In a move to better control shipping and logistics, Amazon has been expanding Amazon Air, with 50 new planes and numerous regional hubs, according to a report by CNBC.
The expansion includes a $1.5 billion hub in Northern Kentucky, scheduled to be open in 2021. Amazon now controls shipping about 26 percent of its online orders, according to Wolfe Research. Amazon said in December that it has a “dedicated air network” that can “transport hundreds of thousands of packages per day” and that it can make two-day shipping possible to almost any location in the U.S.
“Amazon is looking to become a logistics company in their own right,” said Morgan Stanley North American Transportation Analyst Ravi Shanker. “We think that Amazon will be a top logistics provider, whether it’s in trucking or in air, in the coming years. I think the question is just how quickly they will ramp that operation.”
Last quarter, Amazon’s shipping costs rose 23 percent, to a total of $9 billion, and it spent $27 billion on costs related to shipping last year. So, it makes sense that the eCommerce company wants to have more control over that aspect of its business, because the more it can control it, the more it can control costs.
“We estimate that Amazon will pay about $6 a box to move this themselves on their own air network,” Shanker said. “Versus what we estimate Amazon paying UPS and FedEx: about $8 or $9 per box today … and given Amazon’s scale, that could be a couple of billion dollars at least in savings.”
Right now, Amazon Air has airplanes at 21 airports around the U.S., and this year it’s opening regional hubs in Texas, Ohio, and expanding one in Illinois. The new Kentucky location will have capacity for 100 planes.
“We have about eight flights a day on Prime Air,” said Ontario International Airport Deputy Executive Director Atif Elkadi. “I know when they started here a couple of years ago it was maybe three or four flights a day and it has steadily increased.”