Dive Brief:
- Joe Hete and Rich Corrado, CEO and COO of the Air Transport Services Group (ATSG), believe they could be in line to increase their existing business with Amazon, The Loadstar reported Thursday.
- The two are not discouraged by Amazon's relocation of its airport hub from their own base in Wilmington, OH to Cincinnati, OH. Instead they feel that the e-commerce giant's decision means that their own opportunities have increased as a result of the need for more aircraft.
- ATSG is also increasing its presence in China with a joint venture with Okay Airlines and online retailer VIP Shop Holdings. Sooner still, the company plans to move at least two planes into China to access its growing transport market.
Dive Insight:
Supply chains are inherently interdependent, so when the tide rises for a buyer, the full chain can expect to benefit. At least, that's what ATSG's executives appear to be betting on in the case of Amazon. Conversely, however, when a link is broken the full chain suffers the consequences, as both Amazon and ATSG learned last year.
In November 2016, approximately 250 pilots flying for ATSG's subsidiary ABX Air, walked off the job in protest over staffing shortages and countless emergency runs. Though the pilots were ultimately ordered back to work, at the time, Amazon restructured its delivery plans to exclude ABX until it was confident no more strikes would occur. The redirection lasted over a week, well beyond the time the pilots were ordered by a federal judge to resume flying.
The ease with which Amazon achieved this redeployment should serve as a caution to ATSG, which, months later, has yet to present a plan ensuring that ABX pilots aren't again overwhelmed by overburdened schedules. When a contract is breached or a disruption is imminent, a buyer can always flip the coin on the supplier, a leverage luxury suppliers do not equally enjoy. Amazon was able to mitigate the disruption, but ATSG reported a $7 million loss as a result of the strike.
Interestingly, both the strike and Amazon's decision to redeploy elsewhere happened despite the fact that Amazon owns a 9.9% stake in ATSG. The owners of ATSG are therefore confident that their relationship with Amazon is secure, but no relationships are guaranteed in the face of disruption.
