Hawaiian Airlines lands Amazon deal
Amazon inked a deal with Hawaiian Airlines for the carrier to fly 10 Airbus planes the Seattle-based tech conglomerate plans to bring online beginning in fall 2023.
Why it matters: Consumer-facing companies have increasingly relied on air cargo versus sea cargo to get their goods on time since the onset of the pandemic.
- In fact, air cargo (which remains highly fragmented) was one of only a couple of bright spots in the aviation sector during the pandemic, according to a report by consulting firm McKinsey & Co.
Details: There is also an option to expand the number of planes Hawaiian will operate at Amazon's behest, the announcement said.
- Hawaiian will establish a pilot base in the continental U.S., expand existing maintenance bases and hire more pilots, mechanics, dispatchers and supply chain employees, among others, to support the new cargo operations.
- In exchange, Amazon is being granted warrants to acquire up to 15% of the air carrier's shares, which are exercisable over the next nine years.
- For Hawaiian, the move diversifies the airline's operations so it is less reliant on passenger travel.
Of note: Hawaiian Airlines stock jumped 8.88% Friday on the news to $15.33 per share.
What they're saying: "This relationship provides a catalyst to grow our business and the unique opportunity to diversify our revenue sources while capitalizing on our established strengths," Peter Ingram, Hawaiian Airlines' CEO, said in a statement.
The big picture: Air cargo yields globally rose 40% year over year in 2020, and by an additional 15% in 2021, the McKinsey & Co. report noted earlier in this article said.
- And although the level is expect to drop, it is still likely to remain above what it was pre-pandemic.
- "During the pandemic, robust demand for air cargo was initially driven by protective personal equipment (PPE) and medications, and later by challenges in the ocean-shipping supply chain and strong growth in e-commerce sales," the report found.
Yes, and: "The supply of air cargo fell as the number of grounded passenger planes rose, constricting belly capacity and raising rates (and profits for freight forwarders)," the report added.