Amazon’s logistics arm is taking a big step forward by leasing a fleet of Boeing 767s that will ship packages to customers in North America. Air Transport Services Group (ATSG), an air cargo transportation provider, said that Amazon has agreed to lease twenty of its planes for 5-7 years.
The announcement confirms reports from late last year that Amazon wants to operate its own cargo planes, which allows it to take more control of its fulfillment process away from third-party logistics providers like FedEx, the USPS, and UPS, save money, and potentially avoid major shipment delays.
ATSG said it will release further details about the agreement in a Securities and Exchange Commission filing. According to a December report from the Seattle Times, it costs about $600,000 to $700,000 to lease a new Boeing 767F for a month or $300,000 to $325,000 for converted passenger planes. If it’s successful, however, operating its own air cargo fleet can help Amazon reduce its shipping costs, which were $8.7 billion in 2014, a 31 percent increase from 2013.
According to Vice, Amazon has already run a pilot program with ATSG, moving cargo from Wilmington, Ohio (where ATSG is headquartered) to airports in Allentown, Pennsylvania, Tampa, Oakland, California, and Ontario.
Other steps Amazon has taken to build its in-house logistics network in the United States include buying a fleet of trailer trucks and experiments with drone delivery.
Being able to guarantee customers extremely quick deliveries is essential to Amazon’s business as it competes with other e-commerce companies and on-demand startups like Instacart by offering services such as Amazon Prime and Amazon Fresh. The company is also busy working on its international logistics. In January, its China subsidiary was licensed to handle ocean freight shipments for other companies, which will make it easier for Chinese merchants on its platform to send packages to the U.S.