are scheduled to be placed into service in the current financial year. Amazon may, in its sole discretion, place up to 15 additional Boeing 737-800 aircraft into service with Southern Air by 21 May 2021, subject to Amazon’s confirmation that it will exercise such options no less than 240 days in advance of the scheduled delivery date for each aircraft.”

At the end of last year, Amazon’s airline unit, Amazon Air, took delivery of a 20th B767F from Atlas Air, completing a programme of orders announced in 2016.

As for ATSG, which already supplies Amazon with 20 B767Fs, media reports that quote an SEC filing indicate the company’s CAM subsidiary will lease 10 extra 767-300Fs to Amazon in 2019 and 2020.

The amended agreements with AAWW and ATSG also provide scope for Amazon to increase its shareholdings in both companies to almost 40%.

Source: Lloyd´s