Amazon goes it alone on air cargo delivery

US retail giant Amazon has been let down once too often. Now it is starting its own air cargo delivery.

Amazon plans to leave 20 Boeings from Air Transport Services Group.

Internet retailing giant Amazon has started its own air cargo delivery operation with a fleet of Boeing 767 aircraft in a bid to reduce its inflated shipping costs.

The Seattle retailer plans to shuttle merchandise around the US using as many as 20 Boeing 767 aircraft it will lease from Air Transport Services Group.

The lease deal with ATSG spans five to seven years, and the agreement to operate the aircraft is for five years. ATSG has been using five aircraft for a test with Amazon and will buy eight more Boeing 767-300 passenger jets to convert to freighter use, and source seven from existing clients.

As part of an earlier trial with Amazon, ATSG ran a service seven days a week through its main hub at an airport in its home town of Wilmington, Ohio. Flight tracking services showed aircraft travelling to and from airports near some of Amazon’s largest distribution centres.

An Amazon spokeswoman said the ATSG deal would help Amazon develop its Prime $US99 ($130) a per year membership service, which analysts estimate has between 40 million and 60 million members worldwide.

Amazon declined to disclose terms of the deal.

Amazon has taken steps to reduce its reliance on carriers such as United Parcel Service and FedEx by building out a ground network of couriers and new warehouses near or within urban centres for faster and cheaper delivery.

The deal with ATSG would give Amazon control over about 15 per cent of the packages it ships annually, according to Stephens analyst Jack ­Atkins.

“Amazon clearly wants to grow, and they need capacity to do so,” Mr Atkins said. “UPS and FedEx are hesitant to build it out solely for one customer.”

Amazon has been planning an in-house logistics network for years, but the project took on added urgency when some customers received gift orders late, after the Christmas holiday in 2013. Amazon blamed the carriers for the embarrassing episode and offered some customers refunds on shipping and $US20 credits.

Executives at Amazon feel UPS’s traditional hub-and-spoke system was growing obsolete and was a particular liability during the crucial holiday selling season, sources said.

UPS said Amazon was “a good customer” and “we have a good relationship with them”.

Over time, Amazon is likely to turn its delivery network into a business in its own right, charging other shippers to ferry packages and drop off merchandise.

In China, for instance, it is seeking to serve as a middleman for shippers sending goods by boat to the US.

Additional reporting: Doug Cameron, Laura Stevens