Sorry if I missed it somewhere but I couldn't find anything indicating Amazon is interested in moving non-Amazon volume. I found some 2013 online retail revenue numbers: Amazon, $61B, next closest online retailer = Walmart at $10B. Total market = appx $130B. I'd forecast increased competition for Amazon which would be good for Purple, Brown, USPS. I also previously posted a note from Browns 2010 annual report specifying that they had no customer valued at greater than 10% of total revenue. Assuming FedEx is in a similar position, it doesn't appear losing Amazon as a customer will be the beginning of the end for either of these companies.

Losing 10% of a 12 billion dollar quarter would represent a big hit. But like ToolBox mentioned, AMZN really foresee sufficient loads in both directions, on their own? More to the point, will the income statement reflect gain or loss on dedicated freight operations vs. the current arrangement? Only speculation to go on because Jeffrey ain’t really said squat about any of it. At $668.50 a share, no wonder.

Why all the negativity, I wish Amazon the best of luck. On a small scale I can see flight ops supporting one company between specific points working out. But it takes diversity of customers to fill a couple of 757s into the greats and grands everyday. Worst that can happen is a little inefficiency in the air cargo sector for a couple years, and that means more pilots flying, at lest temporarily.

Amazon a Good Thing or Bad Thing?

Lots of Questions about AMZN Buying Planes. Last week, several news agencies reported that AMZN is looking to lease up to 25 aircraft to build out its own airfreight operations. For some reference, FDX has ~400 jets and UPS owns nearly 250 jets and leases or charters another 400. Our note today discusses what this means for UPS, FDX and AAWW.

Some Numbers on AMZN. We estimate AMZN accounts for about 10% of total volume and 5% of total rev. for UPS, and 9% of volume and 3% of rev. for FDX. Overall, we estimate about 30% of AMZN’s business is shipped with UPS, 35% with the Post Office, 17% with FDX, and 18% with regional providers like LaserShip in New York.

What Can AMZN Do with 25 Planes? Below, we try and estimate how many packages AMZN can ship on its own relative to the roughly 1.4B packages it ships currently in the U.S. Our math suggests that with 25 aircraft, AMZN could ship around 225M packages a year, or about 16% of its total U.S. shipments a year.

What’s the Risk for UPS and FDX? We believe AMZN is already leasing 4 freighters to move inventory between its fulfillment centers. And with 25 more aircraft, we suspect AMZN might start shipping its own packages around to diversify away from FDX and UPS. But 25 aircraft are not enough to fully displace UPS and FDX as providers, and they’re nowhere close to enough to start competing against UPS and FDX for other shippers.

We’re Not Sure AMZN is a Good Thing for UPS and FDX. We’ve never recommended UPS or FDX as winners from e-commerce growth, as we believe it’s low-yielding, low-density, and low-margin business. UPS is seeing its best volume growth ever in recent years, but little EPS growth. And FDX Ground margins have contracted the past 3 years as e-commerce has grown rapidly. So as we’ve cautioned about the negative mix of e-commerce growth in recent years, it would seem hypocritical to worry about losing some of the business. Reiterate Peer Perform on both FDX and UPS.

A Few More Thoughts. We love the long-term story at FDX Ground, and would like to see FDX Express shrink its way to better profitability. So if AMZN plans to take on the burden of more aircraft, that’s not a shift that troubles us too much. Meanwhile, if it seems likely that AMZN will do more shipping on its own, we’d like to see FDX and UPS push pricing increases even more aggressively while they can. See more below, including what AMZN’s plans could mean for AAWW

Has "shrinking to better profitability" EVER worked in the business world?

It's been working at ups for past 8 years per bean counters.;)

Was this an article published somewhere? If so, link?

Inside freight

I've been concerned, ever since ground started booming for Fedex (surprised it took them so long), that the Express side would start shrinking as a result for a while....

And yet we are flying the same routes to the same cities we flew to 10 years ago, usually with heavier metal.

And you're buying 767s like they're going out of style..... oh wait, they are. :D

That said, I think -10s and the Airbuses are being slowly parked?

New, more reliable and more fuel efficient! 😀

Bezos Playing Chicken?
 

Perhaps Jeff is playing chicken with FDX and UPS. He is showing them he can have his own delivery operation and if they do not want to lose that stream of packages they will have to give him substantial discounts.

Who will blink first?

I'd love for UPS and Fed Ex to tell Bezos to deliver his own low yielding packages next year, see how fast he gets that network up and running..

Relentless algorithm feeding on a metamodern planet of online shopping junkies; indifferent, unapologetic, impersonal. If Dr. Dystopia dreamed he could make fulfillment fly absent induced drag of salary & benefits, other than his own, think he'd give it a go? Imaginary bull's-eye that can't be hit but one which stands dead center of an oversized target, he'll never quit on. Watch your step replicants, blade runners are standing by.

Kerouac lives!

Thank you, Philip Dick.

Good one,
Bad flaps!!

Seriously? Who will blink first?

I agree with Rocket Bob in the post below yours. If UPS and FedEx sometimes have trouble delivering packages, I would love to see Amazon do it all by themselves next Christmas.

It would be an unmitigated disaster.

Ahh but they might not to do it by themselves. Remember that express cargo airline that worked out of a cornfield in Ohio? Well the pieces are still around!

Seriously, you're delusional if you think Amazon Air can get all of the pieces in place to handle a few hundred million packages next Christmas. Give me a break, good luck finding enough sort employees in that cornfield. im not saying Amazon can't be a successful delivery company, just saying it's going to be a long process.

Lately, though, the companies’ relationship has been strained. A few years ago, UPS shared some of its routing data with Amazon, according to an executive. When Amazon requested additional data, UPS—by then wary of the retailer’s intentions—refused, that executive added.

Amazon has poached more than 40 UPS supervisors, managers and executives in the last three years, according to an analysis of LinkedIn data. In September, Kniffen Kelly, a 16-year veteran working on engineering UPS’s transportation networks, left to become Amazon’s director of sort center engineering.

Cut and paste of an article from the Wall Street journal.

Are they still planning to use Uber drivers to deliver the packages?

After Seattle, Amazon Flex will launch in Manhattan, Chicago, Baltimore, Miami, Dallas, Austin, Indianapolis, Atlanta, and Portland. The company has not set a timeline for its expansion. Drivers make $18-$25 per hour. Work as much or as little as you want.

Amazon’s Flex service is not impacted by Seattle’s move to make it possible for Uber and Lyft drivers to unionize, as reported this week by the Wall Street Journal. That ordinance impacts drivers shuttling human passengers, not packages. (Cargo cut-out).

(Article off internet)

Atlas stock is up $1.50 today on this Amazon talk.

From various articles:
Amazon has a long term deal with the USPS. They will deliver to the customer. The last mile is very, very expensive, just as the last mile of data for internet/tv/phone, etc. Amazon will deliver directly to the closest post office, via truck, and the USPS will deliver it to the door.

20-25 planes, other sources say the plan is 60, while others state it is to be larger than FedEx or UPS, as far as Domestic packages. I wonder about international?

Remember the 40 brightest ex brown that Amazon managed to assemble together are the same fellows in charge when the memorable peak 2013 took place.I wonder if they hired Mr. peak also.

I wouldn't hold my breath for that.

And you know this, how?

Me thinks that there is no fact base to your prediction and it's just your wishful thinking.

So you think Amazon could have everything ready to go next Christmas and deliver millions of packages with 20 airplanes and some uber drivers.

Got it.

Finding enough sort employees won't be a problem. Finding enough 767's is the problem.

You mean the same one that alienated many of the hard working farmers that worked there to get medical benefits? Most of those guys left and Hete was left to bus in inner city "workers" from Cincy/Dayton/Columbus and theft at the sort went through the roof. Or do you remember the fiasco with Garcia Temporary Services that ABX hired to get "workers" to man the sort? They ended up getting busted and raided by ICE one night in ILN after ICE found out that the hundreds of illegals hired by Garcia and vetted by ABX were using just a handful of Social Security numbers.

Tell you what I'll drag this thread up in exactly one year to talk about their progress.

I know you ABX guys are hoping against all hope that Amazon buys ABX to form it's airline or at the very least signs up ABX to provide ACMI and/or CMI to Amazon while utilizing ILN as the sort location. It's the only way for you guys to get out from the clutches of DHL and what they did to you and ILN.

You have to remember that Amazon is doing this to lower it's cost and you guys are one of, if not the highest cost ACMI. The other DHL ACMIs will be courting Amazon heavily also. Would you be willing to take concessions in order to get the Amazon flying?

Here's an idea. How about if none of the DHL ACMI carriers take any concessions!!

Not only no but hell no! And you get what you pay for.

Actually not a lot of the farmers left. The sort just expanded so much that there wasn't enough of them. And I tell you what when Aerosmith started the test sort a few months ago there were plenty of local applicants.

I am not sure how important Wilimington is going to be to Amazon. The Wall Street article I read today indicated they're not that interested in having a traditional hub and spoke system.

I just heard on Bloomberg Business radio that Amazon has planes flying in Europe delivering packages.

They will never make any money that way, they should use vans.

In addition to being difficult to get the 767s, it will be difficult to find the pilots to crew them, unless whoever is sourcing the pilots pays top dollar.

I just heard that Amazon has canceled the flying out of Boeing Field with Northern Air Cargo as of January 15. Any news on the other flying?