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Amazon.com takes to the air

WILMINGTON, OH: March 09, 2016. Air Transport Services Group (ATSG), the world's largest operator of B767 freighter conversions, is to lease 20 units to Amazon Fulfillment Services, an affiliate of Amazon.com, to operate a U.S. domestic air cargo network.

ATSG has also agreed to give Amazon the option to acquire up to 19.9 percent of the company's common stock over a five-year period for US$9.73 per share.

ABX from AnchorageThe five to seven-year agreement covers 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.

"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.

Dave Clark, Amazon senior vice president of worldwide operations and customer service added: "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."

ATSG reported a five percent increase in revenue to US$619.3 million and an eight percent rise in net profit to US$39.2 million for 2015. The company noted that because of increasing tax depreciation on its aircraft growth investments, it doesn't expect to pay significant U.S. federal income taxes until 2019 at the earliest.

In addition to a trial operation with Amazon that began last September with five aircraft and logistical support; 2015 saw ATSG expand its B767 lease agreement with DHL from 13 to 17 freighters; deploy three B767s with Raya Airways in Asia and West Atlantic in Europe; purchase four more B767-300s; and form a joint venture for a Tianjin-based regional air cargo network due to launch in the second half of 2016.

Hete commented: "2015 was an outstanding year for ATSG, as our principal midsize freighter leasing and operating businesses made great strides toward expanding and extending customer relationships into new markets, all while generating record cash flow on US$30 million in revenue growth."

In a related move, Amazon is to open two fulfillment centers near Manchester and Birmingham airports in the UK employing a total of 1,500 people. The additions will take the company's UK fulfillment network to 12 and its workforce to 14,500 by the end of 2016. Amazon said it has invested more than £4.6 billion in the UK economy since 2010.

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