Atlas Air to operate 20 B767-300 freighters for Amazon

by Payload Asia

Atlas Air Worldwide Holdings, Inc. announced today that it has become the latest aviation partner of e-commerce retailing giant Amazon with an agreement to operate 20 freighters on behalf of the company which will take up as much as a 30 per cent share in Atlas.

Under the long-term agreements announced today Atlas will, starting in the second half of this year, operate 20 B767-300 converted freighters for Amazon on a CMI (crew, maintenance and insurance) basis by the group’s airline subsidiary Atlas Air, as well as dry leasing by its Titan Aviation leasing unit.

The dry leases will have a term of 10 years, while the CMI operations will be for seven years (with extension provisions for a total term of 10 years). Operations under the agreements are expected to begin in the second half of 2016 and ramp up to full service through 2018.

Atlas Air B767
Currently Atlas Air’s fleet includes only five B767-200Fs which raises the question of where it will acquire the remainder, with industry watchers expecting them to be converted aircraft.

“We are excited to begin a strategic long-term relationship with Amazon to support the continuing expansion of its e-commerce business and to enhance its customer delivery capabilities,” said president and CEO William J. Flynn. “We appreciate Amazon’s confidence in our capabilities, global scale and operating excellence,” he added.

As part of the deal Atlas Air Worldwide granted Amazon warrants to acquire up to 20 per cent (after the issuance) of Atlas Air Worldwide’s common shares – with the option for a further 10 per cent going forward – which the group said was “part of the inherent value creation and to align interests and strengthen the long-term relationship.”

These share will be sold to Amazon at a price of US$37.50 per share over a period of five years, with vesting tied in part to the commencement of operations of the 20 B767-300 freighter aircraft and other conditions while the additional 10 per cent is structured over a period of seven years.

Dave Clark, Amazon’s senior vice president of worldwide operations said: “We are excited to welcome a great provider, Atlas Air, to support package delivery to the rapidly growing number of Prime members who love ultra-fast delivery, great prices and vast selection from Amazon,” said .

The move is part of the e-commerce giant’s moves to take more control over its supply chain and reduce its dependence on integrators such as UPS and FedEx which saw it strike its first similar deal with Air Transport Services Group (ATSG) In March, involving 20 B767 freighters. It has built a ground network of couriers and new warehouses near or within urban centers for faster and cheaper delivery.