So Amazon is starting an airline and it’s because of me. Or people like me, evidently. As you read in this week’s news columns, Amazon hasn’t confirmed it yet, but sources say they’re trying to make a deal to lease a fleet of 20 or more 767s to fly their own packages around the country. (For comparison, FedEx has about 600 airplanes of various sizes at its disposal worldwide and UPS about 500.)
A little background. Amazon’s Prime service has been around, believe it or not, for a decade. For a flat fee of $99, it offers expedited free shipping, plus some other bangles. A few years ago, I signed up, mainly for the shipping because I order enough stuff to come out ahead on the cost. It’s mostly small stuff that sometimes costs less than the shipping—a RAM mount for my iPad, mic windscreens, intercom batteries, mic adapters and so on. Prime seems to always deliver in two days and sometimes one day. I like that, but it’s usually less important than the free shipping. At least I think it is. Maybe Amazon knows me better than I know me.
So obsessed with rapid shipping has Amazon become that it’s planning a fleet of drones—you’ve read about that, no doubt—and now an airline to address what it seems to think are catastrophic delivery delays. Really? Unless I was waiting for, say, an arterial pressure monitor for my dialysis machine, I can’t imagine thinking of my mic windscreens arriving even a week late as a nuisance, much less a catastrophe. And another thing, I wouldn’t trade the prospect of four-hour delivery against the annoyance of a lot of drone noise. I wonder if many people would. Evidently, it appears that Millennials, as a fat demographic, do want this. So Amazon thinks we, as consumers, have to have our trinkets so badly that it’s willing to construct the drone fleet and now, an airline.
That raises some things to chew on. First of all, some tech companies have a taste for verticality because they think they can apply technology to do things better than anyone else. Or they just want complete control. So my guess is deep in the fertile brain of Jeff Bezos is a plan to make a run at FedEx and UPS, not just delivery of Amazon merchandise more quickly. Maybe Amazon thinks the freight companies are sclerotic, cost inefficient and ripe for disruption. Who’s holding the stronger cards? What if Amazon, with its 168 distribution centers, has discovered that it’s driven its package handling costs to a fraction of what it thinks FedEx and UPS pay? And maybe it thinks it can apply that to a shipping business model and undercut FedEx by 15 percent or 30 percent or some disruptive number. Maybe it thinks it’s got the chops to introduce autonomous freighters much sooner than anyone believes is possible. Think of the big airplanes networked together with little drones into one, seamless autonomous system designed to efficiently move cheap Chinese junk around the planet. The mind boggles.
On the other hand, the two shipping companies have been operating fleets totaling more than 1000 airplanes for many years. They know the costs and methods of doing this. FedEx’s sort process in Memphis is not exactly low-tech. Or slow. Furthermore, through a long, sad history, aviation has not been kind to new entrants challenging established players and replacing pilots with robots may be a pipe dream for near-term business planning.
For proof of the economic challenge, look no further than DHL, which bought up Airborne Express in 2003 with the idea of challenging the FedEx/UPS duopoly. Nearly 4 billion burned dollars later, they exited the business in 2008 and retired to Europe from whence they came. Nowcomes Amazon to occupy—you guessed it—the very same facility DHL had in Wilmington, Ohio. That may have been a choice driven by circumstance and opportunity, but Wilmington is 400 more miles from the west coast than is Memphis. Another hour of flying from the west coast, an hour less from the east. In a business known for slim margins, could that matter? Ask DHL, I guess. The company learned to its pain that FedEx, UPS and even USPS compete intensely and DHL’s innovations weren’t enough to build a bridgehead.
In any new business, you don’t know what you don’t know until it’s too late. In anything related to aviation, the only thing you can count on, but many don’t, is that everything will take twice as long as you think and cost five times as much. Could success for Amazon turn on customer service? Because neither FedEx nor UPS are consistently good at this, in my experience. Two examples. Two months ago, I shipped a green screen to Ohio for a photo shoot. It was destroyed in a FedEx truck crash and returned to me in pieces, with the assurance from the driver that the company would be in touch with a claim. That never happened. I had to initiate the claim and FedEx took its sweet time reviewing and paying. It didn’t give the impression it wanted to pay what it owed. A UPS driver once left a box containing a $1000 camera by our mailbox right on the open road. I complained vigorously to the local office who assured me it wouldn’t happen again. It did. That’s a company that doesn’t care much about its customers, in my view, perhaps as a result of internal culture.
To be fair, both companies score well in independent customer satisfaction ratings, but have been behind retailers, food chains and even banks.People remember bad experiences like mine and that’s what makes them open to try the competition. And for the record, Prime customer service is excellent, although I’ve only used it twice. Does Amazon, being an upstart, understand what FedEx and UPS might not? Maybe we’re about to find out.
But this much is certain: Amazon wants to dominate the universe of selling stuff and one way or another, aviation is going to play a major role in that. And on that intriguing note, I wish you a Merry Christmas as UPS delivers your Amazon bling.
