Amazon pulls back on cargo operations with contractor ATSG

Dive Brief:

Amazon has joined the list of companies pulling back on freighter fleets and reducing their air freight networks amid cooling e-commerce order volumes.
Leases on eight of its dozen 767-200 freighters through lessor Air Transport Services Group are set to expire between May and September, according to ASTG’s Feb 6. fleet transitions outlook. Three of the planes will be retired, while the other five are expected to be re-leased or sold to other customers.
ATSG’s Amazon-leased 767Fs will also operate on reduced schedules and fewer block hours per aircraft in the first half of 2023 versus 2022, according to the outlook.

Dive Insight:

Amazon is looking to streamline operations and increase productivity following a $2.7 billion loss in 2022.

For the company, this means “adjusting their ground and air distribution and fulfillment networks in the United States to conform to reduced U.S. economic growth and consumer spending levels in the first half of 2023,” ATSG said in its outlook.

Despite the cutbacks, ATSG will extend leases on four of the twelve Amazon-contracted 767 freighters into 2024.

Meanwhile fellow Amazon contractor Sun Country Airlines reported reduced earnings from its Amazon cargo operations. Although cargo revenue was up 4.6% YoY in Q4 to $24.4 million, overall freight revenue dipped 1.2% YoY while cargo block hours declined nearly 4% YoY, according to a Q4 and full year earnings report.

“During the first half of the year, we had numerous Amazon aircraft in heavy maintenance, which drove the block hour decrease,” Sun Country President and CFO Dave Davis told investors during a Feb. 2 earnings call.

Although Amazon aims to restructure some of its network, the e-commerce giant continues to strategically invest in its cargo operations. In October 2022 Amazon announced plans to lease 10 of Altavair’s A330-300 converted freighters, which will be operated by Hawaiian Airlines. At the time, Amazon reported more than 110 aircraft in its current network.

Amazon isn’t the only company to resize its air cargo network after years of pandemic-driven growth. ATSG noted in its outlook that its 767 freighters dedicated to DHL will also operate on reduced schedules and fewer block hours.

FedEx is also striving to optimize its global air network in a bid to generate savings. Last year, FedEx not only significantly reduced international and domestic routes, but lowered costs by grounding aircraft, as well.