Amazon.com, Inc. (NASDAQ:AMZN) Expands Air Network, Faces FAA Shipping Penalty

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Amazon.com, Inc. (NASDAQ:AMZN) has been working on lowering its shipping costs, and leasing deals have been the company’s major strategy so that it can enhance its network.

The online retail giant has reportedly leased airline services from Air Transport Services Group Inc. (NASDAQ:ATSG) and it also signed a lease agreement with Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). Some of the airports where Amazon has been conducting its operations include Dallas Fort Worth; Allentown in Pennsylvania; Ontario in Southern California; Kentucky near Ohio; Wilmington, Ohio; Tampa, Florida, and Stockton in Northern Carolina.

Amazon strategically chose these airports because it takes less than 60 minutes to drive to its distribution centers from these airports. An analysis firm known as Pacific Crest believes that the online retailer can save as much as $450 million every year courtesy of such a move.

Not all the company’s air delivery activities are working though. Amazon is currently facing a fine of as much as $350,000 on accusations that the firm shipped dangerous and prohibited products by air. The fine that that was proposed against Amazon by the FAA seeks its basis from a shipping incident in 2014 where nine employees of United Parcel Service, Inc. (NYSE:UPS) touched chemical material that leaked from a package that was being shipped.

The fine arises in the wake of the FAA’s beefed up restrictions against safety violations during the transportation of hazardous material. Amazon, therefore, has to be more careful as it aims to expand its delivery network through warehouses, trucks and airplanes. The FAA issued $4.5 million in penalties related to the shipping of hazardous material by air in 2015 alone. This was a rise compared to the fines adding up to $3.4 million in the previous year.

The regulatory authority has tightened the regulations in response to the past fire incidents that have taken place on board aircraft ferrying hazardous material. The FAA claims that the shipment in Amazon’s case lacked proper packaging and a proper declaration stating hazardous content on board.

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