(Bloomberg)—Amazon.com Inc. could take as much as a 30% stake in a large cargo airline, its second such deal this year as the e-commerce giant steps up efforts to take control of its own delivery logistics.
As part of the agreement, Atlas Air Worldwide Holdings Inc. will operate 20 Boeing Co. 767-300 cargo planes on Amazon’s behalf, according to a statement from the airline Thursday. Amazon is No. 1 in the Internet Retailer 2016 Top 500 Guide.
The Seattle-based retailer is moving quickly to build up its delivery network, seeking to wean itself from dependence on United Parcel Service Inc. and FedEx Corp. as it expands its Prime service, which promises orders in as fast as one day. In March, Amazon said it would lease 20 Boeing 767 freighters from Air Transport Services Group Inc.
Shares of Purchase, N.Y.-based Atlas Air jumped 26% in early trading to $48.31.
Atlas Air will operate the 20 converted freighters for Amazon on leases from seven to 10 years. Amazon was granted warrants to acquire as much as 20% of Atlas Air’s common stock at $37.50 a share over a five-year period, with an option for an additional 10% at the same price over a period of seven years.
Atlas operates the world’s biggest fleet of Boeing 747 freighter aircraft and supplies UPS. Amazon’s potential 30% investment in Atlas comes after it gained the right to buy as much as 20% in Air Transport Services, as part of the March agreement to lease planes.
Amazon has been quietly building out its transport strategy for years. A 2013 report to senior management proposed an aggressive global expansion of the company’s Fulfillment By Amazon service, which provides storage, packing and shipping for independent merchants selling products on the company’s website.
“The natural step for Amazon is controlling more of its own transportation and logistics, including additional air cargo and other transportation/operations, as these are almost a necessity to continue the rapid expansion of Prime and Prime Now,” Colin Sebastian, an analyst at Robert W Baird & Co., wrote in a note to investors.
“Amazon’s ambitions in transportation and logistics are borne out of peak-period capacity constraints, and aims to alleviate some of the stresses on Amazon’s internal fulfillment/logistics network, particularly as network partners (e.g., UPS, FedEx) are unable to accommodate Amazon’s rapid growth,” he said.