It’s fascinating to watch the dance between the ecommerce behemoth and its “logistics partners” now begin to play itself out. Amazon is a very large procurer of logistics services and they are used to calling the shots. Their business requires an extremely tight operational model and the transfer of incremental cost and risk is hugely important to their future success. Whether it’s the air carrier or some of their new ecommerce hub airports, expectations of opportunity are high, yet this is an uncomfortable period where costs and risks are being shifted downward.
As the ecommerce paradigm fundamentally changes to include more rapid delivery capabilities for even more regular-use and fast-demand products, these issues will become even more critical. We see the rapidly expanding air cargo element of the ecommerce model as only becoming a more important part of the business model and the intersection with the established transport (ocean and truck) logistics systems and warehouse/fulfillment network is primary.
With all of that said, in the expansion of air cargo capability we’re clearly in the trialing stage with new partners testing out how this will work and who will bear what costs. In the case of this article, the pilots are showing worry about how this will shake out.
American Shipper article follows:
Atlas Air pilots voice ‘serious concerns’ with Amazon contract
The pilots of cargo plane operator Atlas Air Worldwide Holdings told the company they have “serious concerns” with the way a proposed contract with online retailer Amazon is currently being handled.
The pilots of cargo plane operator Atlas Air Worldwide (AAWW) Holdings told the company that they have “serious concerns” with the way a proposed contract with online retailer Amazon is currently being handled.
AAWW plans to hold a special meeting today to gain approval of three proposals related to its future business with Amazon.
This spring, Atlas entered a deal with Amazon to provide express delivery service using 20 wide-body planes that will be dry-leased from the carrier’s affiliate Titan Aviation Leasing Ltd. Americas and crewed by Atlas Air pilots.
“At first, we were delighted to see that AAWW was aggressively marketing its services and seeking new business,” the pilots wrote in a letter to the carrier’s management. “But over time, we’ve come to realize that the Amazon transaction is not just an ambitious one – it’s also a daunting one in which the risk of failure falls almost entirely upon AAWW, its shareholders and its other stakeholders, including the pilots.
“The transaction will require the upfront expenditure of hundreds of millions of dollars to secure a total of 20 B-767 freighters, as well as to hire and train a sufficient number of pilots to fully staff, operate and meet its commitments to Amazon by 2018,” they added. “Under current circumstances, we are concerned that the Amazon transaction will overwhelm and destabilize AAWW’s operations – ultimately harming the company’s shareholders and the pilots at Atlas Air and Southern Air.”
The pilots group claims to represent the more than 1,600 pilots who work for AAWW, including its affiliates Atlas Air and Southern Air.
“History has shown that AAWW tends to present a rose-colored picture to shareholders, while leaving critical details in the dark,” the pilots said. “In just the past year, AAWW and some of its affiliates were fined more than $125 million for legal and regulatory entanglements relating to price fixing and inadequate maintenance. It seems these fiascos can in part be attributed to AAWW’s preoccupation with stressing transactions’ financial gains, while disregarding the risks. With respect to the Amazon transaction, we fear that AAWW management will repeat those same mistakes.”
The pilots asked the company to take its time to ensure the Amazon transaction and the Amazon-related proposals are “prudent.”
