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After having mastered the delivery in two days, Amazon.com (NASDAQ: AMZN) aims to increase free delivery in one day. Last month, the company announced that it is investing an additional $ 800 million in the necessary order processing infrastructure. A one-day delivery time is already available for more than 10 million items. However, the e-commerce giant is about to face a delay with its day-to-day delivery aspirations, with one of its largest carrier partners having taken a little hindsight.
FedEx (NYSE: FDX) is more interested in other e-commerce opportunities.
Prime Air has since been renamed Amazon Air. Source of the image: Amazon.
Other e-commerce fish in the sea
In a statement released today, FedEx announced it will not renew its contract with Amazon for FedEx Express, the expedited shipping service of the carrier that operates FedEx cargo planes. FedEx noted that the decision did not affect its other contracts with Amazon – such as ground delivery services – and that the moment the current FedEx Express contract expired was not clear. FedEx has announced that it "will focus on serving the broader e-commerce market," which the company expects to increase from 50 to 100 million daily parcels by 2026.
This news comes as part of Amazon 's ongoing expansion of its own fleet of Amazon Air cargo aircraft, comprised of leased aircraft operated by partners. Air Transport Services Group (NASDAQ: ATSG) and Atlas Air On the global scale (NASDAQ: AAWW). Amazon strengthened its partnership with ATSG last year, bringing its total fleet to 50 aircraft. Of this total, 40 aircraft are already in service and the remaining 10 are expected to be delivered by December 2020.
Amazon's constant efforts to improve delivery control have always been about creating tension with operator partners such as FedEx and UPS, although the shipping companies have continued to downplay their concerns. To that end, FedEx even went so far as to say that Amazon accounted for only 1.3% of the turnover in 2018. However, it is difficult to reconcile this rare disclosure with d & # 39; other than FedEx has already provided.
"In addition, some large package shippers, such as Amazon.com, develop and implement internal delivery capabilities and rely on independent contractors for deliveries, which could in turn reduce our shipments. revenues and our market share, "FedEx wrote in its latest annual report. The company also added: "In addition, if our current customers, such as Amazon.com, become competitors and bundled with other services, this will reduce our revenues and could adversely affect our financial situation and our operating results ".
While the precise operational impact of Amazon's one-day delivery capacity decision is unclear, the loss of a major transportation partner will undoubtedly be a further blow to the progress made by society.
Amazon is playing long game
It should also be noted that the e-commerce giant retains many options – or rather mandates – on the table. In its two partnerships with ATSG and AAWW, Amazon has obtained mandates that could enable it to acquire significant interests in one or the other of the operators. As part of these agreements, the larger the number of aircraft rented by Amazon, the more mandates there are.
Amazon and AAWW changed their deal in March, giving Amazon enough warrants to acquire 39.9 percent of the company, up from 30 percent previously. Amazon currently has enough warrants to acquire 33.2% of ATSG, but if it rents 17 additional planes by January 2026, it will have enough warrants to acquire 39.9% of the assets of the company. ; ATSG.
If Amazon is to go it alone, perhaps after the acquisition of one or both of its aircraft operators, there is little doubt that it can and will do so.
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