Amazon Spends $131 Million to buy Stake in Cargo Airline ATSG

Amazon.com Inc. has scooped up a minority stake in a cargo airline that operates a portion of its fast-growing air-cargo division, the newest signal of the retailer’s long-term ambitions to develop its air-freight operations.

Amazon exercised warrants in ATSG that will allow it to acquire about 13.5 million shares in the cargo airline at an exercise price of $9.73 per share, or more than $131.9 million, ATSG said in an SEC filing Monday. As part of a separate agreement, Amazon also purchased approximately 865,000 shares of ATSG, in a settlement that didn't see any cash exchanging hands, the filing states.

Amazon (AMZN) has owned warrants in ATSG since 2016. It was granted warrants as part of an agreement to lease 20 Boeing 767s from ATSG, one of its earliest deals with a cargo company to build out its burgeoning air fleet. Amazon also owns warrants to buy a minority stake in rival carrier Atlas Air Worldwide Holdings.

Amazon's air fleet, launched in 2016, is a part of its push to provide one- and two-day delivery. The company still relies on ATSG and Atlas Air to fly a large portion of its packages, but it has started to bring some air cargo operations in-house, lending further evidence to the belief that Amazon Air could one day rival FedEx and UPS.

In a first for the company, Amazon in January purchased 11 used Boeing 767-300 jets from Delta and WestJet. The company is scheduled to lift the veil later this year on its $1.5 billion air hub, which has a capacity for 100 Amazon-branded planes and is expected to handle about 200 flights per day.

The purchases are contingent upon approval by the U.S. Department of Transportation, ATSG stated.

Following that approval, Amazon will personal about 19.5% of ATSG, stated Quint Turner, the chief monetary officer of the Wilmington, Ohio, company, a stake that offers Amazon the rights to nominate one member of ATSG’s board of administrators.

Shares in ATSG climbed more than 4.9% in early afternoon trading Monday. Amazon shares were largely unmoved.