Two days before Christmas, Amazon announced it would add 10 planes to its air fleet.
And a closer look at Amazon's leasing agreements with Air Transport Services Group and Atlas Air Worldwide Holdings, two aircraft leasing companies, suggests many more planes are in Amazon Air's future.
According to a Morgan Stanley investor note from Monday, Amazon's most recent agreement with Air Transport Services Group includes an option to lease 17 additional planes by 2025. Amazon's 2016 deal with Atlas Air includes a similar option to add 27 planes by 2025.
If Amazon were to take lease of all available additional planes, that would nearly double its fleet to 92 planes from 50.
Morgan Stanley analysts wrote in Monday's note that Amazon's plan "puts them on an eventual path to 100 planes."
Amazon does have the space for all of that. It plans to expand its hub at Cincinnati/Northern Kentucky International Airport to 3 million square feet. The space could accommodate more than 100 Amazon Air cargo planes.
Meanwhile, last month Amazon announced it would expand its 72,000-square-foot cargo facility at Chicago Rockford International Airport to 200,000 square feet. It also announced last month that it would build a new regional hub at Fort Worth Alliance Airport and a new sorting facility in Ohio's Wilmington Air Park.
An expanded Amazon Air fleet is bad news for UPS and FedEx
Morgan Stanley analysts estimated that if Amazon were to continue ramping up their air fleet, UPS and FedEx revenues could fall by a combined 10%.
Morgan Stanley analysts wrote last month that Amazon saved $2 to $4 a package when using its private fleet. That's as much as $2 billion (6% of its shipping expenditure) in savings.
Though people often pit Amazon's private air fleet against the US Postal Service, UPS, FedEx, and the like, analysts say Amazon Air isn't likely to compete as a third-party air cargo provider anytime soon.
Still, those shipping firms do depend on Amazon as a customer. Amazon makes up about 3% to 5% of FedEx's revenue, while Amazon's revenue percentage at UPS is in roughly the low teens, according to Trip Miller, the founder and managing partner of Gullane Capital. (Gullane Capital has shares in Amazon and FedEx.)
"It's obvious Amazon is going to continue to grow their air fleet," Kevin Sterling, the managing director of Seaport Global Securities, told Business Insider.
