- Amazon‘s cargo planes are poised to take market share from UPS and FedEx, Morgan Stanley said.
- The online retailer had leased 40 Boeing 767 cargo planes and invested aggressively in its first air-cargo hub.
- Amazon’s air-delivery system could lead to as much as a combined 10% drop in revenue for UPS and FedEx.
- Watch UPS,FedEx, and Amazon trade live.
“The market is missing the risk Amazon Air poses to UPS/FDX growth,” a group of Morgan Stanley analysts led by Ravi Shanker said Tuesday.
At the time, Amazon said it leased 40 fleet units through air cargo partners Atlas Air and ATSG, and had invested aggressively in its first air-cargo hub located in Hebron, Kentucky, in order to reduce its reliance on the traditional logistics companies like UPS and FedEx. The Wall Street Journal reported in February 2017 that the tech titan was planning a $US1.5 billion investment in the air-cargo hub, which Morgan Stanley says could potentially handle 100 planes.
According to the bank, Amazon can save $US2 to $US4 per package when using its Amazon Air deliveries, which could add up to savings of as much as $US2 billion, or 6% of its global-shipping costs in 2019. Meanwhile, Amazon’s cost effectivity could cause UPS and FedEx revenues to fall by a combined 10% by 2025.
“We also estimate that Amazon that Amazon Air’s lanes overlap with over two thirds of the volume flown by UPS+FedEx combined.”
As a result, Morgan Stanley lowered its price target for UPS to $US87 from $US92 and for FedEx to $US230 from $US240.
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