Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Instant Analysis: to Lease 20 Boeing Jets for Delivery Service

By Evan Niu, CFA - Mar 9, 2016 at 1:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Amazon is looking to supplement its current distribution services with a new air cargo network.

Image source: Amazon.

What happened?
Months after initial reports that ( AMZN -1.38% ) was interested in launching its own air-delivery service, the company has made a tangible step in that direction. Air Transport Services Group ( ATSG 1.02% ) has announced that it will lease 20 Boeing 767 freighter aircraft to Amazon Fulfillment Services in order to operate an air cargo network.

CEO Joe Hete said that the two companies have been working on a deal since last summer, and the new customized network will supplement Amazon's existing distribution network and carriers. On top of that, ATSG has given Amazon warrants that would allow the e-commerce company to acquire nearly 20% of ATSG's common stock at $9.73 per share, over a five-year period.

ATSG also reported earnings last night. Following all of the news, shares have soared to all-time highs.

Does it matter?
Shipping costs are a critically important part of's overall cost structure. Indeed, rising fulfillment costs last quarter were a contributing factor to investor concerns about profitability. Amazon paid net shipping costs of $5 billion last year, or 5.1% of total revenue.

Building a vertically integrated distribution network would be a massive undertaking in terms of capital requirements, and it doesn't seem realistic that Amazon would ever be able to fully integrate delivery services. But at the same time, it may be able to generate some cost savings by supplementing its existing delivery networks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned, Inc. Stock Quote, Inc.
$3,389.79 (-1.38%) $-47.57
Air Transport Services Group, Inc. Stock Quote
Air Transport Services Group, Inc.
$26.76 (1.02%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.