Amazon Air cargo expansion has been forced to slow

This year, Amazon fell from the most searched shopping site last year to the fourth place in the Black Friday and Cyber Monday sales. But its "Prime" member delivery speed is still indisputable. This can only be attributed to its increased air cargo capacity. Amazon's shipping and fulfillment costs have grown faster than revenue over the past five years, according to Cargo Facts Consulting.

At present, Amazon Air continues to add flights, but the growth rate has slowed from 30% in 2021 to about 5% in the first half of 2022. Is Amazon's air cargo layout caught in the vortex of its "speed is of the essence" philosophy? Will you expand your strength in the future? Or will it be sold to third parties like Amazon Cloud Services? For now, at least, it's not going anywhere.

Amazon Air was born out of the company's experience in 2013 when "poor" deliveries from its delivery partners damaged its business and reputation. After that, Amazon wants to get rid of the shackles of shipping partners, control its own destiny, and better serve customers. Through sheer strength, and perhaps some luck, Amazon hasn't faced the crisis of not being able to deliver on Christmas since 2013.

By Christmas 2013, Amazon was almost entirely dependent on FedEx and UPS to deliver most of its packages across the United States. And the delivery enterprise ground transportation problems caused by Amazon can not timely delivery of goods to consumers. This painful lesson forced Amazon to spend the next year to build its own network of distribution centers and optimize truck delivery routes.

Amazon also faced a crisis in the 2014 Christmas season. Amazon, which had been preparing to promote its flagship Kindle and ship it in time for Christmas, found it was running out of inventory to ship within driving distance of its Seattle headquarters. Amazon turned to UPS to fly more Kindles to New York. But with the holiday shopping season in full swing, carriers can't deploy more planes. Amazon's promise of fast delivery has been severely challenged. Although Dave Clark, Amazon's head of global operations, urgently requested the deployment of cargo planes to ensure delivery and escaped the "disaster", in order to smooth the next year, Amazon had to find another way out, that is to build its own air cargo network.

The philosophy of Amazon's founders at the time was to emphasize that "speed is of the essence" and that some irrefutable decisions do not need to be deeply researched. However, the network is not easy to build. In addition to the huge cost, there is also the need to meet government compliance requirements on safety and working conditions.

Amazon has built its own large-scale Air cargo service network "Amazon Air" in a few years, greatly reducing its dependence on the above two major delivery companies. Currently, Amazon owns 11 aircraft and leases about 100 aircraft operated by seven airlines, flying more than 200 cargo flights a day from more than 70 airports around the world. Last year, Amazon spent $1.5 billion to build an air hub at Cincinnati/Northern Kentucky International Airport (CVG) to provide delivery closer to consumers.

However, the "infatuation with aviation" strategy also makes Amazon some "quick success", its employees complained about this, saying that "air transportation costs are high, emissions are large, and sometimes goods transported by air can be efficiently delivered by cheaper ground transportation."

Amazon's air network is in full swing. In 2015, Bezos called a meeting of top and middle managers to discuss whether the airline network would be owned or outsourced. In the end, he decided to leave the mission to other airlines in order to reduce a number of safety and compliance issues.

Amazon followed the example of DHL Express. DHL outsources its air operations in the United States to a number of smaller air cargo companies, which manage the aircraft, staff and maintenance and safety issues. In 2016, Amazon signed a long-term agreement to lease 40 freighters from two medium-haul carriers, Air Transport Services Group and Atlas Air. Later, these cargo planes were printed with the Amazon logo "Prime Air" and flew over the United States.

Amazon has always been accompanied by "noise" in the development layout of the aviation network. With better predictive planning and inventory management, Amazon doesn't need so many planes, and especially doesn't need so many hubs. Former Amazon employees revealed that UPS saved millions of dollars by better connecting to the ground network rather than buying more planes. "Amazon wants to cover the entire United States and beyond."

Some analysts say that when fedex and UPS are faced with a huge volume of business, the response is "existing facilities can not handle so many packages," while Amazon's attitude is always shocking, "renting places near the airport to immediately meet the transportation task." Amazon's management of air freight is not familiar, causing dissatisfaction among many employees, especially the crew. In 2016, Amazon employees saw the real situation of the flight team at the airport. In order to meet Amazon's pursuit of timeliness, the company often requires temporary changes in flight routes, resulting in some pilots having to rest in the cockpit.

In 2017, the head of Amazon's aviation division was replaced by Sarah Rhoads. She was previously in charge of Amazon's distribution centre operations in the UK and Europe and was seen as lacking knowledge of the air cargo sector. Amazon ushered in another wave of airline network expansion and development to further improve operational efficiency.

The expansion allowed Amazon to open six regional hubs between 2019 and 2021, flying more than 200 flights a day in the United States. More hiring followed. This development situation has been confronted with the novel coronavirus epidemic that has lasted for about three years, which has brought a huge burden to Amazon.

The high efficiency requirements of Amazon's airline network, even the minute-precise scheduling management, make it difficult for the crew, and the boundaries between Amazon and the pilot's responsibilities are increasingly blurred. Amazon's meticulous calculation of costs even requires airlines to provide certain fuel consumption information, change established routes to save costs, etc., which makes the partner airlines and their flight personnel feel stressed and unsafe.

Amazon Air's expansion has also drawn complaints from affected communities and residents. In 2019, Amazon launched the "Scythia" project in a mountain area of Florida to increase the number of aircraft at the local airport, aiming to provide local jobs and promote economic development while improving transportation capacity. This has also been approved by the relevant safety and environmental protection authorities. Since then, there will be 22 Amazon flights a day. In 2021, when Amazon announced it would increase its fleet here to 44 aircraft by 2027, residents of the communities involved objected strongly at hearings, saying it would affect their quality of life. Although Amazon has the right to expand capacity here under the terms of its original airport lease, the expansion plans are still pending.

Amazon has faced many similar obstacles. In 2021, the port authorities of New York and New Jersey negotiated to allow Amazon to lease an air cargo facility at Newark Liberty International Airport, but months of opposition protests followed. Local environmental groups, labor groups and politicians say the project could eliminate some union jobs and pollute the surrounding minority communities. Amazon and local port authorities shut down the project.

According to Wired, Amazon is currently optimizing its operations to ensure a sustainable and efficient web. This includes calculating the load rate of the aircraft, taking into account the weight, volume, route, staffing, supporting facilities and other supplies of the package.

For air capacity that is not fully loaded, Amazon said it would mimic the model of Amazon Web Services and sell excess capacity. However, attracting customers is not smooth sailing. Apart from the shipping contract signed by Amazon and the United States Postal Service in 2017, customers are few and far between.

Faced with slow revenue growth and economic uncertainty, Amazon CEO Andy Jassy, who took over last year, appears to have slowed expansion. The company has decided to suspend, close or delay plans to open more than 80 facilities in the United States. The company has fired Dave Clark, the executive in charge of building a massive logistics facility. Recently, Amazon has also embarked on a mass firing spree.

As for the airline business, while Amazon Air continues to add flights, its growth rate has slowed from 30 percent in 2021 to around 5 percent in the first half of 2022, according to Cargo Facts Consulting. Amazon's investment in the aviation sector continues. In October, Amazon announced a partnership with Hawaiian Airlines, which will operate Airbus A330 aircraft on Amazon's behalf. At the same time, several former Amazon employees have told the media that the company has been discussing for years the possibility of buying one of the outsourced airlines and starting its own airline, preferably by hiring non-union pilots.