Is Amazon Running A Secret Shipping Business With Major Disruptive Potential?

• Amazon.com Inc AMZN may be running a secretive shipping operation out of Ohio named Aerosmith.
• Amazon has been pushing to take more control over its shipping operations since the company blamed 2013 holiday shipping delays on third-party shippers.
• Baird sees major disruptive potential for Amazon in the global transportation and logistics business.

People can use any number of adjectives to describe global online retail giant Amazon, but timid is not one of them. After creating major disruptions in the retail and data management space, Amazon may soon be creating major disruption in another area: transportation and logistics.

Taking matters into its own hands
According to a new report by Motherboard, Amazon is likely behind a secretive air cargo operation that has been running out of Ohio. After taking a lot of heat following late deliveries during the 2013 holiday season, Amazon has been investing in ways to manage shipping under its own roof, such as adding courier partners and utilizing its own delivery trucks. These investments are intended to help reduce Amazon’s reliance on third-party shippers like United Parcel Service, Inc. UPS, which Amazon has blamed for the 2013 debacle.

Dream on
In September, an air cargo operation by the name of Aerosmith and run by Ohio holding company Air Transport Services Group (ATSG) began shipping consumer goods for a mystery client that many suspect is likely Amazon.

When asked what the company is shipping, ATSG spokesperson Paul Cunningham said, “It is general consumer goods. I can’t be specific, we just receive the freight, load it on and move it.”

Although nondisclosure agreements prevent ATSG from revealing the identity of its client or details about Aerosmith, UPS, FedEx Corporation FDX and DHL have all confirmed they are not involved with the project.

Disruptive potential
Back in October, Baird analyst Colin Sebastian addressed Amazon’s potential for disruption in the shipping and logistics space. “Just as Amazon leverages infrastructure behind the core retail business to grow AWS and Marketplace, there is evidence the company may extend its increasingly complex and technology-centric logistics and delivery platform as a third-party offering,” he wrote in a report.

Baird has an Outperform rating on Amazon and sees “powerhouse potential” for the company in the large transportation and logistics market.

Disclosure: the author holds no position in the stocks mentioned.