Monday, August 14, 2017

How to Invest in Amazon Prime Air Disruption in the Booming Air Cargo Market: Atlas Air and Air Transport Services Group both lease aircraft to Amazon Prime Air -- their revenues and share price are growing as a result



As the air cargo industry booms, the impact of new entrant Amazon.com Inc. Prime Air remains a bit of a mystery - obvious in some ways and hidden in others.

Of course, a 40-aircraft cargo airline operated by the world's fourth most valuable public company will influence the overnight cargo market, even if FedEx Corporation  executives proclaimed in March that they are not worried.

"The evolution of e-commerce is transforming the global supply chain and creating significant new opportunities for Atlas," said Bill Flynn, CEO of Atlas Air Worldwide Holdings, on the company's second quarter earnings call on Aug. 2. Atlas Air is one of two companies Amazon has selected to operate its fleet of Boeing 767-300 freighters.

"E-commerce is growing rapidly from low penetration levels," Flynn said. "It accounts for only about 6% to 7% of global retail sales, and much of that is streaming media. This create significant opportunities to expand globally."

Amazon said in January that it will build an air cargo hub at Cincinnati Kentucky International Airport in Hebron, KY, about 100 miles from Louisville, Ky., where United Parcel Service Inc. operates a hub. In terms of freight tonnage, the world's three largest airlines are FDX Express, Emirates Sky Cargo and UPS Airlines.

Amazon Prime Air is still ramping up; hub operations began April 30. The fleet currently includes 16 Boeing 767-300s, according to website Planespotters.net. It will expand to 40 767s by 2018.

Some of the impact can be seen at airports such as Charlotte Douglas International Airport, one of a dozen destinations served by Prime Air. Year-to-date through May, the amount of express/overnight air freight at Charlotte Douglas, had gained 12% to 21,849 tons.

The increase reflects the impact of three daily flights by ABX Airlines, formerly Airborne Express: the flights serve Cincinnati and Allentown, Pa, both among the Prime Air dozen. At Cincinnati, in June, cargo volume rose 35% to 92,030 tons: at Lehigh Valley International Airport in Allentown, cargo volume through June was up 134%.

For investors, the Prime Air play so far has involved the two companies that lease cargo airplanes and crews to Prime Air. The companies, Air Transport Services Group  (which operates ABX Airlines) and, Atlas will each lease 20 Boeing 767-300Fs to Prime Air.

On Friday, shares in Air Transport Services Group closed at $22.70, up 42% year-to-date while shares in Atlas Air closed at $60.65 up 16%.

Original article can be found here ➤ https://www.thestreet.com

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