Amazon Looks to Sun Country to Boost Its Cargo Unit

Sun Country Airlines will operate 10 rented 737-800 jets for Amazon as the e-commerce giant looks to the low-cost airline to boost its air-cargo unit. Photo: Nicolas Economou/NurPhoto/Zuma Press By Doug Cameron


17, 2019 5:30 pm ET

Amazon[4]. AMZN 1.21% [5] com Inc. is expanding its domestic airfreight operation, hiring low-cost carrier Sun Country Airlines to operate 10 Boeing[6] Co. cargo jets to bolster next-day shipping.

The e-commerce giant subcontracts deliveries[7] to two air-cargo specialists operating almost 50 jets on its behalf. Amazon plans to have at least 20 more flying by 2021. Amazon is expected to ship around 6.3 billion packages within the U.S. this year, according to analysts at Cowen & Co, up 12% from 2018, while air-cargo volume is rising at a 20% annual clip.

That contrasts with a broader slowdown in the global air-cargo market over the past year as trade tensions and tariffs hit demand to move industrial parts and apparel by jet. Amazon is also experimenting with local collection centers, delivery vans, on-demand taxis and using its employees to speed deliveries to consumers at a lower cost. FedEx[8] Corp. stopped flying for Amazon this past summer, with analysts citing intensifying competition for outside business from the e-commerce company's own fast-growing delivery unit. Amazon this week blocked third-party sellers from using FedEx's ground-delivery network[9] for Prime shipments.

Hiring Minneapolis-based Sun Country, which expects to carry four million passengers this year, adds to Amazon's team of domestic cargo partners: Air Transport Services Group[10] Inc. and Atlas Air Worldwide Holdings[11] Inc.

Atlas and ATSG fly converted Boeing 767 jets for Amazon, which is renting smaller 737-800 planes from the leasing arm of General Electric[12] Co. Atlas will fly up to 20 of the 737s, with Sun Country operating another 10.

Sun Country Chief Executive Jude Bricker said the deal took shape after he failed to sell a 737 to Amazon. The company asked Sun Country to instead fly converted cargo jets on its behalf. Mr.

Bricker, who joined Sun Country in 2017 from Allegiant Travel[13] Co. , said the move into air cargo will balance lulls in the carrier's passenger and charter business, which is focused on carrying travelers from the Twin Cities to sunshine destinations. The passenger market cools each fall, just as the air cargo market [14]peaks ahead of the holiday season.

Amazon will receive warrants to acquire a minority stake in Sun Country, which was bought two years ago by Apollo Global Management[15] Inc., similar to its deals with Atlas and ATSG. The 737 jets will link 20 Amazon facilities to smaller cities, while larger Boeing 767s take packages to bigger markets.

Amazon opened three more air-cargo centers this year in Fort Worth, Texas, Wilmington, Ohio, and Rockford, Ill. A hub at Cincinnati/Northern Kentucky International Airport that can handle 100 planes is due to open in 2021. Analysts expect Amazon to stick with outsourced flying rather than start an in-house carrier.

The domestic industry is highly regulated and has a history of turbulent labor relations, creating high barriers to entry.

Mr. Bricker said Sun Country, which has a fleet of 29 Boeing 737 passenger jets, will expand its pilot roster to around 500 from 350 over the next 18 months to handle the additional flying.

Write to Doug Cameron at [email protected][16]

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  1. ^ Biography (
  2. ^ @dougcameron (
  3. ^ [email protected] (
  4. ^ Amazon (
  5. ^ AMZN 1.21% (
  6. ^ Boeing (
  7. ^ subcontracts deliveries (
  8. ^ FedEx (
  9. ^ blocked third-party sellers from using FedEx's ground-delivery network (
  10. ^ Air Transport Services Group (
  11. ^ Atlas Air Worldwide Holdings (
  12. ^ General Electric (
  13. ^ Allegiant Travel (
  14. ^ the air cargo market (
  15. ^ Apollo Global Management (
  16. ^ [email protected] (

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