Amazon will partner with pioneering Hawaiian Airlines to expand its air cargo service and acquire up to 15% ownership of the airline. The retailer will use Hawaiian to operate and maintain a new fleet of A330 wide-body freighters leased to replace older aircraft. This is a completely new and innovative direction for Hawaii’s largest private employer.
Read on for our local Hawaiian take on this too.
Updated at 1030am 10/21:
In a Hawaiian Air investor call later on Friday, CEO Peter Ingram highlighted a number of aspects of this deal:
- Hawaiian said this deal “enables synergies with our A330 passenger business” and will provide a “distinct and separate significant revenue stream” from Hawaiian’s meat and potato passenger business.
- Ingram added that “Hawaiian was a natural partner” for this 8-year Amazon contract. He said Amazon has the option to place additional planes with Hawaiian and extend the deal beyond the initial 8-year period.
- Hawaiian said they had reached an agreement with their existing pilot labor agreement that was necessary to add this new line of business. Ingram said he expects pilots to spend periods of time dedicated exclusively to the cargo business or the passenger business and not commute more frequently.
- Hawaiian will be paid “block hours” based on hours flown and number of flight departures, and revenue will not be affected in the same way as passenger business. Additionally, the cost of jet fuel will be “transferred” from Hawaiian to Amazon.
- Regarding 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 estimated that this will result in around 160 new pilot jobs for the ten new aircraft.
- In terms of the risks associated with this new venture, Ingram said that on-time performance is of great importance to Amazon. This has been a major issue recently in Hawaiian’s passenger business, as we noted earlier this week when Hawaiian suffered 145 delayed flights 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 that Hawaiian uses 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 draw on 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, but they will also be Amazon Air’s newest and largest aircraft, 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 Amazon has ever used to move cargo.
Hawaii CEO Peter Ingram said, “We are excited to help serve Amazon customers by providing additional air cargo capacity and logistics support. This recognizes our expertise in providing safe and reliable operations, our amazing front-line team, and our shared customer focus. This relationship provides a catalyst to grow our business and a unique opportunity to diversify our revenue streams while capitalizing on our established strengths.”
Hawaiian will be Amazon’s largest airline partner to date.
Amazon already uses leisure airline Sun Country, which stopped service to Hawaii last year, for Boeing 737 cargo service in a similar way. Amazon also uses Atlas and ATSG to transport cargo for them.
As part of the deal, Amazon will retain the option to acquire up to 15% of its shares for the next nine years.
Hawaiian plans to start flying the leased cargo planes next year.
Hawaiian will fly 10 or more of the A330-300s for Amazon beginning in the fall of 2023. All new aircraft will enter service with Hawaiian by 2024.
To do this, Hawaiian is setting up another pilot base, to be established somewhere on the mainland, and plans to hire all the necessary personnel to fulfill the new contract.
Because right now? BOH’s opinion on the Hawaiian Amazon Association.
- We give Hawaiian a lot of credit for their creativity in this latest venture. It is a challenging financial environment, and this diversification can only be seen as beneficial. Another indication of this is that the airline’s shares rose sharply this morning after the news.
- A stronger airline also benefits Hawaiian travelers, so this seems like good news from the start.
- The company draws on Hawaiian’s extensive experience with its own large A330 fleet over the last decade.
- Hawaiian will also maintain the new Amazon A330 fleet and use its own well-adjusted internal and external maintenance resources.
- The airline has the necessary systems and knowledge to hire and train the pilots and other people necessary to comply with this agreement.
- Questions remain, given the pilot shortage still facing all airlines.
- We don’t know if or how this affects Hawaiian’s deals 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’ll be on a call with Hawaiian later this morning and will update this post afterwards.
The photo above is of a Hawaiian Airlines A330-200 airliner.