An Amazon-branded Boeing 767 freighter, nicknamed Amazon One, flies over Lake Washington during the Seattle Seafair Air Show on Aug. 5, 2016 in Seattle.
One of Amazon‘s key air cargo operators said Monday that the e-commerce giant is scaling back on flights this year, citing lower demand and slower economic growth.
Air Transport Services Group, which runs a significant portion of Amazon’s air cargo fleet, said it expects to operate Boeing 767 freighters dedicated to servicing Amazon and DHL at reduced schedules and less flight time per aircraft.
“Both companies are adjusting their ground and air distribution and fulfillment networks in the United States to conform to reduced U.S. economic growth and consumer spending levels in the first half of 2023,” ATSG said.
Air cargo rates, which surged in recent years due to port congestion and high demand for fast deliveries, have slumped. The Baltic Air Freight Index was down more than 33% on Jan. 30 from a year earlier. The International Air Transport Association said last month that air cargo demand in November was down nearly 14% from the year-ago period, while capacity fell 1.9%.
Meanwhile, passenger airlines have said travel demand has held up as consumers prioritize trips and other experiences.
But coming off Amazon’s weakest year for growth in its quarter century as a public company, CEO Andy Jassy has taken steps to curtail expenses. That includes cutting more than 18,000 jobs, pausing warehouse expansion and shuttering some projects.
Amazon built out its fulfillment and logistics network at a frenzied pace during the Covid pandemic, as demand for e-commerce surged. Since then, rising inflation and a slowdown in consumer spending has forced Amazon to downsize. The company has weighed selling excess space on its cargo planes to other airlines, Bloomberg reported last December.
ATSG said Monday that Amazon may not extend its leases on five Boeing 767-200 freighters, which are due to expire between May and September. Amazon opted to continue leasing four 767-200s into 2024, it added.
Shares in ATSG slumped 9% in afternoon trading. Amazon’s stock fell about 1%. Representatives from both companies didn’t immediately respond to a request for comment.
Amazon in October hired Hawaiian Airlines to fly large, rented Airbus cargo jets, and said it would retire some older planes.
Through Amazon Air, the company has built up a burgeoning air network to control more aspects of the delivery process and ensure faster delivery. It invested in ATSG and Atlas Air Worldwide Holdings, though Atlas agreed last year to be taken private by an investor group. Amazon also contracted with passenger airline Sun Country to provide crews and planes to fly packages. The e-retailer typically leases freighters from its air contractors, but it has also purchased used jets from Delta and WestJet.
In addition to Amazon and DHL reducing their air cargo schedules, delivery giant FedEx has also announced cost-cuts that include parking planes and cutting some corporate jobs.
WATCH: How the pandemic shifted how Boeing and airlines think about air cargo
Post source: cnbc