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 leased A330 widebody cargo jets to replace older planes. This is a completely new and innovative direction for Hawaii’s largest private employer.
Read on for our local Hawaii take on this, too.
Updated at 1030 21/10:
In a Hawaiian Air investor call later Friday, CEO Peter Ingram highlighted a number of aspects of this deal:
- Hawaiian said this deal “allows for synergies with our a330 passenger business” and will provide a “meaningful revenue stream separate and distinct” from Hawaiian’s meat-and-potatoes passenger business in Hawaii.
- Ingram added that “Hawaiian was a natural partner” for this 8-year Amazon contract. He said Amazon has the option to place additional aircraft with Hawaiian and to extend the agreement beyond the initial 8-year period.
- Hawaiian said it had reached an agreement with its existing pilot labor agreement needed to add this new line of business. Ingram said he expects pilots to spend periods devoted solely to either cargo or passenger operations and not going back and forth on a more frequent basis.
- Hawaiian will be paid by “block hours” based on the number of flight hours and the number of flight departures, and revenue will not be affected in the same way as passenger operations. Additionally, the cost of jet fuel will be “passed through” from Hawaii to the Amazon.
- As for pilots, Ingram said this is a “new source of opportunity for employees including hundreds of new pilots and others.” He said it will further enhance Hawaiian Air’s appeal to pilots. HA estimates that this will result in around 160 new pilot jobs for the ten new planes.
- As for the risks associated with this new venture, Ingram said on-time performance is of the utmost importance to Amazon. This has been a major problem recently in Hawaiian’s passenger operations, as we pointed out earlier this week when Hawaiian suffered 145 flight delays in one day. Additionally, Hawaiian is new to working with a customer the size of Amazon, rather than airline passengers.
These are similar to the A330 aircraft used by Hawaiian for passenger service.
Hawaiian’s passenger service uses its dedicated fleet of 24 Airbus A330-200 aircraft, while these are A330-300 freighters. These will benefit from the airline’s extensive knowledge and experience with the A330 and also take the airline in a completely new direction.
Amazon said this morning, “These A330-300s will not only be the first of their kind in our fleet, they will 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 planes that Hawaiian will operate. These are the largest planes Amazon has ever used to move cargo.
Hawaii CEO Peter Ingram said, “We are excited to help Amazon customers by providing additional airfreight capacity and logistics support. This recognizes our experience in providing safe and reliable operations, our incredible frontline 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 streams while leveraging our established strengths.”
Hawaiian will become 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 shares over the next nine years.
Hawaiian plans to begin flying the leased cargo jets next year.
Hawaiian will fly 10 or more of the A330-300s for Amazon starting in the fall of 2023. All of the new planes will be put into service by Hawaiian in 2024.
To do this, Hawaiian is setting up another pilot base, which will be located somewhere on the mainland, and plans to hire all the associated personnel needed to fulfill the new contract.
Why now? BOH’s take on Hawaiian’s Amazon partnership.
- We give big kudos to Hawaiian for their creativity in this latest venture. It is 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 also benefits Hawaii travelers, so this initially seems like good news all 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, using its own well-tuned internal and external maintenance resources.
- The Airline has the systems and skills necessary to employ and train the pilots and other persons required to fulfill this Agreement.
- Questions remain given the pilot shortage that all airlines still face.
- We don’t know if or how this affects 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 have a call with Hawaiian later this morning and will update this post afterward.
The image above is of a Hawaiian Airlines A330-200 passenger aircraft.