Atlas Air will end Amazon flights and focus on international customers

Amazon directly controls eight 737-800 aircraft, which are leased from AerCap and which can also be placed on another cargo airline.

Steen said Atlas Air would focus exclusively on intercontinental operations, where the profit potential is greater. To this end, the airline will add eight wide-body freighters in 2024.

Two production 777 freighters ordered from Boeing last year are scheduled to enter service in the fourth quarter for an undisclosed customer. Ocean shipping giant CMA CGM recently announced that its startup airline has entered into a CMI agreement with Atlas Air to operate two Boeing 777 freighters on trans-Pacific routes starting in the coming months. Atlas Air recently acquired four previously owned Boeing 747-400 cargo jets that will join the fleet in the third quarter, two of which will be for Shein and Temu.

“So strategically thinking about the return on investment of the assets we deploy, we are clearly targeting larger wide-body aircraft and the intercontinental market where the growth is greatest,” Steen told FreightWaves.

Global e-commerce needs large freighters

Atlas Air currently operates or leases 112 aircraft, including 48 B747-400s, 10 B747-8s and seven B777-200s, and the fleet will reach 120 aircraft by the end of the year. Sister airline Polar Air Cargo operates nine wide-body jets.

While the market is saturated with regional single-aisle freighters, the future is bright for long-haul cargo jet operators, the CEO said. Atlas Air currently accounts for more than 10% of the world’s widebody freighter fleet and is well positioned to take advantage of growing demand for industrial goods and electronics, as well as growth in e-commerce shipments.

Steen cited forecasts of a compound annual growth rate of 3.5-4.5% compared to 1% industry-wide efficiency gains and a large wave of retirements of aging freighters as reasons for investing in large freighters such as the 747 and 777 . that approximately 20% of the world’s fleet of 650 wide-body freighters is over 30 years old and approaching retirement.

Structural changes in the passenger sector are also driving demand for more specialized freighters. About 60% of the world’s air cargo volume is carried on cargo planes, and 40% on the bellies of passengers, but according to a study by McKinsey, only 47% of intercontinental cargo hold capacity is suitable for air transport as airlines have changed cabin interiors in the wake of the Covid-19 pandemic. to accommodate more premium seats, forcing passengers to carry more luggage and limiting container space. Meanwhile, airlines are also reorienting their networks to serve more leisure destinations where cargo demand is limited.

The surge in deliveries from e-commerce platforms and fast fashion companies in China has driven the recovery in the air cargo market and shows no signs of slowing down. E-commerce accounted for approximately 19% of global retail sales in 2023 and is on track to capture 41% of the market by 2027, according to Boston Consulting Group.

Shein will be the second fast-fashion retailer to sign a long-term dedicated charter agreement with Atlas Air, after Spain’s Inditex. New generation fashion houses are constantly introducing huge amounts of new products to their websites with very short inventory turnover times, so it is important to quickly deliver orders to customers and stores before trends change. Atlas Air already operates dedicated freighters around the world for Alibaba’s logistics division, while several forwarders and new cargo airline Mediterranean Shipping Co. use time-chartered aircraft to support their e-commerce customers.

“The volume is so high that special freighters are needed,” Steen said. – We are their flying warehouse, if you will.

Shein and Temu already use Atlas Air’s services for short-term charters, but they will have full control of the planes from the third quarter.

Atlas Air is the largest operator of 747 freighters in the world and joins the ranks with four pre-owned 747-400 aircraft. Two of the cargo jets were purchased from Silkway West Airlines in Azerbaijan. As previously reported by the trade publication Cargo Facts, two former China Airlines planes have been received from the American carrier Jetran.

Last week, Nippon Cargo Airlines renewed its contract with Atlas to operate five of its 747-400 NCA freighters between Asia and North America amid rising demand. Meanwhile, YunExpress, a freight forwarder in China, signed a long-term charter agreement with Atlas in March for the use of a second Boeing 777-200 freighter.

Pilot list

Retiring flights for Amazon will also free up five 767 planes that were previously held as spares to work full-time for Atlas customers, including the U.S. Department of Defense, Steen said. The company plans to soon make some of its medium-wide-body freighters available to new customers who have signed long-term package leasing agreements covering the aircraft with crew, maintenance and insurance.

Steen rejected suggestions that the airline would reduce its pilot numbers because of the loss of business at Amazon, noting that it needed about 250 pilots and staff to operate eight large freighters and gradually increase the number of 767 flights. According to accounts of the meeting posted in pilot chat rooms, he said employees during a company town hall earlier this week that it has no plans to furlough pilots who choose to stay.

“When we look at reports that many pilots will be unseat-less, I don’t think that will be the case,” the Atlas boss said.

Changes in relations with Amazon

The change in Atlas’s partnership with Amazon makes it clear that at least part of the 767 fleet will be placed on ABX Air, one of two cargo airlines owned by Air Transport Services Group. In early May, ATSG announced that Amazon would provide 10 additional 767-300 freighters to operate on its behalf under a five-year contract, and ABX would begin flying them in June. ATSG did not disclose where Amazon would source the planes, and all are expected to be delivered by December 1.

Amazon has the right to place up to 10 more aircraft at ABX, which currently operates four 767-200s for Amazon. Sister airline Air Transport International operates more than 40 767 aircraft on Amazon’s behalf.

Amazon owns almost 20% of ATSG. He previously held shares in Atlas Air, but the shares were bought by a new ownership group. Amazon also leases two 767-300 aircraft from Titan Aviation, which are operated by ATSG carriers.

Other air transportation outsourcing providers in the United States include Sun Country Airlines, which operates 737-800 aircraft, and Hawaiian Airlines, which operates two converted Airbus A330-300 freighters.

Steen declined to provide details about the breakup with Amazon over dedicated shipping contracts, which give Amazon the ability to terminate the contract with 180 days’ written notice in the event of circumstances such as a change in ownership or performance issues. Penalty clauses may apply to either party in the event of early termination, but are likely to be negotiable. Atlas Air was acquired in early 2023 by a consortium of investors led by Apollo Global Management.

Amazon media representatives did not respond to inquiries about changes to the company’s air network. One analyst familiar with airlines that outsource air transportation to express delivery companies, who requested anonymity so as not to jeopardize business relationships, expressed skepticism that Atlas would voluntarily give up domestic flights to concentrate on wide-body operations, while acknowledging that the new owner may value return on investment differently.

Click here to see more FreightWaves stories by Eric Kulisch.

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