Shipping costs outpace revenue as Amazon’s air network grows

What a difference a year makes. Following Amazon’s recent announcement in early June to lease twelve additional 767-300 freighters from CAM, ATSG’s leasing arm, we have taken a closer look at how the e-commerce giant's dedicated air network has grown in the U.S. and Europe during the last twelve months. Additional fleet growth and insourcing have the potential to yank volumes out of express networks, with UPS most at risk. Air network growth The interactive map below gives a visual overview of Amazon’s U.S. and European networks in July 2019 and June 2020. Each layer provides details on the number of flights per sector per day, as well as a breakdown of the individual operators. .embed-container {position: relative; padding-bottom: 80%; height: 0; max-width: 100%;} .embed-container iframe, .embed-container object, .embed-container iframe{position: absolute; top: 0; left: 0; width: 100%; height: 100%;} small{position: absolute; z-index: 40; bottom: 0; margin-bottom: -15px;} In the U.S., the e-tailer’s dedicated air network has grown from twenty-three to thirty-two active cities, with more to come on line this year. The number of operated sectors has grown by more than 30% to 145 flights per day. While Atlas Group flying has remained largely static, ATSG and Sun Country have picked up additional CMI contracts. By our count, the active fleet operating consisted of fifty-six units, including twelve 767-200, 34 767-300 and ten 737-800. By the end of the year, it will include sixty-eight aircraft, and by the end of 2021, eighty-one aircraft. This will include twenty 737-800s leased from Gecas and a mix of 767-200s and 767-300s. Given that none of the existing leases expires before 2023, the company will have to maintain a rather aggressive growth trajectory, position some units outside the U.S., or remove volumes from the UPS network. For 2019, we estimate that 23% of Amazon’s worldwide shipping expenditure, about $8.7 billion, was with UPS; the integrator has stated that 11.6% of its revenue came from Amazon last year. Meanwhile, Amazon's European network has also seen significant growth and, going forward, we expect the European network would be a good outlet for additional 737-800s. Within the space of a year, the Amazon dedicated European network has grown from seven to ten cities and seventeen to thirty sectors per day. Most flights are operated by ASL Group airlines on 737-400s. Europe represents the company’s main international market, with Germany and the U.K. alone accounting for 8% and 6% of company revenue, respectively. In 2019, Amazon’s European revenue increased by 15% to approximately 32.2 billion euros. Fulfillment and shipping costs vs revenue Amazon has been spending heavily on expanding its fulfillment and more recently, its shipping capabilities. In 2017 and 2018, fulfillment costs grew by 43% and 35%, respectively, while in 2019 fulfillment center costs grew in line with the increase in amount of their space (see chart below). Last year saw a large increase in shipping costs as Amazon expanded its prime delivery capabilities. Shipping costs grew by 37% in 2019 compared with North American and European revenue growth of 21% and 13%, respectively, a trend that has continued in 2020. UPS has benefited from this in terms of volume growth, but package yields have taken a hit. As Amazon expands its own network, UPS has the most to lose. In Europe, companies like Deutsche Post DHL have also seen volume growth slow as Amazon has insourced more volumes. However, in Europe the e-commerce market is more diversified than in the U.S., where Amazon is by far the most dominant player, so a loss of volume may not hurt as much there. Tom Rattray, our Vancouver based analyst contributed to this analysis and article.

Cookie	Duration	Description
34f6831605	session	General purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
a64cedc0bf	session	General purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
ARRAffinity	session	ARRAffinity cookie is set by Azure app service, and allows the service to choose the right instance established by a user to deliver subsequent requests made by that user.
ARRAffinitySameSite	session	This cookie is set by Windows Azure cloud, and is used for load balancing to make sure the visitor page requests are routed to the same server in any browsing session.
cookielawinfo-checkbox-advertisement	1 year	Set by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category .
cookielawinfo-checkbox-analytics	11 months	This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional	11 months	The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary	11 months	This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others	11 months	This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance	11 months	This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
crmcsr	session	General purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
JSESSIONID	session	The JSESSIONID cookie is used by New Relic to store a session identifier so that New Relic can monitor session counts for an application.
PHPSESSID	session	This cookie is native to PHP applications. The cookie is used to store and identify a users' unique session ID for the purpose of managing user session on the website. The cookie is a session cookies and is deleted when all the browser windows are closed.
viewed_cookie_policy	11 months	The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.

Cookie	Duration	Description
_zcsr_tmp	session	Zoho sets this cookie for the login function on the website.
e188bc05fe	session	This cookie is set in relation to Zoho Campaigns
iamcsr	session	Zoho (Customer Support) sets this cookie and is used for tracking visitors (for performance purposes)
WFESessionId	session	This cookie is necessary to enable a Power BI session, a Microsoft tool that helps visualize data.

Cookie	Duration	Description
_ga	2 years	The _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors.
_gid	1 day	Installed by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously.

Shipping costs outpace revenue as Amazon’s air network grows

LATAM and Avianca bankruptcies could reshape cargo in Latin America

US air trade in May: Exports decline and COVID shipments dominate imports

Related Posts

Air express shipment growth moderates after several strong years

Stored freighters dwindling as demand stays high

Cross border e-commerce growth loses steam in key markets

Air Canada Cargo 2021 revenues reach all-time high

US air trade in May: Exports decline and COVID shipments dominate imports

Privacy Terms

ADA Compliance

Welcome Back!

Retrieve your password

Shipping costs outpace revenue as Amazon’s air network grows

You need a subscription to access this premium content!

LATAM and Avianca bankruptcies could reshape cargo in Latin America

US air trade in May: Exports decline and COVID shipments dominate imports

Related Posts

Air express shipment growth moderates after several strong years

Stored freighters dwindling as demand stays high

Cross border e-commerce growth loses steam in key markets

Air Canada Cargo 2021 revenues reach all-time high

US air trade in May: Exports decline and COVID shipments dominate imports

Privacy Terms

ADA Compliance

Welcome Back!

Retrieve your password