Amazon Looks to the Skies Amid Supply-Chain Disruptions

Amazon (AMZN) is buying up cargo planes and expanding geographically to meet customer expectations amid the surge in online shopping. UPS (UPS) and FedEx (FDX) may see competition heat up.

Expanding the Fleet

Amazon (AMZN) is scrambling to improve its logistics after supply-chain disruptions coincided with a surge in online shopping that strained the company’s ability to meet demand for speedy deliveries. Now Amazon is expanding its aircraft fleet in an effort to eliminate uncertainty and take back control.

The number of Amazon cargo flights has more than doubled since May 2020, and they now average about 187 a day. The count is even higher if company partnerships with air cargo transportation companies are included.

Competing with FedEx and UPS

Amazon’s expansion into air space is moving in on the turf of traditional transport companies like FedEx (FDX), UPS (UPS), and DHL (DPSGY). As the number of jets owned by Amazon continues to climb, these companies may increasingly view the ecommerce giant more as a direct competitor than a partner. Amazon currently owns 80 jets, still well below UPS’s 289 and FedEx’s 474, but its expansion into this space may just be getting started.

As Amazon strives to grow geographically with warehouses and shipping hubs closely situated to consumers, it is well positioned to eliminate the need to partner with transport companies. Some industry observers note Amazon could even choose to expand its “third party” offerings, which would put it in direct competition with traditional delivery companies in terms of transporting items from businesses to consumers.

Consumer Impact

Consumers could benefit from Amazon’s latest initiative if it better addresses ongoing supply-chain constraints. If successful, more products may be available faster. More planes could also ensure ongoing speedy deliveries despite the high number of ecommerce sales.

Increased competition between the transportation companies could also cause shipping costs to go down. In an environment where prices on everything seem to be going up, this may be a welcome change.