Eleven days afterFedEx announced it would stop delivering for Amazon, the retail giant had an important announcement of its own, revealing its plans at the International Paris Air Show. Amazon has partnered with GE Capital Aviation Services (GECAS) to lease 15 more Boeing 737-800 cargo planes to add to its Amazon Air delivery fleet by 2021. Amazon currently leases five Boeing 737-800s, also through GECAS. The fleet will deliver domestic packages out of more than 20 air gateways in the Amazon Air network, said Amazon in a June 18 news release.

These new aircraft create additional capacity for Amazon Air, building on the investment in our Prime Free One-Day program,said Dave Clark, Senior Vice President of Worldwide Operations at Amazon. By 2021, Amazon Air will have a portfolio of 70 aircraft flying in our dedicated air network.

Were delighted to support Amazon Airs dedicated air network, said Richard Greener, GECAS Cargos Senior Vice President. The capability of the 737-800 freighter will further Amazons ability to provide reliable and regional delivery to its customers for years to come.

Amazon started its air operations under the name Prime Air in 2016 to support their package delivery service. Since the launch, Amazon has spent millions of dollars to improve package delivery to its customers while also providing thousands of jobs to workers across the U.S. According to Amazon Air, through its air freight and truck delivery systems, the company transports hundreds of thousands of packages per day at facilities across the country. The company plans to add new facilities this year at the Fort Worth Alliance Airport, Wilmington Air Park and the Chicago Rockford International Airport. A main air hub for Amazon is expected to open in 2021 at the Cincinnati/Northern Kentucky International Airport.

In addition to its air fleet, Amazon offers other programs to help it provide fast delivery and supply chain support to customers, including a Delivery Service Partner program; the Amazon Flex app which helps contractors sign up to be vetted and approved to deliver Amazon packages; and a dedicated network of more than 10,000 trailers to increase trucking capacity.

• Delivery Service Partner Program: To qualify for this program, delivery service partners should own 20 to 40 vans and employ 40 to 100 workers. The partner is responsible for hiring, management and coaching of the team in a 24/7/365 environment.
• Amazon Flex: Through this new iOS app, individuals can sign up to be contracted delivery partners for Amazon, setting their own schedule and earning $18 to $25 per hour.
• Amazon Fleet of trucks: Amazon leases trucks through fleet management companies who will then lease the vehicles to delivery service partners to increase capacity while managing costs. Last fall, Multichannel Merchant reported that Amazon had ordered 20,000 trucks from Mercedes Benz.

FedExs contract with Amazon to provide express delivery service is set to expire June 30. FedEx has opted not to renew the contract, saying this strategic decision will allow FedEx to focus on other retailers including Target, Walgreens and Walmart. This decision does not affect other Amazon contracts, including international deliveries or Amazon last-mile deliveries, according to TechCrunch. While this news might cause some to question FedExs decision, FedEx said that Amazons business only represented 1.3% of the companys 2018 revenue.

Insider Take:

The FedEx contract does not appear to have a significant impact on Amazons ability to provide fast, free delivery to Prime members, and it is likely that Amazon knew this change was coming. Amazon is probably bulking up on its delivery resources because of the growing competition from retailers like Walmart and Target who are stepping up their free delivery game. The retailers are not just competing on product offerings, but on delivery including price, speed and their delivery experience. The planes will help Amazon with speed but they will still have to compete on price and reliability.