The Daily Update: Amazoned

Getting ‘Amazoned’ is the term used by industries across the world that live in fear that Jeff Bezos’s company will set its sights on their sector, thus disrupting the status quo and usually putting downward pressure on margins. Well maybe Amazon has found a new sector in which it feels it can make hay, and so again pushing Bezos' ideal that ‘Your margin is my opportunity’. You only have to look at Amazon Web Services (AWS), the in-house division that met Amazon’s web hosting needs before becoming one of the largest cloud computing companies in the world and Amazon’s most profitable unit to boot.

The new industry in Amazon’s crosshairs might well be air freight, to compete head on with the likes of UPS and FedEx. The idea is not new, as long ago as 2015, Amazon Air was launched as an in-house freight airline, to fly cargo between warehouses, mainly within the US and Europe. However, then the global pandemic hit, not only pushing up demand for Amazon’s parcel delivery service, but also causing supply chain problems around the world. This has prompted the company to pull forward its plans to expand its fleet of planes to help keep up with the e-commerce demand and alleviate bottlenecks.

According to some estimates last year Amazon invested USD80bn in logistics infrastructure, on everything from warehouses to trucks to cargo planes, and it's expected the company will spend about the same this year. So far Amazon Air has a fleet of approximately 75 cargo planes, making it the fifth largest dedicated cargo fleet in the world. However, it has also bought a stake in Air Transport Services Group, which has over 90 cargo planes, and has options to buy a slice of Atlas Air, with over 100 planes. A lot, but still less than the big boys, UPS has 572 planes and FedEx nearly 700.

Amazon Air has also expanded its presence at 42 US and eight European airports. Additionally, it has opened a 660,000 square foot ground facility at a cargo airport in southern California, and in August it opened a USD1.5bn cargo hub at an airport in northern Kentucky. However, it now wants to go global according to an article on Bloomberg. It's in the market for more than a dozen long range cargo jets that would allow the company to directly import products from China and other countries. The company has also begun moving cargo for outside customers.

As we have seen with AWS, once the company gets its teeth into an industry, they usually become a major player very quickly. The way e-commerce demand has risen over the last few years there is little doubt there is room for the existing players plus Amazon to operate in the space, however they are sure to put pressure on margins. Just another example of how the behemoth company changes every industry it touches.