Amazon opens $1.5 billion Kentucky air hub in bid to hurry deliveries

Amazon opened its $ 1.5 billion air hub in northern Kentucky on Wednesday, which will help accelerate its efforts for faster delivery and better control over its logistics network.

It’s a major milestone for Amazon Air, the company’s burgeoning air cargo arm, which was founded in 2016 and whose routes are flown by multiple contracted airlines. In the company’s sprawling network of warehouses, trucks, and vans, airplanes remain a critical piece of the puzzle in ensuring packages get to customers’ doorsteps quickly.

Amazon Air operates out of more than 40 airports in the US, but the terminal is at Cincinnati / Northern Kentucky International Airport will serve as the central nerve of its nationwide freight network, enabling it to improve its delivery capabilities to more areas of the country in one and increasingly on the same day. Amazon expanded its aviation logistics unit beyond the USA and opened a 20,000 square meter regional air hub at Leipzig / Halle Airport in Germany last November.

The Kentucky hub, just a short drive from Cincinnati, Ohio, has been in development for more than four years. Amazon founder and CEO Jeff Bezos, then CEO, laid the foundation for the project in 2019 by hopping into a John Deere front loader to “move some earth”.

Back then, Bezos commented, “This hub will allow us to get packages to customers faster. It’s a big deal.”

The hub spans a 600-acre campus that includes a ramp for aircraft parking, a multi-level parking garage, and seven buildings, including an 800,000-square-foot robotic sorting center that sorts parcels by zip code and consolidates trucks before delivery .

Analysts have been eagerly awaiting the hub’s rollout as it has the potential to significantly speed deliveries and help Amazon keep up with carriers like UPS and FedEx. A report by DePaul University’s Chaddick Institute for Metropolitan Development last fall described the hub as “the hub of Amazon’s efforts to develop a comprehensive offering of domestic delivery services in the United States.”

It’s designed to hold 100 Amazon-branded aircraft and handle an estimated 200 flights per day. Investors have wondered whether Amazon will offer its air freight services to other companies to generate new revenue streams.

But for now, Sarah Rhoads, vice president of Amazon Global Air, said the company is focused on handling its own volume of parcels.

“At the moment we are clearly focusing on our customers,” said Rhoads in an interview with CNBC. “We built the hub in Cincinnati to serve our Amazon customers. There really isn’t any other purpose.”

Amazon Air now has more than 75 aircraft on the network, and the company expects to have more than 80 aircraft on its network and 85 both leased and owned by the end of 2022, by that time next year.

Atlas Air Worldwide Holdings and Air Transport Services Group are part of the operators of Amazon Air. Budget airline Sun Country began flying converted Boeing 737s for Amazon last year, a welcome source of income in the depths of the pandemic when many travelers were staying at home .

In January, Amazon acquired 11 used Boeing 767-300 jets from Delta and WestJet, its first full purchase of aircraft as aircraft prices fell during the pandemic.

“We learn a lot as a company through this process of owning and working on converting aircraft,” said Rhoads. “A lot depends on the availability of raw materials and what makes the most sense for our network and our customers.”

When asked whether Amazon would expand the number of airlines flying its airline network or directly own an airline, Rhoads said the company is focusing on the current partners and model.

“We’re becoming a pretty big network and we’re happy with the service we’re getting right now,” she said.

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