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Amazon is leasing more Boeing cargo planes to expand its shipping network

Amazon is leasing more Boeing cargo planes to expand its shipping network


Amazon is reducing its reliance on UPS and FedEx

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Amazon has reached an agreement with cargo airline Atlas Air Worldwide to lease 20 Boeing 767s to better help it ferry products around the US. The deal, announced today to coincide with Atlas's first-quarter earnings, also allows Amazon to purchase up to a 30 percent stake in the aircraft company over the next 10 years. The deal is just the latest in a series of strategic moves Amazon has made to reduce its reliance on third-party shipping services like UPS and FedEx. In March, Amazon announced a similar deal to lease as many as 20 Boeing cargo planes from Air Transport Services Group.

The online retailer has spent the last few years aggressively ramping up its delivery initiatives, which now include two- and one-hour delivery with its Prime Now service. CEO Jeff Bezos has also laid out bold ambitions for delivery via drone with its Prime Air program. Still, to accomplish any of this, Amazon must expand traditional infrastructure — like fulfillment centers near major cities and even cargo fleets — or face mounting fees from third-party providers.

Amazon continues to build a more robust shipping and delivery network

Amazon's fulfillment costs rose to $3.7 billion last quarter, up 34 percent from the year ago quarter. Sales have not been able to match that increase, so Amazon's free shipping perk continues to bite into its business. Yet with more of its own planes, trucks, and warehouses, the company can reduce those costs significantly and pave the way to expand Prime Now and eventually launch its drone delivery program.