Amazon confirms plans with Wilmington company

Online giant to get equity stake in Wilmington-based company

A newly announced deal with online retailer Amazon means more than new flights and business for Wilmington-based air carrier Air Transport Services Group.

It’s good news for the community and could mean new jobs, company officials said.

“Definitely it bodes well for Wilmington,” said Joe Hete, president and chief executive of ATSG.

ATSG’s announcement confirmed what observers had suspected since last fall — that the company is flying cargo for Amazon. The company confirmed Wednesday that it has reached agreements with Amazon Fulfillment Services Inc., an affiliate of Inc., to operate an air cargo network to serve Amazon customers in the United States.

Amazon said the goal is not to compete with package delivery carriers such as FedEx Corp. and UPS but work on improving its own logistics to offer faster delivery for customers as well as providing shipping services for third-party sellers on the site, a service called Fulfilled by Amazon. Amazon’s $99 annual Prime loyalty program offers free two-day shipping on many items.

Amazon will lease 20 Boeing 767 freighters from ATSG. Where exactly Amazon cargo will be shipped and what airports will be used are not specified in the agreement. Amazon will decide where its cargo flies, Hete said.

“We don’t know where aircraft will ultimately be routed,” Hete said. But based on history, a “large number” will go through Wilmington, he added.

Wilmington makes sense as a “central location” for services to Amazon, he said. Today, ATSG operates five daily flights for Amazon. Four of those flights go through Wilmington, said Paul Cunningham, a spokesman for ATSG. It’s possible that with this agreement that number will rise, he said.

“In all likelihood, it will,” Cunningham said when asked if Wilmington will be a key part of Amazon’s air cargo network.

The announcement is a major shot in the arm for ATSG. Wilmington Air Park and the community of 42,000 residents around it suffered greatly eight years ago when German logistics giant DHL ended major operations there.

Wilmington suffered the loss of some 7,000 to 8,000 area jobs as a result.

In January 2010, DHL turned over control of the the air park — which it had acquired in 2003 — to the Clinton County Port Authority. DHL donated the airport and about 1,500 acres — property with a tax value at the time of $62.2 million, according to Clinton County property records.

Even today, however, Amazon is not ATSG’s biggest customer, Cunningham said. That honor still goes to DHL, he said.

Though DHL no longer has major operations at the air park, its planes still fly through. Last year, ATSG announced an agreement that extends its support of DHL’s air cargo network in the United States through at least March 2019.

ATSG is the primary tenant at Wilmington Air Park. The company has more than 2,000 employees total, with about 1,100 working in Wilmington.

“Amazon’s announcement today is terrific news and confirms the strong relationship we have built with them over the past year to expand and invest in our state,” Ohio Gov. John Kasich said in a statement. “Their continued growth here is the perfect example of the way Ohio is now attracting businesses of the 21st century with a diversity of industries, technologies and career opportunities.”

Daniel Evers, executive director of the Clinton County Port Authority, said the news strengthens the air park and Wilmington.

“The major employer at the air park just signed a major contract,” Evers said.

Based on the agreement, ATSG will beef up its fleet of Boeing 767s and will give Amazon a sizable equity stake in the local company. And new hiring is a possibility, Cunningham said.

“We don’t know what the impact on the employment will be at this point,” he said. “It’s too soon to say. But certainly, we hope to (hire). We’ll just have to wait and see.”

The commercial agreements will include the leasing of 20 Boeing 767 freighter aircraft to Amazon Fulfillment Services, Inc. by ATSG’s Cargo Aircraft Management, the operation of the aircraft by ATSG’s airlines, ABX Air and Air Transport International, and gateway and logistics services provided by ATSG’s LGSTX Services, the company said.

The duration of the 20 leases will be five to seven years; the agreement covering operation of the aircraft will be for five years.

“We offer Earth’s largest selection, great prices and ultra-fast delivery promises to a growing group of Prime members and we’re excited to supplement our existing delivery network with a great new provider, ATSG, by adding 20 planes to ensure air cargo capacity to support one and two-day delivery for customers,” Dave Clark, Amazon senior vice president of worldwide operations and customer service, said in the release.

Along with the commercial agreements, ATSG also has agreed to grant Amazon warrants to acquire over five years up to 19.9 percent of ATSG’s common shares at $9.73 per share.

“It’s certainly an offering to gain an equity stake in the company,” Cunningham said when asked if Amazon was positioning itself to one day buy ATSG.

ATSG said it expects to file with the U.S. Securities & Exchange Commission on the Amazon news this week.

Shares of ATSG (NASDAQ: ATSG) rose Wednesday less than 1 percent to close at $13.73.

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