When Amazon announced last year that it was entering directly into the air logistics business with the launch of Prime Air, the airfreight world knew that it had to prepare for bold moves by a deep-pocketed company with a passion for innovation. Yesterday, the Seattle-based online retail giant made another bold move by announcing the shift of its current air hub from Wilmington Airpark (ILN) in Ohio to the Cincinnati/Northern Kentucky Airport (CVG) this spring, hinting at a possibly vast expansion of Amazon’s e-commerce air service.
The move from ILN to CVG will only be about 85 kilometers to the southwest as the crow flies, but the new facility is expected be worlds apart in terms of capacity. Local reports said Amazon will be investing about US$1.5 billion to build a new, 3 million-square-foot facility to accommodate express e-commerce traffic from more than 200 daily takeoffs and landings by the Prime Air fleet. The e-tailer said the new processing hub will use algorithms, robotics, machine learning and other high-tech innovations to increase delivery speeds for customers.
“As we considered places for the long-term home for our air hub operations, Hebron quickly rose to the top of the list,” said Dave Clark, Amazon’s senior vice president of worldwide operations, referring to the Kentucky town where CVG is located, just across the Ohio River from Cincinnati. Benefits to CVG, he added, include a large, skilled workforce and a centralized location “with great connectivity to our nearby fulfillment locations.”
The 900-acre site, which will be leased to Amazon for a period of more than 50 years, will also include a 350,000-square-foot loading wing, some smaller accessory buildings and parking positions to accommodate more than 100 aircraft, Amazon said. CVG’s board also said it will invest $5 million in infrastructure improvements to the site, such as utility extensions.
According to a report from the Cincinnati Business Journal, the new Prime Air hub at CVG will be Amazon’s largest processing facility in the world, and also the largest-ever investment by a company at Cincinnati/Northern Kentucky International Airport. The $1.5 billion price tag for the development will far eclipse the $379 million hub expansion that Delta Air Lines made at CVG in 1993.
Since mid-2015, Amazon had been testing an express network with dedicated freighter aircraft leased from Wilmington-based Air Transport Services Group (ATSG) and operated by ABX Air and Air Transport International. After proving the feasibility of transporting e-commerce-driven cargo between several of Amazon’s domestic fulfillment centers, the project was officially launched in early 2016. Amazon entered into formal agreements with ATSG and Atlas Air Worldwide Holdings Inc. to lease up to forty 767 freighter aircraft by 2018 and provide domestic express service for Amazon Prime customers. Amazon also purchased a 10 percent stake in ATSG in March 2016, with an option to increase that share up to 19.9 percent in the next few years.
Currently, 16 of those 767Fs are flying with the now-familiar blue, gray and white Prime Air livery out of ILN, operate on a hub-and-spoke basis from the ATSG hub. However, some freighters will be used on point-to-point north-south routes on the east and west coasts of the United States, and some on east-west routes. Amazon also uses a dedicated network of 4,000 trailers to make ground deliveries. No more details were provided about whether this arrangement will change after the shift to CVG, although given the extra space for up to 100 aircraft, a significant expansion of the network seems likely.
While the move, expected to happen by this coming April, is welcome news to the Cincinnati and Northern Kentucky region, the loss of Amazon in Wilmington will be seen as a severe blow to ILN, which, as recently as last month, had sought to re-open an existing second runway this year to handle the expected increase in e-commerce traffic. Just seven years ago, ILN had also lost German carrier DHL Express after it pulled out of the North American market due to massive losses and abandoned its $300 million ILN sortation facility.
Notably, CVG is no stranger to the express delivery business, as it is currently home to one of DHL Express’ three “superhubs,” providing optimal global connections between North America and the rest of the world. Amazon’s new facility, however, will reportedly be “significantly larger,” than DHL’s, according to a statement made by Dan Tobergte, CEO of Northern Kentucky Tri-County Economic Development Corp., in the Cincinnati Business Journal.
“A vibrant airport improves the economic vitality of the region, and adding thousands of new jobs through establishing this hub at CVG will certainly be transformational for the local economy and local businesses,” said Candace S. McGraw, CEO of CVG. “This is a once-in-a-lifetime deal.”
Amazon said it expects the new facility to add more than 2,000 employees to the greater Cincinnati area, in addition to the 10,000 that already work in the 11 Amazon fulfillment centers across the state of Kentucky. The company also added, as it pulls out of ILN, it is offering sortation workers from Wilmington any similar jobs to be found at other Amazon sites across the U.S.
Those interested in learning more about how e-commerce from companies like Amazon will shape the future of air cargo should join us at Cargo Facts Asia in Shanghai, April 25-26. To register, or for more information, go to CargoFactsAsia.com.