Amazon kick starts its Air Delivery Network

With Drone delivery already under its testing stage, Amazon has come up with new plans to expedite its delivery processes across the U.S. To meet its commitment for ever faster and efficient deliveries, Amazon.com Inc on Wednesday signed a deal to lease 20 Boeing 767 wide-body freighter aircraft. This deal marks the company’s first formal step in the direction of building its own air delivery network.

Amazon’s expansion plans for its logistic network, however doesn't bode well for its current partners like United Parcel Service Inc and FedEx Corp who currently share most of the delivery load. "This is an incremental negative for FDX and UPS as it will likely remove some higher yielding express freight and parcel volume from each of the respective networks," RBC Capital Markets analyst John Barnes wrote in a client note. The two freight companies also saw a slide of 1.5 percent in their shares after the announcement by Amazon.

Amazon has been working on its logistic plans for quite some time. Recently, it also rolled out thousands of trailers and launched a programme that uses contract drivers to deliver fast orders.According to a 2013 report to Amazon's senior management team, a proposal was made for an ‘Amazon service’, which provides storage, packing and shipping for independent merchants selling products on the company's website. The project, called Dragon Boat, envisioned a global delivery network that controls the flow of goods from factories in China and India to customer doorsteps in Atlanta, New York and London.This information, however is yet to go public.

As Amazon is expanding its Prime members, who pay an annual fee and get free, expedited shipping on millions of products, the agreement with Air Transport will “ensure air cargo capacity to support one- and two-day delivery for customers,” said Dave Clark, Amazon senior vice president of worldwide operations and customer service, in a statement.

The operation of leased planes begins on April 1, according to Amazon spokeswoman Kelly Cheeseman. The duration of the leases will be five to seven years, lessor Air Transport Services Group Inc said. As part of the agreement, Amazon has the right to buy up to 19.9 percent of ATSG's stock over five years at $9.73 per share.