A report in the Seattle Times broke the story yesterday that Amazon is looking at acquiring 20 Boeing 767-300ER freighters to avoid problems with unmet deliveries during peak seasons.  Amazon has been experimenting with its own delivery service, which was described by Motherboard here, outlining how an unknown company, rumored to be Amazon, has been testing air freight operations.

The bottom line to this reporting is that it appears Amazon is getting into the package express business, to avoid the difficulties it faced with missed deliveries, refunds of shipping and $20 gift cards to customers that did not receive packages on time.

We know, historically, that Amazon disrupted the bookselling business, and grew to become the go-to and one of the largest on-line retailers in the world.  The results have been devastating to some businesses.  But delivery is a part of the process, and Amazon is looking at innovations.

This video demonstrates how Amazon’s drone delivery service, Amazon Prime Air, will work.

The Bottom Line

Innovation is always disruptive.  If Amazon designs an entirely new delivery channel, with its own air service, its own trucks, and its own drones, where does that leave FedEx and UPS?  There’s a tremendous volume that could be lost to them if Amazon goes independent.   Amazon has a lot of clout because of its sheer mass.

But Amazon doesn’t have a Part 121 certificate, and unless it acquires an airline with one, will need to outsource any flight operations.  Will Amazon create a new-technology distribution company?  In certain markets, it is already offers one hour delivery for items ordered on-line.  While it is not cheap, it provides the “instant fulfillment” some customers want. Combine that innovation with drones, delivery imaging and other innovations, and Amazon could revolutionize the package freight business.

While peak seasons require additional lift, this is not a problem year-round.  What happens during the non-peak season?  Would an Amazon air service seek additional business to offset its fixed costs?  Could Amazon begin to compete with FedEx and UPS?

The implications of this a far reaching.  But with Amazon in negotiations for 20 767-300F aircraft, they are real.  The fall-out will be interesting to watch.

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