Dive Brief:
- Amazon will add ten freighter aircraft to its Air fleet as the company looks to more quickly move goods across its sprawling fulfillment network, the company announced Friday.
- The A330-300 converted freighters, which Amazon is leasing through Altavair, will begin operations late next year. Hawaiian Airlines will fly and maintain the aircraft and establish a continental U.S. pilot base in preparation for the operations.
- "These A330s will not only be the first of their kind in our fleet, but they’ll also be the newest, largest aircraft for Amazon Air, allowing us to deliver more customer packages with each flight," Sarah Rhoads, vice president of Amazon Global Air, said in a company blog post.
Dive Insight:
Through the deal, Amazon has secured the necessary aircraft and operator to advance its air cargo ambitions.
The online retail giant has been expanding its fleet since its first aircraft took flight in 2016, using them to move inventory quickly between warehouses. Today, Amazon Air has more than 110 aircraft in its global network. The new aircraft will be introduced as the company phases out older planes in its fleet, Rhoads said.
Despite its robust expansion since 2016, Amazon Air's daily flight activity has slowed in recent months, according to a September report from the Chaddick Institute for Metropolitan Development at DePaul University. It grew by just 3.8% between March and August, compared to 14.3% growth the previous six months. The company has been adjusting to reduced e-commerce demand relative to the surge it saw in 2020 and 2021.
The specific aircraft model that Amazon will gain from the deal — the A330-300P2F — is well-suited for integrators and express carriers due to its payload capabilities for lower-density cargo, according to Airbus, which produces the aircraft. Hawaiian Airlines has been using A330s in its fleet since 2010, giving it familiarity with the aircraft’s maintenance and operation.
Beyond establishing a continental U.S. pilot base, Hawaiian Airlines plans to grow existing maintenance bases and expand hiring to support the new cargo operation. The agreement also allows for the expansion of the fleet depending on Amazon's future business needs, per the airline's news release.
“Where Amazon is going to want to use this airplane is at the largest volume points of its network, so between the larger fulfillment centers, and probably take advantage of some of the longer range flights like Hawaii,” Peter Ingram, president and CEO at Hawaiian Airlines, said on an investor call Friday. “But ultimately, they are the ones who dictate the flying.”
Hawaiian Airlines will provide Amazon with air cargo transportation services for an initial term of eight years under the agreement, which can be extended further, according to a Hawaiian Airlines securities filing.
Throughout the duration of the agreement, Hawaiian Airlines will supply flight crews, perform maintenance and certain administrative functions and procure aircraft insurance, the filing said. Amazon will pay the company a fixed monthly fee per aircraft, a per flight hour fee and a per flight cycle fee for each cycle operated. It will also reimburse Hawaiian Airlines for certain operating expenses, such as fuel.
In connection to the deal, Hawaiian Airlines issued Amazon warrants to acquire up to 15% of its common shares, exercisable over the next nine years. Amazon entered into similar warrant agreements with Atlas Air and ATSG, which also fly aircraft for the company, in 2019.
