There have been reports that Amazon has been trying to sell additional cargo space on cargo planes in an attempt to accommodate slowing growth in online consumer demand as a result of the cooling of consumer demand, according to people familiar with the matter.
As of right now, Amazon has about 100 cargo planes operating in the United States and Europe. It has been reported that in recent months, the company has hired executives who have expertise in the field of airline cargo space marketing. According to two sources familiar with the matter, the latest plan is to fill empty cargo flights returning from Hawaii and Alaska with fresh produce such as pineapples and salmon, which are expected to be shipped back to the mainland. The plans have been declined by an Amazon spokesman, who declined to comment on the matter.
In spite of the current cooling in consumer demand, Amazon’s long-term plans for air freight have not changed, according to an individual who spoke on the condition of anonymity. According to another person, Amazon is under increasing pressure to make money off excess capacity in the air cargo market as it looks to increase profits despite a slowing growth in revenues.
As Amazon launched its own air cargo service in 2016, the industry speculated that Amazon might eventually be able to build a next-day delivery network across the United States to rival UPS and FedEx, which are the industry’s top competitors. It is the company’s practice to operate Amazon Air aircraft from small regional airports throughout the United States near Amazon warehouses, enabling the company to quickly move its merchandise inventory in order to meet the demand for same-day and next-day delivery services.
Experts in the industry, who have written conflicting reports on Amazon Air’s development, have also been unable to figure out the firm’s long-term goals. With Amazon Air’s rapid growth in its early years and with its $1.5 billion investment in its Cincinnati/Northern Kentucky International Airport hub, it has led to speculation that Amazon wants to compete with UPS and FedEx by becoming a major delivery company. There are other investors who believe Amazon’s core business is still online retail, and that Amazon Air will be a way for the company to avoid the large freight companies like FedEx and UPS, which have more cargo planes and flights, with no overlap between them.
It has been reported that air cargo demand has declined this year and that this trend will continue into 2023. International Air Transport Association (IATA) estimates that there will be $149.4 billion in sales worldwide next year, an increase of $52 billion over 2022, but still a decrease of $48.6 billion over 2019.
A team of researchers at the Chaddik Institute for Metropolitan Development at DePaul University began monitoring Amazon Air’s flight operations in 2020 and have been tracking them ever since. According to reports, Amazon’s flights grew at a slower rate than they have for the past three years this September.
Despite the slowdown in demand, Amazon announced in October that it plans to partner with Hawaiian Airlines to add 10 Airbus A330-300 freighters starting next year. But two people familiar with the matter said Amazon plans to cut its fleet and not renew some of its aircraft leases with Air Transport Services Group.
As consumers resume their offline spending habits, even the largest express carriers are tightening their belts, which is putting pressure on the shipping industry. On Dec. 20, FedEx announced plans to cut $3.7 billion in spending next year, including using digital tools to rebalance freight flights between company-owned aircraft and those from third-party carriers.
Amazon Air is marketing excess capacity on its cargo planes, one of the people familiar with the matter said, in the latest move by Amazon to deal with slowing online sales. The move comes as Amazon has begun subleasing excess warehouse space and announced the elimination of about 10,000 jobs.