Why Amazon Is Buying a Freighter Fleet

Just 16 years ago, we needed a $25 minimum order to get Amazon’s free Super Saver Shipping for an 8 to 10 day wait. An extra $9.48 got us two-day delivery and $16.48, one day. But then in 2009, they created Amazon Prime for $79.00 and the rest is history?

Not quite.

Amazon’s Air Fleet

Our story starts in 2013 with an Amazon disaster. Unable to meet one and two day delivery promises because of too many packages, they had to give refunds and deal with countless unhappy customers. Amazon responded by building and acquiring shipping hubs. The goal was to have enough warehouses close to enough customers. Then Amazon’s trucks could do it all (or a lot).

Meanwhile our delivery expectations kept shrinking.

So Amazon is buying 7 of Delta’s and 4 of Westjet’s 767-300 passenger planes that they are converting to freighters. In 2019, they didn’t renew their their air cargo contract with FedEx and were reputedly not pleased that UPS created delivery caps and raised prices. The goal appears to be a repeat of the 2013 decision to do it themselves. Analysts expect the Amazon air fleet to grow from the 85 freighters they currently own and lease to 200.

The  BCFs (Boeing Converted Freighters, 737-800s) that Amazon originally bought could carry almost 23 tons. The clips and rollers in the floor move and secure the cargo:

Our Bottom Line: Reference Points

A behavioral economist would tell us that Amazon’s air fleet could again transform our online shipping reference points.

A reference point influences our opinion. With gasoline, for example, a previous week’s price of $4.00 a gallon makes us feel that $3.50 is a bargain. But if the price beforehand had been $3.00, then $3.50 looks astronomical. Similarly, at work we won’t like a 5% raise when an associate gets 7%. If our stock portfolio plunges, we don’t feel so bad if the S&P declined even more.

Returning to where we began, we can look back to Amazon’s Super Saver 10-day shipping and ahead to more BCFs and shifting reference points.

My sources and more: My (free) email subscription to Bloomberg supply lines came in handy for learning about Amazon’s freighters. Next, if you want to read still more, at econlife we looked at the history of Amazon Prime and also went back to this Vox  podcast with the Prime story. But  the most interesting article was at Business Insider with its close look at the BCF. And finally, I again recommend economics Nobel Laureate Daniel Kahneman’s superb book, Thinking Fast and Slow, for the reference point story and much more.

Please note that several sentences in “Our Bottom Line” were in a previous post and our featured image is from Business Insider.