Air Transport Services Group has confirmed an agreement with Amazon Fulfillment Services, an affiliate of Amazon.com, to operate an air cargo network to serve Amazon customers in the United States.
“Since last summer, we have been working closely with Amazon to demonstrate that a dedicated, fully customized air cargo network can be a strong supplement to existing transportation and distribution resources,” said Joe Hete, President and CEO of ATSG. “We are excited to serve Amazon customers by providing additional air cargo capacity and logistics support to ensure great shipping speeds for customers.”
The commercial agreements will include the leasing of 20 Boeing 767 freighter aircraft to Amazon Fulfillment Services by ATSG’s Cargo Aircraft Management (CAM), the operation of the aircraft by ATSG’s airlines, ABX Air and Air Transport International, and gateway and logistics services provided by ATSG’s LGSTX Services. The duration of the 20 leases will be five to seven years; the agreement covering operation of the aircraft will be for five years.
“We offer Earth’s largest selection, great prices and ultra-fast delivery promises to a growing group of Prime members and we’re excited to supplement our existing delivery network with a great new provider, ATSG, by adding 20 planes to ensure air cargo capacity to support one and two-day delivery for customers,” said Dave Clark, Amazon senior vice president of worldwide operations and customer service.
In conjunction with the commercial agreements, ATSG also has agreed to grant Amazon warrants to acquire over a five-year period up to 19.9 percent of ATSG’s common shares at $9.73 per share, based on the closing price of ATSG common shares on February 9, 2016.
Several hedge funds and institutional investors have added to or reduced their stakes in ATSG of late. California State Teachers Retirement System increased its position by 1.8% in the fourth quarter to own a total of 97,831 shares worth $986,000. Martingale Asset Management boosted its position by 6.6% in the fourth quarter to 109,887 shares worth $1,108,000. Susquehanna International Group increased its ATSG share stake by 15.5% in the fourth quarter to own 131,811 shares worth $1,329,000. Paradigm Capital Management increased its position by 1.7% in the fourth quarter to won 178,500 shares worth $1,799,000. Monarch Partners Asset Management also increased its position by 7.4% in the fourth quarter and now owns 204,150 shares worth $2,058,000.
Several analysts, including Robert W. Baird, have rated the shares as outperform. Cowen and Company boosted its target price on ATSG shares from $11.50 to $12.00 and gave the company an outperform rating.