Watch out FedEx, here comes Amazon Prime Air. And, if history is any guide, Amazon may be quite happy to provide your cargo services at a discount to costs, which we suspect your shareholders, unlike Amazon's, will find to be sub-optimal.
According to the Consumerist, Amazon has signed a 50-year lease on a 900-acre cargo hub at the Cincinnati/Northern Kentucky International Airport intended to house a fleet of 40 Prime Air jets. Amazon is expected to invest $1.5 billion in the facility in return for $40 million in tax incentives from the State of Kentucky.
The facility is located at the Cincinnati/Northern Kentucky International Airport, less than 100 miles away from the 1,200-acre UPS Worldport in Louisville. That’s right near the massive Amazon fulfillment center in Hebron, KY, and the e-commerce behemoth has signed a 50-year lease on 900 acres of property from the airport. Amazon is investing $1.5 billion in the hub, which will receive $40 million in tax incentives from the state of Kentucky over ten years if Amazon meets job targets.
Only 16 of the 40 Prime Air cargo jets that Amazon has leased are in service now, and the Cincinnati/Northern Kentucky hub is meant to serve as their home once they’re all in the air. Amazon began its air operation at what used to be the DHL domestic hub at a decommissionedd Air Force base in Ohio, northeast of Cincinnati.
In a move that the Trump administration will undoubtedly approve of, Amazon plans to hire 600 full-time employees and another 1,400 part-time workers to staff the new facility.
Per the Lexington Herald Leader, Amazon has signed leases on a total of 40 Boeing 767s, of which 16 are now in operation.
“As we considered places for the long-term home for our air hub operations, Hebron quickly rose to the top of the list with a large, skilled workforce, centralized location with great connectivity to our nearby fulfillment locations, and an excellent quality of living for employees,” said Dave Clark, Amazon’s senior vice president of worldwide operations.
A news release from Amazon said that the company in 2016 entered into agreements with two carriers to lease 40 dedicated cargo airplanes for Prime shipping; 16 of the planes are now in service for Amazon customers, “with more planes rolling out over time,” the release said.
While Amazon has denied it so far, Wall Street analysts have long speculated the online retailer may have ambitions to compete with UPS and FedEx in providing freight forwarding for other companies. Per Reuters:
Analysts suspect it has larger ambitions.
"We estimate a $400 billion-plus market opportunity for Amazon in delivery, freight forwarding, and contract logistics," Colin Sebastian, an analyst for Baird Equity Research, said in a note to clients.
The northern Kentucky location - not far from UPS's major hub - puts Amazon's aircraft in shooting distance of top cities. The company said last year it would lease 40 Boeing Co 767 planes, 16 of which are currently in service.
It also lets Amazon's trucks reach 11 fulfillment centers in state. And a large operation of Deutsche Post DHL there lets Amazon transfer packages easily abroad, said Brian Clancy, managing director of advisory firm Logistics Capital & Strategy LLC.
As Sir Richard Branson once said, the fastest way to become a millionaire is to take a billion dollars and start an airline business. Best of luck.