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How Amazon’s New Air Hub Could Affect Its Shipping Partners

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Amazon’s new air hub

Amazon (AMZN) has started working on its new air hub, worth $1.4 billion, which is slated to open at Kentucky International Airport in 2021. The air hub, which will have about 50 aircraft, was initially announced in 2017 and is expected to have around 2,000 employees. The air service is expected to make faster deliveries and shift Prime delivery from two days to one day. At the end of 2018, Amazon Prime had over 100 million members in the US, up from 54 million members in 2015.

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Impact on the shipping industry

Amazon’s rollout of air services is expected to significantly hurt its shipping partners, as the retailer will cut ties with partners such as United Parcel Services (UPS), FedEx (FDX), and the US Postal Service (or USPS), which have been earning billions of dollars from the delivery of Amazon parcels. Reportedly, USPS handles 62% of Amazon’s packages, followed by UPS and FedEx, which handle 21% and 8%, respectively. Smaller regional and local carriers carry the remaining 9% of Amazon packages.

Amazon has been expanding in the delivery area to lessen its Prime delivery time. It is competing with retail behemoth Walmart (WMT), which has recently started next-day delivery on specified items on minimum orders of $35 in regions of Phoenix and Las Vegas. In the near term, the service is expected to expand to southern California regions.

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