Amazon Partners with Atlas Air Worldwide for Cargo Services -- 2nd Update
06 May 2016 - 2:42AM
Dow Jones News
By Joshua Jamerson
Atlas Air Worldwide Holdings Inc. said Thursday it would provide
air cargo services to Amazon.com Inc., further building out the
online retailer's delivery network.
Atlas Air's shares rose 29% to $49.40 in midday trading as
Amazon edged down 0.3% to $668.68.
The move, which includes the lease of 20 Boeing Co. 767 freights
to Amazon, comes after the tech giant made a similar agreement in
March, when it said it planned to shuttle merchandise around the
U.S. using as many as 20 767s from Air Transport Services Group.
News of that deal sent the Air Transport Services' stock soaring
24% at the time.
Atlas Air Worldwide also said it granted Amazon warrants to
acquire up to a 30% stake in the company at a price of $37.50 a
share, after the issuance of Atlas Air's common stock. Amazon could
acquire 20% over five years and then an additional 10% over seven
years. Atlas Air said Thursday that Amazon can take a seat on its
board when Amazon exercises warrants for an initial 10% sake in the
air cargo operator.
Similarly, the online retailer had said in March it would work
to secure warrants giving it almost 20% of Air Transport Services
equity and a board seat. Those warrants were priced at $9.73 per
share over five years.
The agreement with Atlas air Worldwide includes operation of 20
Boeing Co. 767 freighters for Amazon by Atlas subsidiary Atlas Air
Inc. The operation of the freighters with crew, maintenance and
insurance will last for seven years. Atlas Air said Amazon agreed
to a so-called dry leasing by its Titan Aviation leasing unit,
which have a term of 10 years. In a dry lease agreement, only the
plane is given.
Dave Clark, Amazon's senior vice president of world-wide
operations, said the agreement would "support package delivery to
the rapidly growing number of Prime members who love ultrafast
delivery."
The agreement is expected to begin in the second half of the
year and continue to ramp up through 2018.
The Seattle retailer has taken steps to reduce its reliance on
carriers such as United Parcel Service Inc. and FedEx Corp. It has
built a ground network of couriers and new warehouses near or
within urban centers for faster and cheaper delivery.
The Wall Street Journal reported in December that Amazon was
seeking aircraft from companies including Atlas Air and Air
Transport Services.
Atlas Air, which reported better-than-expected earnings on
Thursday, said the partnership with Amazon would add to its
earnings and cash flows over time.
In the first quarter, Atlas said it earned $471,000, or 2 cents
a share, compared with a year-earlier profit of $29.2 million, or
$1.17 a share. Excluding items, Atlas Air said it earned 31 cents a
share. Analysts polled by Thomson Reuters projected 25 cents a
share.
Revenue fell to $418.6 million from $444.8 million. Analysts
expected $420 million.
Doug Cameron contributed to this article.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
May 05, 2016 12:27 ET (16:27 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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