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Amazon’s Air Force Could Make It Vulnerable

A pilot shortage and ongoing labor negotiations could lead to new pricing pressures.

A recent report from Business Insider indicates that while Amazon continues to grow its profits and expand is offerings, it could be facing a daunting challenge when it comes to maintaining delivery expectations. According to the report, pilots who fly for Amazon Air earn significantly less than their colleagues at UPS and FedEx. 

Amazon currently contracts with a couple of airlines, including Air Transport Services Group and Atlas Air Worldwide Holdings. They provide Amazon with the leasing, staffing, maintenance, and insurance for all the planes and the pilots who navigate them. 

While the pilots manning these flights are all unionized, some are entering their fifth year of contract negotiations, which is long even by pilot standards. The problem is that the initial labor contracts were negotiated during the recessionary years, and they involved a number of concessions. 

So, in addition to employer-friendly pension, healthcare and vacation standards, many of the pilots took pay cuts. This led to the current situation where many of these pilots who now fly for Amazon Air haven’t seen a pay raise in nearly a decade. 

This results in Boeing 767 captains, regardless of experience, maxing out at $246 - $273/hr. flying for Amazon Air and its partners. The same position at FedEx pays $313/hr. and $309/hr. at UPS. 

So as these negotiations continue, it will be interesting to see the potential fall-out they could create for Amazon. Companies like ATGS and Atlas want desperately to keep the Amazon business, and they can do so by keeping their prices low. But with pilot shortages hitting everyone from the Air Force to commercial air lines, keeping labor costs down as demand for good pilots goes up, will be difficult.

If these labor costs go up, Amazon could be faced with new pricing pressures in order to preserve shipping times.

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