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Barclays questions Amazon?s logistics plans | Air Cargo World

It's no longer much of a secret that Amazon has been considering creating its own air network in both the American and European markets. But anew report by Barclays Equity Research questions why the online retailer would want to take such as strategy when opening more fulfillment centers would be more cost-effective.

According to Lloyds Loading List, which had obtained a copy of the Barclays report, the study’s authors estimate that by the end of this year, Amazon is likely to have more than 100 fulfillment centers in the United States. Once these fulfillment centers are operational, Amazon will have a nationwide network with meaningful scope, enabling inventory placement to be made closer to consumers in most major cities.

Amazon has been working with several carriers in the U.S. on trial air operations and is believed to have begun the process of setting up its own U.S. domestic air network. It has also been conducting air trials in Europe with charter carrier ASL on a schedule between Wroclaw, Poland; Doncaster, U.K.; and Kassel, Germany – all of which are near existing Amazon fulfillment centers.

The Barclays report said: “Air transportation, especially of goods, is an expensive proposition. FedEx remains the market leader in terms of domestic U.S. air shipments, but financial returns have remained stagnant for over a decade. We know aircraft and airlines drive disproportionate attention from the media; flying is still sexy.”

Barclays speculated that the potential launch of an air operation at the former DHL hub in Wilmington, Ohio, is not necessarily a sign of a new network on the way. Instead, the report called it “a likely experiment” or perhaps a small network designed to meet the inventory needs of a “very specific high-value product.”

Also, the report said, the investment doesn’t pencil out. “With only limited financial returns and plenty of existing air capacity during non-peak periods in the incumbent package networks, we question the need for Amazon to devote the significant capital required to operate a standalone, time-definite air network.”

Barclays added that this was likely to be “less impactful in the long run, relative to local fulfillment center build-out.” The report said that one of the keys to Amazon’s success was its ability to continually build out its distribution infrastructure.

b2pilot186

"E-commerce giant Amazon has provided clarity on its moves into airfreight and other cargo transport modes, saying it is not looking to take on existing logistics operators.

Over the Christmas period Air Cargo News reported that Amazon had chartered aircraft in the US and Europe in order to move cargo across those continents.

Some reports even suggested it was looking to charter as many as 20 Boeing 767 Freighters as it planned to set up an overnight US domestic delivery service.

On the shipping side, a Chinese subsidiary registered as a non-vessel operating common carrier (NVOCC) allowing it to block book space on container vessels.

These reports led some analysts to opine that it was planning to enter the world of transport and logistics and take on the likes of FedEx and UPS.

However, the firm looks to have now quashed that speculation, saying its transport operations were only meant to cover the peak season rush because its logistics providers had struggled to meet the extra demand in the past.

Amazon chief financial officer Brian Olsavsky said: “What we've found is in order to properly serve our customers at peak we've needed to add more of our own logistics to supplement our existing partners - that's not meant to replace them.

“Those carriers are no longer able to handle all of our capacity that we need at peak. They have been and continue to be great partners and we look forward to working with them in the future. It's just we've had to add some resources on our own.”

However, it has invested in its own trucks to move cargo between its warehouses and source centres.

The moves to charter aircraft came as the company had run into shipping delays over the last few years because of sharp demand increases at the major integrators during the peak season.

Some have suggested that to mitigate the delays in 2015, the integrators had told Amazon they would need to put up prices if they were to meet the demand surge.

Last year, in the US, Amazon ran its own airfreight operation out of Wilmington, Ohio, through lessor Air Transport Services Group (ATSG) and subsidiary ABX.

In Europe, reports said Amazon has been flying five times a week from Katowice in Poland to Luton, East Midlands or Doncaster airports and then back to Poland via Kassel in Germany.

The operation was being run in co-operation with German logistics operator DB Schenker, with a Boeing 737 leased from ASL France.

At the time, sources indicated to Air Cargo News that the charter of the single aircraft was a temporary contract to cover the peak Christmas period.

Therefore suggestions that the e-commerce giant is set to launch its own ongoing air cargo operation in Europe on the back of the temporary service appeared to be purely speculation."

Amazon not looking to replace the likes of UPS and FedEx - Air Cargo News

MaydayMark

Will Bezos's $6B (pocket change?) loss yesterday curtail his airline plans?

http://www.businessinsider.com/jeff-...gs-flop-2016-1

Czech Airman

If you would have bothered to read the above post, it would have answered your question. Amazon has no plans to start it's own airline.

atpcliff

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the above is less than 10 characters...STUPID software!!!