The future of Amazon’s $117 billion logistic service revenue is now in jeopardy as pilots from Air Transport International (ATI), a vital air freight provider for Amazon, have voted to authorize a potential strike. The concerns voiced by the pilots primarily revolve around issues of low pay and a significant increase in turnover. If this strike were to materialize in the coming year, it could lead to disruptions in Amazon’s extensive delivery network, as reported by Wired.
Over the years, Amazon has successfully built a robust third-party logistics (3PL) operation that not only supports its e-commerce network but also extends services to businesses beyond Amazon.com. The company provides 3PL services through Fulfillment by Amazon and Amazon Multi-Channel Fulfillment, handling e-commerce fulfillment for orders placed on Amazon.com and order fulfillment for sales channels outside the platform, respectively.
According to Amazon’s 2022 annual report, the company revealed a substantial $117.7 billion in net sales from its third-party seller services, constituting nearly 23% of the total revenue. This highlights the critical role that the logistics service plays in Amazon’s overall business model.
During the past three and a half years of negotiations between the pilots’ union and ATI, industry wages have seen an increase, leaving ATI’s pilots dissatisfied with what they perceive as falling behind in compensation. ATI, owned by Air Transport Services Group (ATSG), operates half of the 80 US aircraft currently in service for Amazon.
The potential strike, backed by 98% of ATI’s 640 pilots, is subject to federal law procedures. The US government’s National Mediation Board will intervene in airline labor disputes, initiating a 30-day cooling-off period if an impasse is declared. This period could potentially lead to a walkout or lockout, further disrupting Amazon’s logistics operations.
Amazon Air, which relies on various cargo airlines for its air service, operates over 330 daily flights in the US alone, facilitating the transportation of packages from fulfillment centers to airports. ATI’s significant dependence on Amazon is evident, with 94% of its flying hours dedicated to Amazon deliveries.
The pilots’ union contends that ATI has witnessed a record attrition rate, with over a third of pilots leaving this year. This has led to rising concerns over diminished service quality and pay disparities among pilots, fueling discontent within ATI.
It’s worth noting that the last and only time Amazon faced a strike by one of its air carriers was in 2016, during the early days of its air cargo operation. In that instance, 250 pilots for ABX Air walked off the job. However, a judge deemed the strike illegal and ordered the pilots back to work the following day, highlighting the legal complexities surrounding such labor actions in the aviation industry.
As the situation unfolds, the potential strike by ATI pilots poses a significant challenge to Amazon’s logistics operations, potentially impacting the company’s ability to meet delivery commitments and maintain the efficiency of its vast distribution network. The outcome will not only affect Amazon but also serve as a reminder of the broader challenges and intricacies involved in managing the logistics of e-commerce giants with extensive global operations. Only time will tell how this labor dispute unfolds and its ultimate impact on the future of Amazon’s logistics services.
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