Amazon will partner with bellwether Hawaiian Airlines to expand its air cargo service and take up to 15% ownership in the airline. The retailer will use Hawaiian to operate and maintain a new fleet of rented A330 widebody cargo jets to replace older planes. This is an entirely new and innovative direction for Hawaii’s largest private employer.
Read on for our local Hawaii take on this too.
Updated at 1030 am 10/21:
A Hawaiian Air investor call took place later on Friday, CEO Peter Ingram highlighted a number of aspects of this agreement:
- Hawaiian said this agreement “allows for synergies with our a330 passenger business” and will provide a “meaningful revenue stream distinct and separate” from Hawaiian’s’ meat-and-potatoes Hawaii passenger business.
- Ingram added that “Hawaiian was a natural partner” for this 8-year Amazon contract. He said that Amazon has the option to place additional aircraft with Hawaiian and to extend the agreement beyond the initial 8-year period.
- Hawaiian said that they had reached an agreement with their existing pilot labor agreement that was needed to add this new line of business. Ingram said that he expects pilots to spend periods of time dedicated exclusively to either the freighter business or the passenger business and to not go back and forth on a more frequent basis.
- Hawaiian will be paid by “block hours” based on the hours flown and the number of flight departures, and income won’t be impacted in the same ways as the passenger business is. Also, the cost of jet fuel will be “pass-through” from Hawaiian to Amazon.
- In relation to pilots, Ingram said this is a “new source of opportunities for employees including hundreds of new pilots and others.” He said it will further enhance the appeal of Hawaiian Air to pilots. HA estimated that this will result in about 160 new pilot jobs for the ten new planes.
- In terms of risks associated with this new venture, Ingram said that on-time performance is of very high importance to Amazon. This has been a major issue recently in Hawaiian’s passenger business, as we pointed out earlier this week when Hawaiian suffered 145 delayed flights in one day. In addition, Hawaiian is new to working with a customer the size of Amazon, rather than airline passengers.
These are similar to the A330 planes that Hawaiian uses for passenger service.
Hawaiian’s passenger service uses its dedicated fleet of 24 Airbus A330-200 planes, whereas these are A330-300 cargo planes. These will leverage the airline’s extensive knowledge and experience with the A330 and also take the airline in an entirely new direction.
Amazon said this morning, “These A330-300s will not only be the first of their kind in our fleet, they’ll also be the newest, largest aircraft for Amazon Air, allowing us to deliver more customer packages with each flight.”
Amazon also said today that it had signed an agreement with Airbus to lease the 10 aircraft that Hawaiian will operate. These are the largest planes that Amazon has ever used for moving cargo.
Hawaiian CEO Peter Ingram said, “We are excited to help serve Amazon customers by providing additional air cargo capacity and logistics support. This recognizes our experience in providing safe and reliable operations, our incredible front-line team, and our shared focus on the customer. This relationship provides a catalyst to grow our business and the unique opportunity to diversify our revenue sources while capitalizing on our established strengths.”
Hawaiian will be Amazon’s largest airline partner to date.
Amazon already uses leisure airline Sun Country, which last year stopped its Hawaii service, for Boeing 737 cargo service in a similar way. Amazon also uses Atlas and ATSG to fly cargo for them.
As part of the deal, Amazon will retain the option to acquire up to 15% of its stock over the next nine years.
Hawaiian plans to begin flying the leased cargo jets in the next year.
Hawaiian will fly 10 or more of the A330-300s for Amazon starting fall 2023. All of the new planes will go into service by Hawaiian by 2024.
To do this, Hawaiian is setting up another pilot base, which will be set somewhere on the mainland, and plans to hire all the appurtenant staff needed to fulfill the new contract.
Why now? BOH’s take on Hawaiian’s Amazon partnership.
- We give much credit to Hawaiian for their creativity in this latest venture. It’s a challenging financial environment, and this diversification can only be seen as beneficial. A further indication of that is that the airline’s stock rose sharply this morning on the news.
- A stronger airline benefits Hawaii travelers too, so this appears at the outset to be good news all the way around
- The venture leverages Hawaiian’s extensive experience with its own large A330 fleet over the past decade.
- Hawaiian will also maintain the new Amazon A330 fleet and use its own well-tuned internal and external maintenance resources.
- The airline has the systems and knowledge needed to hire and train the pilots and other people necessary to fulfill this agreement.
- Questions remain, given the shortage of pilots that all airlines are still facing.
- We don’t know if or how this impacts Hawaiian’s agreements with its current pilot and other unions.
- It will further Amazon’s relationship with the state of Hawaii.
- This will be a fascinating development to follow.
We will be on a call with Hawaiian later this morning and will update this post afterward.
The above photo is of a Hawaiian Airlines A330-200 passenger aircraft.