Amazon just expanded their fleet to 50 aircraft - and it shows that FedEx and UPS is starting to lose one of their biggest customers
- Amazon just announced it will add 10 more planes to its cargo aircraft fleet over the next two years.
- That will bring its fleet number to 50 planes.
- Amazon Air isn't likely to compete with USPS, UPS, or FedEx as a third-party air cargo provider, but it shows that they might be moving away from using the services.
Amazon Air announced Friday it will add 10 more planes to its cargo aircraft fleet over the next two years.
Those planes are Boeing 767-300 aircraft leased from Air Transport Services Group, which Amazon says is already leasing 20 planes.
That will bring its fleet number to 50 planes, and render Amazon all the better to deliver packages in a timely fashion.
It's the latest announcement from Amazon that signals just how keen the e-commerce juggernaut is on expanding its own air shipping capabilities, rather than relying on UPS, FedEx, USPS, and the like.
Just last week, Amazon announced it will expand its 72,000-square-foot cargo facility at Chicago Rockford International Airport to 200,000 square feet. It also announced last week it would build a new regional hub at Fort Worth Alliance Airport, and a new sorting facility in Ohio's Wilmington Air Park.
That matches plans to expand its hub at Cincinnati/Northern Kentucky International Airport to three million square feet. The space could then accommodate more than 100 Amazon Air cargo planes.
What does that mean for UPS, USPS, or FedEx?
People often pit Amazon's private airfleet against UPS, USPS, FedEx, and the like. But analysts say Amazon Air isn't likely to compete as a third-party air cargo provider anytime soon.
But those shipping firms do depend on Amazon as a customer. Amazon comprises around 3%-5% of FedEx's revenue, while Amazon's revenue percentage at UPS is around the low teens, according to Trip Miller, founder and managing partner of Gullane Capital. (Disclosure: Gullane Capital has shares in Amazon and FedEx.)
Morgan Stanley analysts wrote earlier this month that Amazon saves $2 to $4 per package when using its private fleet. That's as much as $2 billion (6% of its shipping expenditure) in savings.
If Amazon continues to grow its private air fleet, that means those firms will lose one of their biggest customers. By 2025, Morgan Stanley estimated that UPS and FedEx revenues could fall by a combined 10%.
"It's obvious Amazon is going to continue to grow their air fleet," Kevin Sterling, managing director of Seaport Global Securities, told Business Insider.