Pontifications: Amazon’s quiet plans to grow its airline

By Scott Hamilton

Oct. 8, 2018, © Leeham News: Amazon, the giant on-line retailer, continues to move quietly to expand its Amazon Air cargo carrier, with plans to grow the airline to a size that could rival FedEx, market sources tell LNC.

Amazon’s contracting with Atlas Air, ATSG and others for Boeing 767F services is well known.

So are plans for a $1.5bn cargo center at the Cincinnati (OH) airport (which is really across the state line in Kentucky). This expansion will support more than 100 airplanes. Operations are targeted to begin in 2020.

Prime operates about 40 through its airline partners and is in the market for 10 more, LNC is told.

But this is just the tip of the iceberg.

Growing by leaps and bounds

Amazon originally leased 919 acres for its project, but in January 2018 added 210 more.

While the current project has been public for a long time, LNC is told this is but one phase of a multi-phase expansion plan.

At least three more phases of equal size are said to be planned. This would provide space for 400 airplanes.

Amazon has long been rumored to be interested in ordering 100 new-build 767-300ERFs from Boeing, but nothing has materialized.

Nevertheless, Boeing plans to take 767 production to 4/mo early next decade. The rate is now 3/mo. It’s unclear if the rate increase is for the KC-46A aerial refueling tanker, which is assembled on the same line as the commercial 767, or in anticipation of freighter orders. UPS is said to have interest in ordering the airplane as it faces aging aircraft in its fleet. UPS already flies the 767F.

Boeing 767-300ERF. Source: Amazon.

FedEx currently has nearly 400 jets in service and 86 on order, including the 767-300ERF. Another 285 propeller aircraft, mostly Cessna 208Bs, are also in service.

UPS has 246 jets in service and 25 on order.

Scrounging the used market

Amazon is reported to be scrounging the airplane market for used 767s to convert to freighters in the future. There are more than 400 767-300/300ERs passenger aircraft in service, according to the Airfinance Journal Fleet Tracker. There are about three dozen in storage.

It’s unclear if Amazon has shown any interest in used Airbus A330s for P2F conversions. The early models are just hitting the age where acquisition cost is low enough to make this an option. The first A330-200P2F program is now underway.

Amazon is also known to have inquired in the used market about Boeing 737-800s and Airbus A321s that could be converted to freighters.

777 freighters

The possibility of acquiring early Boeing 777s for conversion to freighters also has been mentioned, but this is characterized as purely speculative.

IAI Bedek is performing engineering on a P2F program, but Boeing abandon plans for its own 777-200 P2F. Instead, it’s studying a 777-300 P2F possibility.

Old, lightweight 777-200s and 777-300s (the non-ER version) would make good airplanes for Amazon, one industry expert says. The type of cargo Amazon flies cubes out long before weight becomes an issue. The lightweight structures of the early 200s and the non-ER 300s would easily accommodate Amazon needs, this person said.

There is no known indication of Amazon’s interest in the 777, however.

56 Comments on “Pontifications: Amazon’s quiet plans to grow its airline

      • That really depends on the floor loading ability.

        Freight packagers (now joined by Amazon it looks like) could have used the A380F.

        No one else had any use for it.

    • Notice an aircraft on AB’s production list called A330-743L, MSN number 1936. Looking at the list it must be 18+ from now before assembly?

      • Hello Anton,

        The A330-743L is the Beluga XL. See the excerpt below from Wikipedia. I would guess that this aircraft is far in excess of Amazon’s needs unless or until they start offering major airliner or military transport sub-assemblies for sales.

        “The Airbus Beluga XL (Airbus A330-743L) is a large transport aircraft due to enter into service in 2019. It is based on the A330 airliner, to be the successor to the Airbus Beluga. The XL has an extension on the fuselage top like the Beluga. It is being designed, built and will be operated by Airbus to move oversized aircraft components. The aircraft made its first flight on 19 July 2018. ”

        https://en.wikipedia.org/wiki/Airbus_Beluga_XL

  1. Dear Scott, thanks for this informative article. Do you have any speculations on what’s taking so long on the Amazon 767 order? It would seem, with aircraft lead times and Amazon’s Kentucky hub investment, this order should have been placed by now! Also, do you have any idea on what’s keeping those 36 or so 767s in storage? Price, parts reserve, or too “cycled out”? Thanks again.

    • @Montana: I can only speculate, given market intelligence and the fact that Amazon is notoriously secretive. 1, I don’t think it’s ready to place an order for new airplanes. 2) there’s still a fair amount of feedstock in used airplanes to tap before any new order is needed. 3, the facilities in CVG won’t be ready till 2020 and expansion comes later. 4) There’s plenty of time before Boeing is prepared to up production.

      • Thanks again, Scott. I guess I got a little hung up on their massive investment of a 100 a/c facility, to open in late 2020. Assuming BA wouldn’t allow them more than 1 production 67-300F per month, that’s only 24 or so more new, “on boards” by the end of 2020. Also, I was thinking they might try to “crowd out” UPS and FedEx to some degree by taking 1 per month on a 100 plane order. I’m assuming, from the size of their overall logistical investments, they’re trying to build a likewise rival to UPS and FedEx. Also, do you have any thoughts on how many of the 36 or so boneyard 67s will make back into the air as cargoliners in the next two to three years?

  2. I expect Amazon to become the launch customer of the 330-900F. 50 orders at rock bottom price for a new freighter to carry lots of volume, that would be the ideal start for Airbus to finally get a big foot in the freighter market.

    • I expect Amazon to become the launch customer of the 330-900F.

      Based on what?
      Wishful thinking?

      • As he said : Pricing and interior volume.
        The lead story says they max out planes like the 767 in volume before weight limits. And the A330 and its predecessor dates back to around the time of the 767, why cant it be built as cheaply. Doesnt Boeing have a labour shortage now for its ‘rivetted’ planes at Everett, so its going to struggle to increase production.
        The numbers being talked about mean Cincinnati airport could do with a lessor number of bigger planes as peak times will have your planes stacked up all over the Kentucky night sky.

        • Well FedEx manages it in Memphis and UPS does in Kentucky (Louisville not Cincinnati)

          Lot of empty space out there to stack em.

          Nothing like NY, Atlanta, SFO, LA around.

          If A330 was an answer they would have been buying them, 767s seems to suit a slot that A330 does not.

          • Of course. Just doing it the way everyone else does has always worked for Amazon.
            And Boeing wants to raise its margins, selling old style freighters at ‘end of line prices’ when it cant even find the work force makes sense too.
            Yep , nothing to see here… and the other unicorn, building 5 tonne empty weight military trainer mostly using old style methods of riveted aluminium will transform their commercial airliner business where the rudders alone likley come in at 5T.
            Sheeesh theres a lot of wishful something … you wouldnt even call it thinking.

          • Well you seem to ignore the fact that there are proven metrics for freight.

            Its not rocket science, that is why tube and wings with struts is the way to go, it works.

            Now if someone comes out with a game changer, that does change things – but there are no game changers.

            TF-X, so they should come up with some wizz bang new tech and stealth to boot, cost 100 billions and then what?

            Lowest cost solution that deals with the specs. Nothing new about that either but a proven winner.

          • The metrics for freight ?
            I dont have the numbers to hand, but they are maybe 1/3 the revenue of passenger traffic by weight. Then there is a freighter payload , maybe 20-25% of plane max takeoff weight. of course those metrics are why 20 yr old plus airliners which only fly a few hours a night are the only economic solution. Warehouses where everything is tracked to the second cant be compared to flying where delays and mechanical faults combined with weather cause havoc- all the time.
            We have seen what the long range wide bodies did to the freight market, where un needed long range mean the fuel was traded for belly cargo, with a marginal extra cost for the airline which is flying anyway.
            What is Amazon going to do about its fixed costs, beat down Boeing for even cheaper 767s ? Fuel is a far bigger cost, are they going to buy refineries as well. Delta found rising prices and falling prices changes everything when you own a refinery.
            As for the T-X, it seems a fine plane, and built almost using a template from the 70s and 80s. But a warning for Boeing is if you arent doing leading edge tech in the military fast jet area then you reach a stage that you cant do it at all. It seems clear its reached that stage with the former McDonnell plant. Oh well, the financial engineering seems to be an eye opener.

      • My wishful thinking will be an A330-1000F if its about volume. A simple ~4.8m (10 panel) stretch. MTOW could potentially be kept at 251T with 76Klb engines for a passenger version (320 seats) with range of ~5500Nm for high density medium haul routes.

        In high density seat layout (400-440 seats) with range of ~4500Nm (?) this could find application in certain parts of the world.

  3. Also, I think the prospects are good for the NMA to be a 757F and 767F replacement. If it is around 300K MTOW and has a 100K payload, it could split the difference between them. I would opt for a circular aluminum fuselage to reduce cost and complexity. If a 14′-4″ outside diameter from 2-2-2 seating or 16′ outside diameter from 2-3-2, either way, more volume than a 757F.

    • We don’t even have the aircraft and its being turned into an F?

      And we have all those 737s and still 757s that can be converted. A320 not so popular but those are out there as well.

      • Don’t know what’s AB’s intentions with an A321+, it is suggested to be modest stretch of 2 seat rows in economy. This could potentially serve a platform for a “narrow body” freighter replacing 757’s.

  4. I doubt any amazon operation will be theblaunch customer for any cargo conversion of the A330. Amazon wants the cheapest planes it can get

  5. In 08-A/C ANALYSIS-feature – news_22.pdf a guy called Stephen Fortune rules out LGW A330-300s up to L/N112 and talks about limitations on the remaining LGWs up to L/N244, with the really suitable aircraft being the HGWs starting with L/N256 (1999 build). The vintage from 256 and up show as pretty much all active and operated by Korean, American, Air Canada, Cathay Pacific but none of these shows any sign (as far as I can see) of disposals soon. The L/N113-244 shows only 29 (?) still existing so, even if Amazon is interested in the 330-300P2F and would consider the limited LGW version perhaps this would be too small a sub-fleet to interest Amazon.

  6. Apparently emission controls that will come into place from 2028 will impact on the 767(F’s).

    With the potential size of the 767F market sure it could be big enough for GE to develop a variant of the GEnx for new aircraft and to re-engine older. This could potentially spill over to an engine option for the KC46?

      • They have been around for a while, pretty much the same as the C Rev for the Trent upgrade wise.

        Keep in mind that engines are upgraded all the time (usually with a back fit intent). They don’t always get a Rev or Pip id though they may be quite markedly improved over the base line Rev of Pip.

        GE no longer publicly has a Pip III per Rev C for RR, but they are upgraded engines from Pip II original that keep improving the engine.

        RR clearly hit a limit on the Rev that could resolve the Trent 1000 basic drawbacks and went with an all new engine.

        GE keeps refining their, no idea if internally its got its own model designation, there will be some way to keep track of what got what when and where.

        • RR went for a partly new engine for the 787 because they had a
          new engine from new plane to use – A350 and GE dint have an engine on that program.
          The original 787 engines were designed way back in the early 2000’s.
          this isnt unusual, the CF6 from the last few years, the CF6-80 series is nothing like the first CF6 designed for 41k thrust for the DC10 in late 60s. That too required a complete redesign for the A300, as it says in wikipedia

          “Unable to increase (HP) turbine rotor inlet temperature, General Electric chose the expensive path of reconfiguring the CF6 core to increase its basic size. They removed two stages from the rear of the HP compressor, leaving an empty air passage where the blades and vanes had once been. Two booster stages were added to the LP (low pressure) compressor, which increased the overall pressure ratio to 29.3. Although the 86.4 in (2.19 m) diameter fan was retained…”

          The fan size was later increased along with other changes for the CF6-80 series such as is used for the 767F today. Maybe the changes have pushed it too far is there has been a regular series of recent uncontained failures.

          Massive internal changes are feature of big fan engines as the years pass as that too was a feature of the turbo jet age. We even now at the smaller end where GE did a completely different LEAP engine for Boeing after doing one for Airbus. Its not just the fan size as the cores are different as well. That wasnt even a 10 year wait .

          • So, RR went to the massive effort to certify a new engine on the 787 because they had a new whiz bang one ready to go!

            Really? Now there is a re-write of reality.

            Can you say flawed engine? Sure you can (Mr. Rogers from the US for those not familiar)

            And this is a qute on the status, Not that the Trent Ten IP is being re-desinged as well.

            “This latest snag involving the Trent 1000 comes less than three months after Rolls launched a “precautionary” redesign in the IPC in the Package B and Trent 1000 TEN engines, adding another dimension to a saga that began in mid-2016 with the well-publicized afflictions involving Package C engines in Boeing 787s operated by All Nippon Airways. ”

            There is a vast and huge difference in an architecture that can’t achieve the thrust levels needs (the Trent 1000 did that, it just won’t do it very long!)

            So we hear the Trent 10 was an upgrade when it was mostly all new (75%) apparently they kept the worst part of the 1000.

            And then there is the all new except the old part that is not so good.

            Oh, and the Trent 10 is the only engine going forward (some like Norwegian are taking the 1000 off the -9s, keeping them on the -8s) – Putting Tens on the -9s.

            Phew.

          • Remember the GE90 for the 777 series . That too came in 2 very different versions, not far apart in time but …surprise… because a new 777 version came along the 777-300ER ( and its heavyweight siblings the -200LR and the -200F)
            As always its not the size of the plane that matters . its the extra weight. A350 -1000 MTOW went from 280t to 316t, and with maybe a -1100 version in the wings ?

            GE has been doing major internal changes to its big fan engines ever since it entered the market…. why ? because it is doing major research on components and tech all the time.
            Makes sense that RR follows suit, its newest engine is the RR pearl, an upgrade/re-design to the Tay engine for business jets and a likely choice for B-52.

    • CFM/PW most likely will come up with engines of 40-50Klb for an NMA.

      The demise of the quads saw new 50-60Klb engine developments disappear. I however think if an engine manufacturer build a gem of an engine in that thrust category there could be applications. For AB an 275 seat 6000Nm range MoM for example, or 767F-Neo for BA?

  7. If I was an AMZN share holder I would be worried. Running an airline is very different from what Amazon excels in. They should concentrate on their business and use their size to extract good prices from companies who specialise in cargo airline operations.

    • that is likely because you don’t understand what Amazon excels in.

      Amazon is, first and foremost, a logistics company. they receive, warehouse, pick, pack and deliver. all their SW development is rooted in that. The Amazon cloud was developed first to provide a computing back end for managing their logistics operation, their devices are primarily a way to drive traffic to their marketplace to keep product moving through their system. Prime is a major tool to load level their logistics operation by creating a captive and consistent volume customer base throughout the year.

      If Amazon is creating an airline, it is because they did the analysis and determined it was cheaper than paying UPS/FedEx/DHL to be their transportation backbone.

      • That does not preclude Amazon form using the UPS and FedEx system for its surges and distribution where it makes no sense to have a dedicated aircraft.

        It should be interesting. FedEx and UPS do not have captive customers, Amazon has its own (extensive) supply stream.

        As noted, its logistics as they provide a pass through function.

        • and that is exactly their plan going forward. baseline freight (ground and air) is carried organically and UPS/FEDEX/DHL for surge loads. they pay the USPS a premium rate for last mile services which is still a lot less than UPS/FEDEX were charging them, and less than what they could do it for organically, while making it possible for the USPS to continue to exist.

          it’s like nuke plants and gas plants for electricity. the Nuke plant is for 80% of the base load, the gas plant is for fine control of the topline.

      • When one review Amazon performance one discover that there is one thing Amazon does not excel in and that is to produce profits. Their profits are meagre and it is a profitable company only because it’s success in the profitable cloud business where it was one of the first to discover the right offer to attract young startups to register to it’s services. The formula by the way was to offer their services free for one year. Beside that it hardly made any profits especially not in their retail business. Running an airline is much different than being a logistic operation. Have they ever hedged oil? Have they encountered a situation of bad weather shutting down their operations? It is totally different game.

        • Well as I recall, some of the airlines that hedged oil also got bit big time.

  8. It seems that for UPS, FEDEX, and now Amazon, the 767 works in some sort of sweet spot. The range to their hubs and aircraft size, especially for smaller airports may be part of that. And for larger loads and longer range destinations they have 777 & 747. I don’t know why the 330 has not caught on, nor why fuel economy does not seem to be an issue.
    But the carriers have more or less selected Boeing. Must work well for them

    • Hello Rich,

      Regarding: ” I don’t know why the 330 has not caught on, nor why fuel economy does not seem to be an issue.”

      It is not that fuel economy is not an issue, it is just that whether better fuel economy is worth a higher purchase price is a function of how many hours a day or year a carrier typically flies its aircraft. The higher purchase price for a more fuel efficient aircraft that just barely makes sense to a carrier that typically flies its aircraft 12 hours per day (fuel savings just barely justify the higher price), would not make sense to a carrier that typically flies its aircraft 6 hours per day (fuel savings would only pay for half of the higher purchase price). Many passenger airlines fly their aircraft from sunrise to late at night. In contrast, many UPS or FedEx mainline aircraft make only two flights per day, one from a US spoke into their US national hubs (Louisville for UPS, Memphis for FedEx) in the evening, and one back from the hub to the spoke in the early AM. I believe that most people would object to waiting in a collection box for five or six hours before being sent to catch an early evening flight to a hub, for a midnight connection which arrives at their destination around sunrise; however, for the overnight package delivery businesses of UPS and FedEx having one big plane take all the packages from a medium size city to the midnight package sort at the hub, is apparently cheaper than having five or six smaller planes leaving every hour for the hub.

      I don’t know what realistic aircraft purchase and lease prices are, so I will give a concrete example based on car lease prices. Suppose you are trying to decide between leasing a Toyota Corolla (40 mpg highway) and a Toyota Prius (53 mpg highway). When I just checked the Toyota USA web site I found a $179 per month lease deal for a Corolla, and a $289 a month lease deal for a Prius Two. If you typically spend $50 per month on gasoline, the Prius could be expected to reduce your monthly gas bill to (40/53) x $50 = $37.74. Spending $110 more per month to lease a vehicle that saves you $12.26 per month on gas will not save you money on monthly gas + lease. On the other hand, if you typically spend $600 per month on gas, the Prius could reduce your gas bill to (40/53) x $600 = $452.83, and the $147.17 a month in gas savings would justify the $110 per month higher lease bill.

        • Ugh I played that full screen and got scared, it looked like ticks crawling over my screen!

        • The MD-11 is no ones idea of a fuel efficient aircraft, but its wildly popular with FedEx and UPS.

          I think FedEx plans to fly it into the 2030 era.

          Its closest competitor is The 777-200. Feedstock for a pax conversion is not there and a new 777F is big bucks.

          FedEx is flipping them around, they picked up 3 newer MD-11s a while back and retired a few (storage I think).

          On the other hand, what should be a fairly fuel efficnet aircraft the A300/310 is being dropped.

          • Fedex has 68 active A300 and 3 stored, they have 57 active MD11 and 8 stored according to Airfleets.
            Only 26 of the A300s are the final version the A300-600 and Fedex still runs 36 DC10s and has 53 out of service.

            The few A310 still active are nearing 30 years in service so would be in line to replaced for that reason. The newest A300F was the last built and was for Fedex order and was delivered in 2007, the oldest active is around 33 yrs old.

            Age seems to be the reason for the slow wind down of the A300/310 types as is the same for the DC10/11

          • The MD11 keeps on trucking.

            The MD10s (all converted to FedEx cockpit ala the 11) are going away fast.

            The 767 suits the routes better than the Airbus did.

            While its mechanic comments, they never did like them. Something about werid European approach to things.

      • At 8 to 9 minutes into the video below there is a good discussion of why FedEx, UPS, and DHL use mostly older and less fuel efficient planes than passenger airlines do, but do purchase new planes for some routes.

    • Have you seen Amazons numbers. The accumulated profit for first 14 years from 97 was $1.5 bill. They are worse than the loss making record of existing airlines. And you can be sure that existing carriers wont be caught napping, they will make sure to drown any Prime airline at birth.

    • Just selling other peoples stuff isnt adding value. Its just a Sears and Roebuck or A&P for a different age.

      • If they’re selling stuff for less than Sears & Roebuck because they don’t have the overheads from the staff and the stores then they are adding value. The added value is the sum of what we find in our pockets that we wouldn’t otherwise have. LCCs add value in the same way.
        Re fuel economy; unlike most other large operators, these logistics firms may have the wherewithal to refine their own fuel, perhaps using predominantly renewable, non-fossil resources. Weren’t Delta doing this? That would be a way of doing things differently, taking some of the profits out of the mouths of the oil companies.

        • Delta is selling its fuel plant

          With fuel price spike they may change their mind!

    • B-767 156′ A-330 198′

      Probably why few A-330 freighters, no space in the hub.

  9. And in support of Scott, Boeing looks to have recovered from the 737 problems.

    63 deliveries in September

  10. There has been a lot of talk about moving armor by air.
    This is a good background for that. Its not just the armor, its the support armor has to have in order to function.

    It took 30 C-17 sorties to bring in just five Abrams tanks, five Bradleys fighting vehicles, and a battalion command post, along with the personnel to man those vehicles and facilities.

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