Amazon to build $1.5bn air hub in Kentucky


Amazon has announced that it is building a new air cargo hub in Kentucky which will presumably replace its existing ATSG facility in Ohio. Judging by the scale of the investment, the size of the new hub may eventually approach that of the neighbouring UPS hub in Louisville or FedEx in Memphis.

In a rather elliptical statement released on Tuesday, the Seattle-based company said that it would create “a centralized air hub to support its growing fleet of Prime Air cargo planes” at Cincinnati/ Northern Kentucky Airport and that the “company expects to create more than 2,000 new jobs” at the new facility.

It would provide support for “Amazon’s dedicated fleet of Prime Air cargo planes by loading, unloading and sorting packages”. It has already agreed to lease 40 cargo aircraft from ATSG and states that 16 of these are already operational.

Reportedly, the CEO of Cincinnati/ Northern Kentucky Airport, Candace McGraw, said that the expenditure by Amazon would total US$1.49bn. This implies a very large facility, although possibly not quite of the size of UPS’ or FedEx’s hubs.

The clear implication of Amazon’s move is that it is seeking to construct a logistics capability that replicates what UPS and FedEx offer, and for that to operate in parallel with these two company’s operations. This obviously has implications for the express package market in the US. Presumably in the near future Amazon will seek to divert a greater quantity of its traffic through its own in-house capability. As it is using less than half of its existing air freight capacity, it is very likely to increase the volumes handled in-house substantially. Further to this, it appears that the size of the Cincinnati facility is of a scale that will be able to handle more than the 40 aircraft already contracted to operate as part of Amazon ‘Prime Air’. In the long-term this would have a significant impact on demand for services from FedEx and UPS, much of whose growth is presently being driven by e-commerce.

The Cincinnati development also indicates that Amazon is continuing to realise its ambition of creating an end-to-end logistics capability within the US and possibly elsewhere. This clearly will have an impact on other logistics markets, with a strong possibility of further major investment or acquisitions.

Source: Transport Intelligence, February 2, 2017    

Author: Thomas Cullen