Amazon has cut its operations in Cologne-Bonn significantly. © Tobias Arhelger
In another sign that e-commerce is hitting barriers, Amazon Air’s fleet and network growth has slowed dramatically over the past six months.
The e-commerce giant has already taken steps to shrink its warehouse footprint to match a slower-than-expected market.
After a disastrous summer, FedEx reduced flight frequencies and grounded planes, but Amazon Air hasn’t reduced flight operations, although momentum has clearly slowed.
According to DePaul University’s Chaddick Institute for Urban Development, which tracks developments at Amazon’s Cargo subsidiary, flight activity between March and September grew by just 3.8%, down significantly from the 14.3% rate recorded between last October and March.
Amazon Air operated 194 flights per day, up from 187 flights in March. During this period, its fleet of 767 and 737 freighters remained flat at 77/78.
“Amazon has moved away from the accelerator,” Joseph Schwetterman, professor of public services management and director of the Chaddick Institute commented.
On the ground, it actually turned in the opposite direction this summer, canceling warehouse projects, shutting some facilities, and in July reneging on plans to build a $432 million air hub at Newark at Liberty International Airport.
While air activities have not decreased, the expected transition to transoceanic flights appears to be more remote than ever. With ocean-going flows from Asia dwindling, such a move is highly unlikely, especially as Amazon has been struggling to contain logistics costs, which rose 25.5% last year. In the second quarter, Amazon posted a net deficit of $2 billion.
Schwittermann noted that Amazon Air operations grew in some areas, and declined in others. It increased in Europe, Florida and the American mountain states, while it decreased in other points such as Seattle, Portland and Cologne.
The German airport saw a drop in average daily flights from 5.8 to 0.9. On the other hand, daily flights in Leipzig rose from 3.2 to eight. In Milan, they increased from 3.2 to nine. Schwittermann sees these two as emerging focal points in the company’s evolving European network, where he anticipates further expansion.
New flights in the US (El Paso and Las Vegas) are designed to fill gaps in market coverage and have now put 73% of the US population within 100 miles of an airport served by Amazon Air.
However, the largest expansion in the United States was carried out at Cincinnati-Northern Kentucky Airport (CVG), which recorded a 71% growth in aviation activity, from 26 daily flights to 44 flights. day.
CVG and nearby Wilmington now account for 21% of Amazon Air flights, up from 14% six months ago, indicating that this is emerging as a true hub for the company. Cincinnati is also the North American hub for DHL, which works with Amazon.
Schwittermann sees one trigger for CVG’s emergence: Amazon moved in April to court third-party parcel traffic by offering merchants who don’t sell on Amazon’s platform use of free next-day delivery and back to its Prime subscribers. He believes this makes Amazon more competitive with FedEx and UPS for third-party package deliveries.
CVG increasingly resembles an integrated hub, enhanced by the addition of a combination of evening arrivals and after-midnight departures that have facilitated transfers between aircraft. This also results in Amazon placing next-day deliveries from its network of warehouses in Indiana, Kentucky and Ohio.
However, none of Amazon’s moves indicate a push to create morning deliveries, indicating that it’s not targeting the B2B market, at least for now.
Schwittermann expects further expansion of CVG, with at least six more overnight flights there in the next six months.
While adjustments in the network over the past six months indicate that Amazon has adapted to the slowdown in the market, it still sees room for expansion going forward.
“Long-term growth still looks strong,” he said.