Amazon Airbus A330 rendering
Hawaiian Airlines parent Hawaiian Holdings, Inc. and Amazon struck a deal that will see the airline operate at least 10 Airbus A330-300 freighters for the e-commerce giant, giving Hawaiian a new and diversified revenue stream and providing Amazon with needed capacity between U.S. fulfillment centers and customers.
The agreement will see Hawaiian fly and maintain 10 A330-300 converted freighters, leveraging its experience as an A330 operator. The first aircraft is slated to enter service in about a year, with the balance coming online by 2025. The eight-year deal can be extended, and also could see Amazon place more aircraft with Hawaiian. Amazon is leasing the freighters from Altavair. Conversions to freighter configurations will be done by Elbe Flugzeugwerke.
As part of the deal, Hawaiian Holdings issued Amazon warrants to acquire up to 15% of its common shares, exercisable over the next nine years.
“Over the next several months there is significant work for us to do to prepare for these cargo operations, but we are confident that we can achieve Amazon’s desired timeline for entry into service,” Hawaiian Holdings President and CEO Peter Ingram told analysts on a conference call Oct. 21. “Amazon has needs, and we have core capabilities flying the A330. This agreement provides Hawaii a meaningful revenue stream distinct from our core business and has the potential to materially improve and diversify our business with a different risk profile, while leveraging our existing strengths.”
Hawaiian plans to set up a pilot base in the continental U.S., grow existing maintenance bases, and expand the hiring of pilots, mechanics, dispatchers, supply chain employees and others to support the expanded operation, the company said.
“We’ll be hiring hundreds of new pilots and maintenance employees as a direct result of this agreement,” Ingram said. “And particularly in the current very competitive labor market for pilots, the addition of incremental widebody captain and first officer positions at Hawaiian further enhances our employment appeal by enhancing the career earnings potential of our pilots.”
Hawaiian will focus on continental U.S. flying, primarily outbound from fulfillment centers.
“Basically the boxes that are going to end up on people’s doorsteps,” Ingram said. “Most of it will be on the [continental] U.S. We do expect that some of it will be to Hawaii as well.”
Hawaiian declined to speculate on how much flying each A330 freighter would do, but Ingram is confident that utilization metrics will be high.
“Amazon will bear the fixed cost of ownership of the aircraft, and this is the largest and newest aircraft in their fleet,” he said. “So they have incentives to manage the utilization up to a healthy level.”
Cowen and Company analyst Helane Becker sees numerous positives for both parties.
“We believe this is a good deal for Hawaiian, as it adds to revenue in a diversified business,” she wrote in an investor note. “We continue to estimate that Amazon needs at least 200 aircraft to fly its network. Up to now, Prime Air has utilized the [Boeing] 767-200F and the 767-300F as its widebody fleet. The issue for it is there aren’t enough 767 passenger aircraft available to convert into freighters, and there aren’t enough conversion slots in the near term to complete the process.”
Faced with a limited number of 767s, Amazon needed an additional medium-sized widebody aircraft type, and the A330 fits the mission. But none of the company’s existing airline partners operate A330s, making Hawaiian an ideal candidate for collaboration.
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