Air Transport Services Group Inc. (NASDAQ: ATSG) led the bulls out of the gate in Wednesday’s regular trading session. The company has announced agreements with Amazon Fulfillment Services, an affiliate of Amazon.com Inc. (NASDAQ: AMZN), to operate an air cargo network to serve Amazon customers in the United States.
At this point, the commercial agreements will include the leasing of 20 Boeing 767 freighter aircraft to Amazon by ATSG’s Cargo Aircraft Management, the operation of the aircraft by ATSG’s airlines, ABX Air and Air Transport International, and gateway and logistics services provided by ATSG’s LGSTX Services. The duration of the 20 leases will be in the range of five to seven years, and the agreement covering operation of the aircraft will be for five years.
ATSG also has agreed to grant Amazon warrants to acquire over a five-year period up to 19.9% of its common shares at $9.73 per share, based on the closing price of ATSG common shares on February 9, 2016.
Joe Hete, president and CEO of ATSG, commented:
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. We are excited to serve Amazon customers by providing additional air cargo capacity and logistics support to ensure great shipping speeds for customers.
Dave Clark, a senior vice president in Amazon’s Worldwide Operations and Customer Service unit, added:
We offer Earth’s largest selection, great prices and ultra-fast delivery promises to a growing group of Prime members and we’re excited to supplement our existing delivery network with a great new provider, ATSG, by adding 20 planes to ensure air cargo capacity to support one and two-day delivery for customers.
Shares of Air Transport were trading up nearly more than 18% at $13.92 in the early afternoon, with a consensus analyst price target of $10.92 and a 52-week trading range of $7.60 to $12.10.
Amazon shares were trading down 0.8% at $555.58, with a consensus price target of $736.27 and a 52-week range of $365.65 to $696.44.
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