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AMAZON LOGISTICS EXPANSION

Feb 06 2017

The scale of Amazon’s investment in a new US air freight hub highlights the extent of its logistics ambitions andspeculation about whether it will become a significant disruptive rival to traditional third-party logistics players. Although the US internet giant has given few details about its plans to create a new “long-term” centralised US air cargo hub at Cincinnati/Northern Kentucky Airport (CVG), state officials said Amazon plans to invest $1.49 billion in the hub and has agreed to a 50-year lease with the airport with provisions to provide up to 900 acres (360 hectares) of land. Kentucky state’s Cabinet for Economic Development noted that with agreements approved by the Kenton County Airport Board and the Kentucky Economic Development Finance Authority, Amazon will build a state-of-the-art sorting, loading and unloading facility on the airport property. Airport board members approved a 50-year lease expandable to 900 acres of property. Additionally, CVG will invest $5 million in supporting infrastructure that will benefit the airport as a whole.

Although Amazon has said that its moves into air freight and other areas of logistics are only meant to supplement, not replace, specialist cargo carriers, some analysts suspect that it has larger ambitions and have noted that a 360-hectare site would be of a similar scale to FedEx’s main air hub in Memphis and UPS’s main air hub in Louisville. The US internet-retail giant declined to explain why it had rejected its current base at aircraft operator ATSG’s home airport, Wilmington, Ohio (ILN) in favour of a new long-term air hub around 80 kilometres southwest of ILN at Hebron. However, CVG is also DHL’s main US international air express hub, and some analysts believe the access this provides to international uplift and delivery services may have been a key factor.

Nevertheless, to encourage the investment and job growth, the Kentucky Economic Development Finance Authority on Tuesday preliminarily approved Amazon for tax incentives up to $40 million through the Kentucky Business Investment programme. It said the performance-based incentive allows the company to keep a portion of its investment over the agreement term through corporate income tax credits and wage assessments by meeting job and investment targets. In addition, Amazon can receive resources from the Kentucky Skills Network.

Meanwhile, state officials noted that the region would see significant additional benefits from the new shipping hub – notably putting the region firmly on the global logistics map. Steve Pendery, chair of Northern Kentucky Tri-ED, said: “This is a once-in-a-generation project for our region, representing the largest capital investment announced by a private company in Northern Kentucky in the last 30 years. We are looking at approximately a billion-and-a-half-dollar capital investment, 2,700 jobs, and infrastructure improvements that will literally transform the face of Northern Kentucky and will vault us into one of the top cargo locations in the world"

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