Amazon.com Inc. has acquired a minority stake in a cargo airline that serves a portion of its rapidly expanding air-cargo division, the latest indication of the retailer’s long-term plans to expand its air-freight operations.
Amazon paid $131 million for around 13.5 million shares of Air Transport Services Group Inc., the air freight company said in a securities filing on Monday, exercising warrants it had previously purchased. Amazon also purchased approximately 865,000 additional shares in a non-cash transaction. The sales are subject to approval by the United States Department of Transportation, according to ATSG.
Following the approval, Amazon will own roughly 19.5 percent of ATSG, according to Quint Turner, the Wilmington, Ohio-based company’s chief financial officer, a stake that gives Amazon the power to select one member of ATSG’s board of directors. According to ATSG’s annual report, if Amazon leases more planes and exercises all of its warrants, it could own as much as 39.9% of the cargo carrier.
At 12:21 p.m. on 9th March, in New York, ATSG stock was up nearly 5%. Amazon remained largely unchanged. In 2016, Amazon obtained warrants to buy ATSG stock as part of an arrangement that saw ATSG began flying aircraft for Amazon’s then-new air cargo division.
Amazon announced its first aircraft acquisitions earlier this year, purchasing 11 Boeing Co. 767-300 jets to enter a fleet of leased planes. Later this year, the company plans to complete construction on an air-cargo terminal at Cincinnati/Northern Kentucky International Airport. Amazon uses the air service to expedite the delivery of items from its warehouses to customers, minimising its dependence on third-party distribution companies such as United Parcel Service Inc.
Amazon also bought warrants to buy shares of Atlas Air Worldwide Holdings Inc. and Sun Country Airlines Holdings Inc., two other airlines that fly Amazon Air planes.
On a recent conference call, ATSG Chief Executive Officer Rich Corrado stated that the company expects to operate 46 aircraft for Amazon by the end of this year, up from 33 by the end of 2020.
Quint Turner, chief financial officer of Wilmington, believes, Amazon’s decision to exercise the warrants, is “an acknowledgment that company has a very strategic partnership with them. Clearly, this is a critical partnership for both companies.
