|Amazon Air is quietly expanding toward Asia's doorstep in its latest warning shot to FedEx and UPS|
Jun. 24, 2019, 5:22 PM
Observers say Amazon is building a logistics empire to compete with UPS and FedEx. Beginning June 27, Amazon will start daily operations out of Stevens Anchorage International Airport — one of the 20-plus US airports from which Amazon Air flies. It does not appear that the move points to Amazon's desire to cater to Alaska's 737,000 residents. Rather, it shows that Amazon is positioning itself to start flying to Asia. Visit Business Insider's homepage for more stories.
Amazon Air is adding another gateway to its network of airports: Anchorage, Alaska. Amazon's in-house air cargo fleet, which will total 70 planes by 2021, is key to the e-commerce behemoth's plan to achieve one-day shipping for its Prime members this year.
"We're thrilled to bring Prime members in Alaska their packages faster," an Amazon spokesperson told Business Insider in a statement. "Amazon Air's daily service to Anchorage Airport will begin this week. We are currently focused on expanding our network across the United States."
But observers say Amazon is not necessarily invested in catering to Alaska's 737,000 residents — the third-smallest state in the US by population with about 2% of the country's residents.
Rather, it's a sign that Amazon is inching toward expanding its in-house logistics capabilities to be able to move goods to and from Asia.
"There's no other reason," Brandon Fried, the executive director of the Airforwarders Association, told Business Insider. "Alaska and specifically Anchorage is a technical stop for freighter aircraft traveling to and from Asia."
Anchorage International is the classic pit stop for air cargo shuttling between North America and Asia Stevens Anchorage International Airport is the fifth-busiest cargo airport in the world and No. 2 in the US, according to Jim Szczesniak, the director of Anchorage International. There are more than 20 daily flights from Anchorage to Chicago, and more than 20 daily flights from Anchorage to Shanghai, China.
Of cargo flights going between Asia and North America, 79% of them stop at Anchorage.
"Anchorage gives you the option to do both — you can serve the Anchorage market but you have the ability to get the Asian and American markets, too,"Szczesniak told Business Insider.
UPS and FedEx both have bases in Anchorage, while DHL and Chinese cargo airliner SF Express also both operate out of the airport, Szczesniak said. "Now we've added Amazon Air," Szczesniak said. "We've got all these integrators that are there and taking advantage of Anchorage."
Amazon is blurring the line between e-tailer and transportation company — again But there aren't any retailers flying their goods to and from the Alaskan cargo hub in their own branded planes. Opening the base in Anchorage shows Amazon's ever-growing interest in becoming a third-party cargo carrier to compete with FedEx and UPS.
"We've told our members that Amazon is obviously an online retailer that is trying to expedite the delivery process as efficiently as possible for its customers," said Fried, who has nearly 40 years of experience in the air-freight industry. "But, at the same time, their foray into freight forwarding and transporting cargo for outside entities that are not buying its products is entirely possible in the future."
UPS and FedEx both had no comment on Amazon's latest move.
Starting this year, Amazon has begun describing itself to investors as a "transportation and logistics services" company. It said in its 2018 annual filing that it competes "across geographies, including cross-border competition."
And just last week, Amazon announced it's adding 15 new cargo planes to its network, bringing it to 70 planes by 2021.
"In the last three years, Amazon has built a global end-to-end logistics network that comprises of their own internal last-mile network, their own trucks, their own trains, their own planes, their own truck brokerage, and their own air and ocean freight forwarding," Morgan Stanley analyst Ravi Shanker previously told Business Insider.
But the cargo line is still developing. Most of the planes in Amazon Air's fleet have the range to cover the US, but not enough to make the trek across the Pacific. In order for Amazon's fleet to get to Asia, it makes sense to invest in Stevens Anchorage International Airport as a refuel and technical stop.
"That technical stop is going to be required and they're probably using Anchorage as a beachhead for an assault on Asia," Fried said.