Amazon Cuts Out Middle Men FedEx and UPS with Own Air Fleet (AMZN)

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Amazon.com, Inc. (NASDAQ:AMZN) is well known for its efficient distribution system, allowing the retail giant to sell a high volume of merchandise at low prices.

Amazon Cuts Out Middle Men FedEx and UPS with Own Air Fleet (AMZN)From robotics and automation in its warehousing to intense e-commerce architecture on its websites, AMZN stock is the gold standard of moving goods around quickly and efficiently.

But the next step for Amazon stock on the way to distribution dominance isn’t drones, as some speculate … it’s actually old-school air cargo.

According to The Seattle Times, “Amazon.com is is negotiating to lease 20 Boeing 767 jets for its own air-delivery service.” The report adds, “The online retail giant wants to build out its own cargo operations to avoid delays from carriers such as United Parcel Service, which have struggled to keep up with the rapid growth of e-commerce.”

AMZN Stock Dominates Shipping

If the report hadn’t already called out United Parcel Service, Inc. (NYSE:UPS) directly, investors should have easily connected the dots between the increasing ambitions of AMZN stock and the fortunes of shippers like UPS and rival FedEx Corporation (NYSE:FDX).

Dissatisfaction with cargo carriers is nothing new, after Christmas delays have become the norm thanks to a high volume of packages as people increasingly do their shopping online. Execs have been frustrated for a few years now as Amazon stock has been held up by third-party carriers, and given the famous focus on customer satisfaction at the e-commerce giant, that is not something that AMZN leaders take lightly.

One could say that the nascent Amazon air cargo is just well-timed posturing, a shot across the bow of FDX and UPS as we enter the crucial final days of holiday shipping. However, it’s also a bit naive to think that Amazon wouldn’t be going this way anyway, even if shipping relationships were hunky dory.

AMZN stock has a history of rolling up parts of the supply chain, including the purchase of retail competitor Zappos and robotics company Kiva and digital-film-distribution company Withoutabox, just to name a few.

And given that Amazon is finally showing some signs of profitability in 2015 — which is incredibly pleasing to investors in AMZN stock — it’s natural that the company is looking to shore up efficiency (and margins) wherever it can in the future.

Time will tell whether Amazon air cargo winds up being a net positive for Amazon stock or a negative for carriers like FedEx and UPS. The reality of building out an air cargo network from scratch may be more daunting than Amazon expects — and at the same time, the overall volume of packages is increasingly briskly as people continue to flock to online merchants, so there could be plenty of other business to be had for these carriers.

Either way, however, this is certainly a development for AMZN stock holders to watch.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

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Article printed from InvestorPlace Media, https://investorplace.com/2015/12/amazon-stock-air-fleet-fdx-ups-amzn/.

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