It is no surprise that one of the most impactful global companies is yet again making the headlines. Amazon is continuing to grow and diversify, poised to make an even bigger impact on the global economy in the coming years. The scope of Amazon’s reach has moved exponentially into other businesses in the last several years, and they have no intention of stopping anytime soon. By impacting and moving industries far beyond their scope, Amazon is indirectly creating jobs around the world.
Flying the Amazon Skies
Work hard. Have fun. Make history. Amazon is doing all of that and more. What started as a fledgling online bookstore in 1995 is now billed as an “everything store” where people can shop from the comfort of their couches and find anything they need. The impact of Amazon on the global economy cannot be overstated. Amazon generated $470 billion in revenue in 2021, making it the third largest company in the world by revenue. Only Walmart and China’s State Grid bring in more revenue.
Amazon’s latest venture has them staking a claim with Hawaiian Airlines in their efforts to increase their cargo-hauling operations with a fleet of Airbus SE freighters. Hawaiian Holdings Inc. has recently offered warrants giving permission to Amazon to acquire as much as 15% of the carrier’s outstanding shares. These warrants are valid over the next nine years.
In 2021, Amazon had reported that they wanted to move towards shipping their goods using their own planes with long-range Boeing Co. and Airbus freighters. This will certainly serve to heighten the rivalry they have with the United Parcel Service Inc. and FedEx Corp. And this is a win-win for Hawaiian, who is rebounding slowly with Asia-Pacific travel still crawling along. With varying levels of Covid restrictions, some countries have only recently allowed unrestricted air travel again.
“Amazon business will not only improve Hawaiian’s revenue diversification, but help alleviate the earnings volatility that is characteristic of Hawaiian’s passenger business,” Deutsche Bank analyst Michael Linenberg wrote. Clearly the improvement was seen straight away, as Hawaiian’s shares jumped as much as 15%, to $16.15, and the biggest intraday in nearly two years.
This plan will hopefully get Amazon’s cargo airline up to speed, which has been sluggish since the start of the pandemic. They founded Amazon Air in 2015 to ensure their shipments would reach their company’s warehouses and then their customers. Amazon has been intent on expanding their delivery network, acquiring a fleet of leased and purchased aircraft, mostly at a discount. This is the ongoing pursuit of Amazon to expand the reach of its delivery network and to become less reliant on third parties.
Initial plans have Hawaiian operating 10 Airbus A330-300 freighters starting in 2023, with the possibilities for expansion if Amazon needs it. Hiring pilots and mechanics will be a priority, with a pilot base on the continental US. Currently Hawaiian carries freight on passenger aircraft within Hawaii and between North America, Asia, and Oceania.
“This relationship provides a catalyst to grow our business and the unique opportunity to diversify our revenue sources while capitalizing on our established strengths,” Hawaiian Chief Executive Officer Peter Ingram said.
The planes will be “the newest, largest aircraft for Amazon Air, allowing us to deliver more customer packages with each flight,” Philippe Karam, director at Amazon Global Air Fleet & Sourcing, said in the statement.
A Long Reach
The air transit industry is just the latest place that Amazon has extended its reach. It has insinuated itself into a wide range of industries, and is not stopping anytime soon. From money loans to groceries to insurance, Amazon has its hand in many pots. In fact, its biggest purchase to date is Whole Foods, which it purchased for $17.4B in 2017.
With its doorknob delivery, it made sense that Amazon would move into pharmaceuticals. Amazon acquired PillPack in 2018 for around $750MM, in a deal that would change the way people get their prescriptions. They cite customer experience, ease of delivery, and pre-existing conditions as reasons why this works out so well.
The move had a profound effect on corner drugstore pharmacies. “Amazon’s acquisition of a business with pharmacy licenses in all 50 states caused the tickers of Walgreens, CVS, and Rite-Aid to lose about $11B in value overnight.” With the Covid-19 pandemic came increased need for an easy way to get prescriptions delivered, and Amazon certainly rose to the challenge with its logistics and delivery capabilities.
Another area of the market that Amazon is working on cornering is the entertainment industry. “As of 2021, Amazon has over 200 million Prime subscribers. 147 million are based in the US. Amazon Prime Video counted more than 175 million unique viewers in 2021, and Amazon recently acquired MGM Studios for $8.4B, adding more exclusive movies to the platform.” Twitch was also acquired by Amazon in 2014, a live streaming service mostly dedicated to video games.
Perseverance and Persistence, Amazon Style
Amazon is still going strong, and vows to infiltrate even more industries. From insurance, to luxury goods and services, Amazon is poised to move. The smart home market is continually in its sights, after launching the Amazon Echo smart speaker in 2014. Look for Amazon to continue working this angle, having held a 69% market share of the smart speaker market as of August 2021. They will continue to gain traction in this field.
Another interesting pot that Amazon is dipping into is the flower pot, having launched their Plants Store in 2018, and using changing consumer interests to build up this end of the industry. Younger homeowners, generally first-time home buyers, look at gardening more as a service or product, rather than the heartfelt pastime of previous generations. And during the pandemic, this part of the industry grew as people were stuck indoors, with sales increasing by 8.6% year-over-year in spring 2020. Plants, undoubtedly, are challenging to ship, but Amazon has the wherewithal to make it happen.
The news of the acquisition of Hawaiian airlines is just the next step in Amazon’s overreaching plan. They are certainly doing their best to work hard, have fun, and make history. Along with their bottom line, they are creating many new jobs throughout the world, and making history in a wide variety of new ways.
I like to spend my time giving back with organizations that focus on mentoring aspiring entrepreneurs. I have supported after school programs that focus on entrepreneurial and global initiatives in local primary schools. I recently extended my mentoring to include students at Case Western Reserve University.