Amazon.com Inc plans to schedule more than 200 flight departures and landings per day at a $1.49 billion cargo hub it is building near Cincinnati, the airport’s chief said in an interview on Wednesday, in a sign of the soaring ambitions of the online retailer.

Amazon announced the airport project on Tuesday but gave few details. The flight estimate offers new insight into Amazon’s plan to handle shipping in-house, cut costs and speed packages to shoppers. It is written in the lease term sheet that Amazon and the airport expect to sign, said Candace McGraw, chief executive of Cincinnati/Northern Kentucky International Airport.

The scale of the Cincinnati project suggests it will take on cargo airlines such as FedEx Corp and United Parcel Service Inc , said Marc Wulfraat, president of logistics consultancy MWPVL International Inc. Amazon has said its plane leases are designed to supplement, rather than replace its cargo partners. It did not immediately respond to a request for comment.

“They’re going to become a full-fledged competitor to UPS,” Wulfraat said. The $1.49 billion investment could have bought Amazon six warehouses, but the e-commerce giant is instead making a longer-term move aimed at lowering shipping costs, he added. Amazon only has disclosed leasing 40 Boeing Co 767 planes to date, 16 of which are in operation. It has been building operations at smaller airports across the country.

Amazon will lease 919 acres (372 hectares) from the airport, and the south lot it plans to build out first will have more than 100 parking spaces for planes, said Cincinnati airport’s McGraw. The world’s largest online retailer would have to contract dozens more planes worth billions of dollars at current list prices to fill its future hub’s parking spaces, and still more if it wants to operate routes that do not include Cincinnati.

Amazon’s plane leases were for 10 years or less. The airport lease is for 50 years. The size and term of the deal has convinced McGraw that Amazon’s air cargo business is more than a trial service. “I have complete confidence they’re all in,” McGraw said. McGraw said she expected to finalise the term sheet with Amazon soon.

Reuters

Publish date: February 2, 2017 12:32 pm| Modified date: February 2, 2017 12:32 pm

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