Amazon.com, Inc. (NASDAQ:AMZN) has announced a contract with Air Transport Services Group Inc. (NASDAQ:ATSG) that involves the leasing of more than a dozen Boeing 767 aircraft.
The deal is part of Amazon’s strategy to secure aircraft that will be used to make deliveries for Amazon Fulfilment Services. The airplanes will be operated by the airline leasing firm together with Air Transport International and Barrick Gold Corporation (USA) (NYSE:ABX). The aircraft deal is a good indicator that Amazon is committed to enhancing its logistics network to speed up deliveries as well as cultivating more efficiency in the business.
Colin Sebastian, an analyst at Robert W. Baird & Co., stated that the lease contract is the first formal affirmation of the online retail company’s plan to expand its delivery services. He further added that there is no longer a reason to doubt Amazon’s intentions in this matter.
The leases for the aircrafts have a life of about five years before expiry. Amazon will also acquire the right to purchase up to 19.9% of ATSG shares in the next five years. This provides the possibility of an expanded agreement if the delivery network is successful. Joe Hete, CEO of ATSG revealed that the companies have been conducting negotiations over the deal since the summer of 2015. Hete also added that the companies have been in close ties to establish that a fully customized air cargo network can be a good addition to current distribution and transportation resources.
Amazon has been relying on a combination of services from other firms including United Parcel Service, Inc. (NYSE:UPS), FedEx Corporation (NYSE:FDX) and the US postal service to carry out its delivery services. The company was also granted authorization by the Federal Aviation Administration to test fly delivery drones. Glenn Zaccara, the director of corporate public relations at UPS, stated that the his company has had a good relationship with Amazon, and their ties will continue to exist. The new development means Amazon is speeding up the process of independent delivery, and more is expected soon.