Elizabeth Weise

USA TODAY

SAN FRANCISCO — In a long-awaited and much-rumored move, Amazon is now officially going into the air freight business with the announcement that the Seattle online retailer has signed a five- to seven-year lease for 20 cargo planes.

As Amazon has grown, and especially as it has built out its lucrative Prime business, taking control of its logistics chain has been seen as key to cost cutting and on-time delivery.

"These planes provide critical capacity expansion to support the growth of Prime in the U.S. Planes provide an additional dedicated transportation method connecting Earth’s largest selection to customers from coast to coast. At our scale, supporting growth requires adding some of our own logistics capabilities," said spokeswoman Kelly Cheeseman.

Air Transport Services Group (ATSG) of Wilmington, Ohio, announced Wednesday that it had signed an agreement to operate an air cargo network of 20 Boeing 767 freighter aircraft for Amazon Fulfillment Services in the United States.

“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,” Joe Hete, president and CEO of A

TSG, said in a statement.

ATSG will lease 20 Boeing 767 freighter aircraft to Amazon Fulfillment Services,, an affiliate of Amazon. The lease is for between five and seven years.

The Ohio company will also fly the aircraft and be responsible for gate and logistics services.

ATSG closed up 16.7% Wednesday at $13.73, on the news.

There have been rumors that Amazon planned to launch its own air freight-delivery service for months. The move will aid Amazon (AMZN) in its quest to control more of its logistics chain. It is part of what appears to be a broader plan by the company to build out its own delivery system worldwide.

"Amazon is tired of having its hands tied and relying on other carriers to move its massive amount of volume. As a result of this announcement, now Amazon is bringing more of its logistics in-house from supplier to fulfillment to delivery. Will we next see changes in how Amazon manages its final mile delivery?" said John Haber, CEO of Spend Management Experts, an Atlanta-based supply-chain management consulting firm.

Amazon down slightly Wednesday, off 0.1% to $559.47.

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The agreement also gives Amazon the right to buy up to 19.9% of the Ohio company over the next five years.

Fulfillment and Sortation

Amazon uses a variety of delivery services in the United States, including UPS, FedEx, the U.S. Postal Service and its own direct delivery system. The ATSG planes will now be a part of that network.

"The planes will be used to transport customer packages from our fulfillment centers closer to customers for delivery, including for injection into our sortation center network," Cheeseman said.

Sortation centers take packages and sort them into very specific geographic groupings so they can be handed off to Amazon's last-mile delivery partners in close to ready-to-deliver order. Shipping prices go down for the online retailer the more of the sorting work it does upfront.

In some cases the ATSG planes may also take loads directly to Amazon's delivery partners.

For the most part, Amazon relies on other carriers to do final-mile delivery to customers' homes. However in the case of Prime Now, Amazon already delivers directly to customers in more than 25 metropolitan areas across the United States. That's also the case in some areas for AmazonFresh, an online grocery delivery service.

FedEx senior vice president for integrated marketing and communications Patrick Fitzgerald said the announcement was not a surprise to the shipper.

“We work closely with Amazon and have been aware for some time about their need for supplemental air capacity related to inventory management. Amazon continues to be a valuable FedEx customer.”