An expanded route network, more sophisticated scheduling through hub airports and greater use of partner airlines to supplement its fleet have significantly enhanced Amazon Air's (NASDAQ:AMZN) ability to conduct overnight deliveries, according to new research from DePaul University.
During the past six months, Amazon's private airline has plugged critical gaps in its network and increased flight activity to position itself for what is expected to be an enormous holiday season for online shopping in 2021. It added seven destinations to its route structure and now serves 42 domestic airports that are within 100 miles of 70% of the U.S. population, up from 54% 15 months ago. That means 53 million more people are within a short truck drive of Amazon's air network, the analysis by the Chaddick Institute for Metropolitan Development said.
"Amazon Air's expanded reach bolstered its ability to rapidly move inventory among its multitude of warehouses and sorting services to make next-day delivery possible for an enormous array of products to much of the U.S. population," the report, released Wednesday, stated.
Flying activity grew 17% since February, aided by the addition of 14 aircraft. Amazon Air now has 73 aircraft in its fleet — smaller Boeing 737s and 767 widebody aircraft — and now averages 163.5 flights per day, up from 140.2. The findings were based on data from flightaware.com and flightradar24.com that tracked 3,500 takeoffs and landings of aircraft registered to Amazon Air. The retail giant increased its presence in Canada with the lease of two 767-300 midsize freighters to Canadian carrier Cargojet, which accounts for 3% of Amazon flights. Cargojet connects Amazon (NASDAQ:AMZN) to Calgary, Edmonton, Hamilton, and Vancouver.
The airline is adding 11 medium-size 767s it bought from Delta Air Lines (NYSE:DAL) and WestJet last year and is converting into freighters.
The analysts predict Amazon will expand flight operations by another 12% to 14% in the coming months, bringing its daily total to more than 180 by January. The fleet of Amazon Air planes in active service will grow to more than 80, and the company is likely to increase nighttime flying to support what could be unprecedented e-commerce volumes for the Christmas holiday.
The report, "Blue Skies for Amazon Air," says Amazon has increased reliance on partner airlines. The exact number of flights operated with aircraft not officially part of Amazon's fleet is difficult to pin down, but the authors, led by Professor Joseph Schwieterman, estimate affiliates of Air Transport Services Group (NASDAQ:ATSG) and Atlas Air (NASDAQ:AAWW) fly 20 to 30 legs per day for Amazon in the U.S. Flight itineraries also suggest that ASL Ireland, which operates Amazon's two 737-800s in Europe, also flies its own aircraft for Amazon.
Amazon deepened its partnership with ATSG this year by taking a minority stake in the company.
ATSG subsidiary ABX Air is playing a particularly elevated role for Amazon. Many flights operated by ABX appear to be missions to support Amazon Air, according to flight data and schedules analyzed by the DePaul researchers. ABX, for example, appears to have largely replaced Amazon Air as the carrier of record at Allentown-Lehigh Valley International Airport in Pennsylvania.
New Airports Served By Amazon Air In 2021
- Charlotte, North Carolina
- Fairbanks, Alaska
- Kansas City, Missouri
- San Bernardino, California
- St. Louis
- Toledo, Ohio
Amazon's airline contractors are also expected to add aircraft not bearing the Amazon livery to support increased package delivery, the study said.
Shortages of qualified pilots and other labor, however, could crimp Amazon Air's growth plans as it tries to fill open positions, the researchers cautioned.
Amazon so far has maintained a relatively decentralized approach toward air linehaul but opened two big hubs this year and is planning another.
In August, the company opened its "super hub" at Cincinnati/Northern Kentucky International Airport (CVG). In the spring, its 700,000-square-foot air sort facility at San Bernardino International Airport in California began operating, with about eight daily flights and more expected soon. And the retail logistics giant has struck a tentative deal for a 20-year lease of cargo space at Newark Liberty airport. The development of an East Coast regional hub significantly enhances next-day delivery because packages for nearby New York City and other Northeast ZIP codes don't have to be routed first through the national hub.
Source: "Blue Skies for Amazon," Chaddick Institute for Metropolitan Development, DePaul University
Amazon Air has also beefed up operations in Portland, Oregon, and Seattle, each of which has a dozen or more flights per day. Air activity has increased at Baltimore-Washington International Airport, Fort Worth Alliance in Texas and Lakeland Linder airport near Tampa, Florida, as well.
According to the study, Amazon Air over the past year has increased synchronization of flights between CVG and its "mini hub" at nearby Wilmington Air Park in Ohio. Network planners have concentrated CVG outbound flights during the midafternoon while Wilmington's occur in the middle of the night, similar to how express carriers DHL, FedEx and UPS operate.
The two airports are just 55 miles apart and together have flights that reach airports within 150 miles of 182 million U.S. residents. Amazon relied heavily on DHL, which has its U.S. hub at CVG, for package sortation while it was building its $1.5 billion national hub.
"These tightly woven ‘banks' of flights are well-suited to allow packages and inventory to be
transferred between planes without long delays. The pattern of mid-afternoon outbound flights also allows Amazon to move inventory to key locations for next morning delivery (or in some cases, perhaps same-day delivery as well)," the report said.
Amazon Air did not significantly expand flights at CVG immediately after it opened the hub, but Schwieterman's team said it expects a concerted buildup by early 2022. It previously estimated the new hub will support 50 flights per day by year's end, up from 28 daily flights before the expansion. It will have capacity to handle up to 200 flights per day when fully built out.
Long-haul flights more than 1,000 miles to major metropolitan regions dominate the schedule. Routes under 600 miles are mostly limited to major cities such as Atlanta, New York and Philadelphia, suggesting Amazon's strategy is to use trucks as much as possible for medium-haul lanes.
The Wilmington airport receives flights in the evening, with outbound departures between midnight and 1:30 a.m.
Dividing flights between two airports in close proximity adds complexity to the operation and could result in sorting centers being underutilized during certain hours of the day, the DePaul study said. But the arrangement also gives Amazon a viable backup if one airport is knocked out of service, as can happen in the case of accidents.
"The diverging schedule pattern could allow warehouses and fulfillment centers to utilize the
same trucks to support deliveries to CVG and [Wilmington] on the same day," the report said.
Amazon Air will soon be able to penetrate less populous areas when it deploys ATR-42 and 72 turboprop planes. Reports indicate that Amazon initially plans to add three of the aircraft to reach cities in states such as South Dakota and Montana that are far from existing Amazon airports.
The enhanced capability to conduct next-day delivery nationwide increases the likelihood that Amazon will offer third-party logistics services to other companies in the near future, analysts and Morgan Stanley say.