Atlas Air strikes air cargo services agreement with Amazon

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Atlas Air Worldwide will provide air cargo services to support Amazon’s package deliveries to its customers, which the carrier expects will boost earnings and cash flows over time.

The long-term commercial agreements will include the operation of 20 Boeing 767-300 converted freighters for Amazon on a CMI (crew, maintenance and insurance) basis by Atlas Air Worldwide’s airline subsidiary, Atlas Air, as well as dry leasing by its Titan Aviation leasing unit.

The dry leases will have a term of 10 years, while the CMI operations will be for seven years with extension provisions for a total term of 10 years. Operations under the agreements are expected to begin in the second half of 2016 and ramp up to full service through 2018.

Atlas Air Worldwide chief executive officer, William J. Flynn says: “We are excited to begin a strategic long-term relationship with Amazon to support the continuing expansion of its e-commerce business and to enhance its customer delivery capabilities. We appreciate Amazon’s confidence in our capabilities, global scale and operating excellence.”

Amazon’s senior vice president of worldwide operations, Dave Clark says: “We are excited to welcome a great provider, Atlas Air, to support package delivery to the rapidly growing number of Prime members who love ultra-fast delivery, great prices and vast selection from Amazon.”

As part of the inherent value creation and to align interests and strengthen the long-term relationship, Atlas Air Worldwide granted Amazon warrants to acquire up to 20 per cent of its common shares at a price of $37.50 per share over a period of five years, with vesting tied in part to the commencement of operations of the 20 767-300 freighter aircraft and other conditions.

The agreements also provide for future growth of the relationship as Amazon may increase its business with Atlas.

Atlas Air Worldwide also granted Amazon warrants to acquire up to an additional 10 per cent after the issuance of common shares at the same exercise price, over a period of seven years, with vesting tied to payments made by Amazon in connection with that business.