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Amazon.com Inc (AMZN) Launches Prime Air with Dedicated Cargo Planes

Amazon.com Inc is trailblazing the delivery sector as it works on drones and self-driving trucks. However, the firm is making a big and bold move in deliveries with the launch of its first-ever branded cargo plane, the Amazon One. The aircraft is a Boeing 767-300 plane that Atlas Air operates – Atlas Air is the same firm that provides cargo services.

Amazon One AMZN Prime Air

Last week, Jeff Bezos’ firm made a splash in the news when it revealed that it had reached an agreement with the British government’s Civil Aviation Authority will commence testing on drone delivery technology.  The firm has been talking about using drones for deliveries for about two years. The firm’s doggedness in employing an army of drones reveals a passionate drive to cut operational cost down and increase profits.

Meet Amazon One

The Amazon One is one of the 40 dedicated cargo airplanes that Amazon leased from Atlas Air and ATSG in order to strengthen its delivery network . The aircraft will have its inaugural flight during the Seattle SeaFair Air Show today. The aircraft has Prime Air painted on its side, the firm’s logo appears in its belly, the Amazon arrow is deftly placed on the tail, and its tail number N1997A is a prime number.

In a statement, Dave Clark, SVP of worldwide operations observes that “Creating an air transportation network is expanding our capacity to ensure great delivery speeds for our Prime members for years to come”. The firm currently has 11 dedicated airplanes doing its grunt work for deliveries and the new fleet allows the firm to “continue to maintain our fast delivery speeds and lower our costs as our Prime base and our Prime member growth continue to soar.”

On a lighter note, the Amazon One and other airplanes in the fleet won’t be dropping off parcels at your doorsteps – you’ll have to wait for drones to do that. However, the new fleet will foster a faster movement of goods between the firm’s warehouses and fulfillment centers in order to cut down the time it takes to ship goods to you.

Amazon takes a longer stride into logistics

Amazon pays a huge amount of money to logistics companies such as UPS, DHL, and FedEx to move goods from its warehouses, to its fulfillment centers and to the doorstep of the final customers. In 2015, the firm revealed that its net shipping costs topped $5B to mark a 19% year over year increase. The problem however is that the firm offers free delivery millions of items and the shipping fees it usually charges is lower than the actual shipping fees it pays to logistics firms.

Apart from the cost of using third-party logistics firms, Amazon has no control over the reliability of their services. For instance, in 2013, the firm was forced to offer refunds to some customers after bad weather delayed Christmas ship for both FedEx and UPS.

Amazon has been working hard to reduce its reliance on third party logistics firms. In the last one year, the firm has included a dedicated network of 4,000 trailers into its logistics network in order to increase its trucking capacity. The firm has also introduced its Flex app, which is an Uber-like service that allows individuals to sign up to deliver packages on their routes.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.