While air travel demand is soaring in the aftermath of the pandemic, some airlines are still diversifying their offerings by carrying not just passengers but cargo.
On Friday, shares of Hawaiian Airlines parent company Hawaiian Holdings (HA) jumped after the airline announced that it reached a deal with Amazon (AMZN) to operate 10 leased freighter jets to transport orders. The e-commerce giant will receive warrants to buy up to 15% of the airline holding company's shares as part of the deal
The Airbus A330-30 planes, which will start coming into service in 2023 and 2024, will be used for what the companies call a variety of Amazon "business needs"--this could be anything from Amazon Prime One-Day delivery to moving items between suppliers and warehouses.
A 'Catalyst' Amazon-Airline Relationship
Due to Hawaii's isolation from the rest of the country, Hawaiian Airlines has a long history of doubling as a freight airline. It was, in 1942, the first commercial airline certified to transport cargo. The emergency authorization was granted due to a pressing need to transport supplies to the South Pacific amid World War II.
In the age of e-commerce, there is a lot of business to be had in branching out into shipping.
Over the last few years, Amazon has been working to prevent supply chain disruptions afflicting the rest of the industry by buying up used Boeing (BA) aircraft from Delta (DAL),, chartering private ships and even building it's own cargo containers.
"We are excited to help serve Amazon customers by providing additional air cargo capacity and logistics support," Hawaiian Airlines CEO Peter Ingram said in a statement. "[...] This relationship provides a catalyst to grow our business and the unique opportunity to diversify our revenue sources while capitalizing on our established strengths."
To transport the freight, Hawaiian Airlines will establish a pilot base on the U.S. mainland and hopes to significantly expand its crew of pilots, mechanics, dispatchers and supply chain workers.
Pilots Are in Short Supply
The entire airline industry is currently in a major staffing shortage. One study estimates that North American airlines will be short 12,000 pilots by the end of 2023 while even the U.S. Air Force currently has 1,500 fewer pilots than it wants.
While pilots are in particularly short supply due to the high cost of training and mandatory retirement age, a dearth of airport workers of all kinds has led to serious backlogs over the summer.
In July, Delta flew an Airbus A330-200 from London to Detroit with no passengers but over 1,000 pieces of luggage that were stranded due to not having enough baggage handlers at various airports across Europe.
To transport packages and inventory necessary to fulfill orders, Amazon launched the cargo airline now known as Amazon Air in 2015. For the first few years, Amazon would lease planes from other operators. It invested in its first Boeing 767-300 planes in January 2021.
While demand for freight operators is down from its pandemic highs, shipping is something that's expected to see strong demand for years to come.
After news of the partnership with Hawaiian Airlines, shares of both companies trended upward--Hawaiian Holdings stock soared by a whopping 14% while Amazon shares were up a more moderate 2% by mid-day Friday.
