Amazon.com Inc announced Thursday its plans to double the size of its fleet of jets for domestic package deliveries by working out a deal with Atlas Air Worldwide Holdings, Inc.
This is the second investment the giant internet marketing company has undertaken this year with a major air cargo company.
The deal will include the operation of 20 Boeing Co. 767 freighters for Amazon by Atlas Air Inc., an AAWHI subsidiary, and the operation of the freighters involving the crew, maintenance and insurance will go on for seven years.
According to Atlas Air Inc, the internet marketing giant agreed to what they call dry-leasing through its Titan Aviation leasing unit which offer a 10-year term. In this arrangement, only the plane is provided by the company.
The term of the deal is set to start in the second half of 2016 and will continue to increase through 2018.
This deal also provides Amazon the right to purchase as much as 20 percent of Atlas Air's common shares, with options to acquire an additional 10 percent of the shares.
Shares of Atlas Air climbed almost 30 percent after the deal was announced, while shares of Amazon stayed the same.
"We continue to believe the natural step for Amazon is controlling more of its own transportation and logistics, including additional air cargo and other transportation/operations, as these are almost a necessity to continue the rapid expansion of Prime and Prime Now," wrote Colin Sebastian of Baird Equity Research in a note Thursday.
Amazon has taken initiatives to reduce its dependence on air carriers like FedEx Corp and United Parcel. It established a ground network of couriers and new warehouses near or within urban centers for cheaper and faster deliveries.
Meanwhile, Atlas Air said the collaboration with the online marketing company will also increase its earnings and add to its cash flows over time.
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