Amazon is a retail company at its core, its logistics operations are in service to that end.
For Amazon to directly fight FedEx and UPS, it risks doing so at the detriment of its own operations.
As Amazon Air grows, its rise is not strictly zero-sum and FedEx and UPS benefit from the expanding marketplace.
Read part one of our look inside the rise of Amazon Air.
On a Tuesday evening in April 1973, fourteen Dassault Falcon 20s departed for Memphis, Tenn. The aircraft were carrying the first 186 packages to receive overnight service to and from 25 cities across the United States.
In the forty years since, Federal Express has grown its fleet to over 650 aircraft and now connects over 375 cities across the world with a massive and intricate intermodal network. The company has fully adopted its FedEx nickname by changing its official name to FedEx Corporation, and most notably, spawned multiple new competitors by way of UPS, Airborne Express, and DHL.
Just as interwoven into the functioning of the global economy, FedEx’s competitors have also benefited from the e-commerce-driven surge in demand for quick delivery, the largest being Atlanta-based UPS. No stranger itself to massive growth in the overnight parcel space, UPS has built a competitive overnight network centered around their Louisville, Ky. hub. Rounding out FedEx’s competition is the international logistics giant, DHL, which anchors itself in the U.S. in the Cincinnati area.
Understanding the rise of a giant
This TAC Analysis is the second of three parts examining the rise of Amazon’s role as air cargo operator. The coming third part focuses on its aircraft purchasing. Given Amazon’s willingness to try anything, what would it take for the retailer to build an overnight capable fleet of cargo aircraft and what could Amazon’s full-service overnight hub mean for UPS and FedEx?
The designs of each of the express parcel competitors’ networks share significant similarities. A Midwest superhub to act as the primary node in the network, coupled with a bypass hub, a west coast hub, and a daylight-flying network for two-day service, geographic necessity has dictated the three networks of FedEx, UPS, and DHL look extraordinarily similar.
Yet, even as the competitors have fought, and each individually succeeded through decades of expansion, a new potential threat is emerging. This time, the threat originates not from a competitor, rather a customer.
As a continuation of the first part of this examination, TAC Analysis dives deeper into the Amazon Air network, what it is, what it could be, and the threat it poses to the competitive space of the supermassive overnight logistics providers.
Amazon Air has grown into a formidable force, with plans to grow its network to over 85 aircraft by the end of 2021, built to provide two-day delivery for much of the online retailer’s customer base in the United States. Yet, with the construction of its new Cincinnati area hub in Northern Kentucky, Amazon looks to offer overnight delivery of its own, putting itself directly into the space of FedEx, UPS, and DHL.
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