Amazon to build cargo hub in Kentucky, in possible move to vie with FedEx

San Francisco — Amazon.com plans to invest $1.49bn to build a large air cargo hub in northern Kentucky, state officials said on Tuesday, stoking expectations it may one day opt to directly compete with FedEx and United Parcel Service.

The world’s biggest online retailer has agreed to a 50-year lease for about 365ha of property from Cincinnati/Northern Kentucky International Airport — close in size to the global hubs of top cargo airlines.

Amazon is handling more shipping in-house so it can deliver packages to customers faster, as well as cut costs and uncertainty associated with relying on third parties. It has said its moves are designed to supplement, not replace cargo carriers.
Analysts suspect it has larger ambitions.
"We estimate a $400bn-plus market opportunity for Amazon in delivery, freight forwarding and contract logistics," Colin Sebastian, an analyst for Baird Equity Research, said in a note to clients.

 

 

Amazon, which has not announced a start date for the hub, said it expects to create more than 2,000 jobs when the site opens.
The northern Kentucky location — not far from UPS’s major hub — puts Amazon’s aircraft in close reach of top cities.

The company said last year it would lease 40 Boeing 767 planes, 16 of which are currently in service.
It also lets Amazon’s trucks reach 11 fulfilment centres in state. And a large operation of Deutsche Post DHL there lets Amazon transfer packages easily abroad, said Brian Clancy, MD of advisory firm Logistics Capital & Strategy.
As part of the investment, Amazon anticipates it will spend nearly $462m on building and improvements over an unspecified number of years, according to a report by the Kentucky Economic Development Finance Authority.

The authority’s board tentatively approved $40m in tax incentives for Amazon over 10 years if it meets hiring commitments, with average wages including benefits targeted at $26 per hour, the report said.
So far, Amazon has loaded its aircraft with big but lightweight boxes, according to data reviewed by Reuters and interviews with airport officials around the US. This has helped it dodge fees from cargo partners, which are increasingly pricing by volume rather than weight.
Amazon’s new site compares with about 485ha UPS has in Louisville. FedEx has more than 365ha in its Memphis hub, a 2010 airport plan showed.

Reuters\BDlive