Jeff Bezos Has An Airline Called Amazon Air

Key Takeaways

• Amazon has agreed to purchase up to 15% of Hawaiian Airlines in exchange for the operation of 10 Airbus A330-300’s.
• It’s the latest addition to Amazon Air, which now has 97 planes at its disposal and flies to 64 different destinations.
• Amazon Air has a number of similar arrangements with other airlines, though it’s looking to purchase its own aircraft in the near future.
• It’s the latest in Amazon’s long list of acquisitions or major stakes, which include Whole Foods, Twitch and One Medical.

It was announced late last week that Amazon will be taking a 15% stake in Hawaiian Airlines. In exchange they’ll crew and operate ten Airbus jumbo jets for Amazon, which will allow them to expand their distribution network.

It’s the latest expansion of Amazon Air, Amazon’s own private cargo airline which makes sure you and I get wooly slippers and cheap USB cables to our front door in record time.

You might not have heard about Amazon Air, which flies under the callsign Prime Air, but it’s been around for seven years now. Starting 2015, Amazon Air boasts a fleet of cargo planes 97 strong, with all of them leased from other airlines.

This deal with Hawaiian Airlines is another one of these arrangements and allows Amazon to add ten more planes to their haul.

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How Amazon Air works

As you’d expect, Amazon has a heck of a lot of air cargo to ship. They send out an estimated 1.6 million packages each and every day, and that’s a lot of miles that needs to be covered.

After trial runs in late 2015, Amazon Air (then known as Amazon Prime Air) took a 19.9% stake in Air Transport Service Group which would provide them with the use of 20 Airbus 767’s.

Since then, just like almost every project Jeff Bezos and his team take on, it has expanded dramatically. Amazon Air now has partnerships with Silver Airways, Atlas Air, Sun Country Airlines, ASL Airlines Ireland, Air Transport International, ABX Air, Cargojet Airways and now, Hawaiian Airlines.

With a total of 97 planes at their disposal, Amazon Air now flies to 63 destinations across the US and Europe.

There are some potential plans in the works for Amazon Air to purchase their own planes, but right now their fleet is all run and operated by their partner airlines. This arrangement sees the pilots and the associated crew employed and managed via their airline partner. It allows Amazon to focus on what they do best, without having to fully commit to the volatile airline business.

Amazon Air was originally called Amazon Prime air when it first commenced service back in 2015. With the arrival of their new drone delivery service, also called Amazon Prime Air, the cargo plane business removed ‘Prime’ from the name.

The Hawaiian Airlines deal explained

Like many businesses in the travel and leisure sector, Hawaiian Airlines has been struggling to bounce back from the depths of the pandemic. Offering cargo services to a blue chip client like Amazon was likely to have been an easy decision to make.

The markets responded positively to the announcement, with Hawaiian Airlines stock jumping 10% shortly after the announcement.

Amazon’s investment includes 9.4 million warrants to purchase Hawaiian Airlines stock and if fully exercised it would represent an investment of $110 million into the company. The planes which Hawaiian Airlines will be operating for Amazon will be leased through aviation leasing specialists Altavair, with Hawaiian providing the staff and support to keep them in the air.

Amazon’s notable acquisitions

This deal is by no means Amazon’s first major stake or acquisition. They’ve taken over dozens of other companies over the past 25 years, with the pace seeming to pick up in recent years.

Some of their most pivotal deals include:

Whole Foods

Upscale grocery chain Whole Foods is Amazon’s largest acquisition to date, costing them $13.7 billion back in 2017. It became Amazon’s de facto first foray into bricks and mortar retail, though a major part of the strategy has been to bring Whole Foods products into grocery delivery service Amazon Fresh.

Metro-Goldwyn Mayer

As one of the oldest Hollywood movie studios, MGM made more immediate sense as an addition to Amazon Prime Video. The company was purchased in 2021 for $8.45 billion and saw Jeff Bezos take control of some big name franchises such as James Bond, The Handmaid’s Tale, Rocky, Vikings and Stargate.

Twitch

Live streaming service Twitch was bought back in 2014 for $970 million. While the service offers streaming in a wide range of different genres, it’s best known as the hub for esports and video game live streaming.

The acquisition allowed Amazon to make a major stamp on a niche they saw had a big future, gaming. It’s a bet that’s paid off.

One Medical & PillPack

The acquisition of primary-care provider One Medical happened this summer and saw Amazon take control at a price tag of $3.9 billion. The purchase represents a further push into healthcare after buying PillPack for $750 million in 2018.

It operates alongside Amazon’s telehealth service Amazon Care, and signals a clear intention from Amazon to become a bigger player in the healthcare space.

iRobot

Of all of the names on this list, and the dozens more on Amazon’s full list of previous acquisitions, you’d think the purchase of a robot vacuum cleaner would be low in terms of controversy.

However, in a world that is becoming increasingly concerned about privacy, the $1.7 billion acquisition of iRobot has raised a number of concerns. The main issue is around the fact that the iRobot Roomba vacuum cleaners generate a schematic of the user’s home. The idea of Jeff Bezos having the floor plan for millions of homes doesn’t sit well with some people.

The tech sector still makes sense for investors

This latest announcement shows that Amazon, and the broader tech sector, isn’t going anywhere. Despite stock prices that have plummeted, Silicon Valley’s finest are still generating massive revenue with big growth plans.

In some ways it’s been surprising to see just how far some of these companies’ stock has fallen. Take Amazon, for example. The share price is down almost 30% this year. That’s despite continued growth, increasing revenue and major acquisitions.

In our view, this presents an opportunity for investors. The forward expectations for tech and communications sectors are more favorable than for the more traditional companies that are found in the Dow Jones. Even so, those companies in the Dow have held up better.

It means that tech looks potentially undervalued in comparison.

With that in mind, we’ve created the Tech Rally Kit. This takes a long position in tech whilst simultaneously taking a short position in the Dow. It means that investors can profit off the relative change between tech and the Dow. Even if the overall market trends sideways or down, investors can win if tech holds up better.

This type of pair trade is usually only for sophisticated hedge fund clients, but we’ve made it available for everyone.

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