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Businesses Transportation The Almighty Buck Technology

Amazon To Build $1.5 Billion Air Cargo Hub In Kentucky, Creating Around 2,000 New Jobs (techcrunch.com) 128

Posted by BeauHD from the job-creation dept.
Amazon is planning to build a $1.5 billion air cargo hub in a spot that crossed the Cincinnati and Kentucky border, according to the Wall Street Journal. When the project is completed, it will eventually result in around 2,000 total new jobs. TechCrunch reports: The new hub is designed to help provide a home for its increasingly large fleet of at least 40 cargo planes, a group of vehicles it perviously revealed it was leasing under the name of Amazon Prime Air, complete with Amazon exterior paint jobs. The planes are designed to help Amazon handle its increasing transportation needs, which are growing as its share of global retail business increases, and straining the capacities and capabilities of its shipping partners, which include FedEx and UPS. Amazon has long maintained that it's not looking to compete with other logistics providers, but it recently became an ocean cargo shipping company, with the ability to act as a "freight forwarder," services that FedEx and UPS also offer. Amazon still hopes to eventually offer services both to itself and to outside companies and retailers, which would put it in direct competition with its current partners, according to the WSJ's sources.
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Amazon To Build $1.5 Billion Air Cargo Hub In Kentucky, Creating Around 2,000 New Jobs More

Amazon To Build $1.5 Billion Air Cargo Hub In Kentucky, Creating Around 2,000 New Jobs

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  • Straining? (Score:5, Insightful)

    by QuietLagoon ( 813062 ) on Thursday February 02, 2017 @09:07AM (#53787363)

    ...straining the capacities and capabilities of its shipping partners, which include FedEx and UPS...

    I'm fairly sure that both FedEx and UPS would be more than happy to build out their respective fleet if they knew that Amazon would not leave them hanging, as Amazon apparently is doing.

    • >> both FedEx and UPS would be more than happy to build out their respective fleet

      Not sure about that. Remember that retailers like Amazon do a disproportionate amount of business around Christmas. If you build a fleet to completely support that capacity, you're likely wasting money on overcapacity (extra planes, too many pilots, etc.) the rest of the year. That's why retailers (and farms, etc.) hire "seasonal" employees that are only needed when things are busiest.

      • Re: (Score:1)

        by Anonymous Coward
        We already expand our fleet during the Christmas months. Planes come out from the desert, extra linehaul routes get scheduled from the ramps and every transit-sized van from Penske/Ryder/Uhaul gets reserved until the first week of January. We would be more than happy to dedicate a Amazon fleet, but we do not want to spend the money and then get stiffed when UPS/USPS undercut us by a couple of pennies a package and the volume goes over there. Amazon will quickly find out that serving the cities are easy,
        • >> We already expand our fleet during the Christmas months. Planes come out from the desert...every transit-sized van from Penske/Ryder/Uhaul gets reserved

          I think we agree then: FedEx/UPS don't actually OWN the capacity needed to fulfill Amazon at peak. For Amazon then, the opportunity is to cut out the middleman (FedEx/UPS) and contract the extra peak capacity itself, provided it can find cost savings managing it itself rather than contracting through FedEx/UPS.

          But in any case, I think it's settled

    • Margin leakage (Score:5, Interesting)

      by sjbe ( 173966 ) on Thursday February 02, 2017 @10:31AM (#53787837)

      I'm fairly sure that both FedEx and UPS would be more than happy to build out their respective fleet if they knew that Amazon would not leave them hanging, as Amazon apparently is doing.

      I'm sure they would. Problem is that they necessarily have to make a profit and Amazon would rather keep that money for themselves if they can. This margin leakage is why companies sometimes find it valuable to vertically integrate. Unless the supplier can provide the service at a substantially lower cost then there is no reason to outsource the work. Most companies don't find if worthwhile to build their own delivery networks but for companies like Amazon or Walmart it can make very real fiscal sense. You need a certain minimum scale for it to be economically worthwhile but the savings can be substantial.

      Honestly I'd expect Amazon to continue to vertically integrate their delivery and logistics systems as they continue to grow. It will make it harder and harder for anyone to compete with them because they can move product cheaper than anyone else. Walmart has used basically the same tactic for decades now. They invested in their logistics while their competitors ignored it until Walmart had an almost insurmountable price advantage over most of them.

      • Also both Amazon and Walmart destroy average wages for their low-level employees and leave their healthcare and general welfare as externalized costs. I am very torn about this as a frequent Amazon shopper. I was able to stay out of Walmart but Amazon sucked me in early, before it became clear how evil they were/are.

  • Borders. (Score:5, Informative)

    by msauve ( 701917 ) on Thursday February 02, 2017 @09:14AM (#53787389)
    "will occupy a spot that crosses the Cincinnati and Kentucky border"

    Odd, one's city and the other's a state. And the border between them is a river - hard to build an airport across a river.

    Turns out that's wrong - they're building a facility at the Cincinnati/Northern Kentucky Airport. Since the article is just paraphrased from an original by the WSJ (paywalled), I suspect the original said something like "near Cincinnati, across the border in Kentucky", and the person paraphrasing is an idiot (Darrell Etherington).

    • large fleet of at least 40 cargo planes, a group of vehicles it perviously revealed it was leasing under the name of Amazon Prime Air

      Since the planes allow fluid to pass through them, I see no difficulty in having an airport straddling a river.

    • >> building a facility at the Cincinnati/Northern Kentucky Airport

      ^^^ This. Article summary, as usual, sucks.

      Good move on Amazon's part, I think. The airport's been a long-time Delta secondary hub, but Delta's been pulling out (e.g., http://www.wcpo.com/money/local-business-news/delta-airlines-confirms-a-14-percent-service-cut-at-cvg-airport-in-northern-kentucky), so there's plenty of local capacity ready to jump on this.

      • Yes, Delta has been decreasing service through CVG ever since their merger with Northwest Airlines which got them a shitload of gates in Detroit and Minneapolis. They also have given up their lease on the disused terminal at CVG that was only being used for storing snow removal equipment and training TSA search dogs, which will be torn down this year.

        That being said, they just yesterday announced that they will be increasing flights out of CVG.

    • Re: (Score:2)

      by habig ( 12787 )

      "will occupy a spot that crosses the Cincinnati and Kentucky border" Odd, one's city and the other's a state. And the border between them is a river - hard to build an airport across a river.

      I was wondering about that. Not being able to read the paywalled part, my conclusion was: Riverboats are returning! Delivery by paddle wheel, more nostalgic than drones. Seriously though, seems a good move since CVG used to be a Delta hub, but isn't anymore: there's way more airport there than is being used.

      • Re:Borders. (Score:5, Funny)

        by khallow ( 566160 ) on Thursday February 02, 2017 @11:23AM (#53788143)
        They're probably using an aircraft carrier and launching cargo planes from the side of the river that has the best tax advantages for that particular flight. I imagine the state of Kentucky has certain tax advantages and the state of Cincinnati has others. The bonus is that they can conduct combat sorties against their many competitors, a necessity in these trying times.

        • The bonus is that they can conduct combat sorties against their many competitors

          This explains so much: Amazon's preference for military vets, the drone program, etc.

      • A lot of that unused airport has been taken up by DHL - CVG is one of their three global hubs. They employ 2500 people there, and just spent $100M to expand the facilities.

    • You are right that they are different location types, they however both legitimately have borders. Although, it may be not standard to compare the two, it is still a valid usage.

    • Cincinnati / Northern Kentucky Airport is becoming much more of a cargo hub than an airport for passenger travel. Ever since Delta screwed the airport over by getting lots of construction concessions while using it as a hub, and then basically leaving town except for mostly small regional traffic to other hubs, there is a massive airport with four runways sitting there mostly empty. DHL took up a lot of the empty space in the pattern by building shitloads of warehouses nearby. Looks like Amazon is lookin

  • They would have to be increasing their shipping output to create 2,000 new jobs. Instead, they are relocating most of those jobs (from other companies, in fact) which means a lot of people are going to get laid off from shipping companies currently doing their work and only a percentage of them will end up re-hired by Amazon. It will save Amazon money by making them more efficient and cutting out the profit going to the middleman, but it's not going to create jobs.

    • Re:They are not creating 2,000 jobs, duh. (Score:5, Interesting)

      by msauve ( 701917 ) on Thursday February 02, 2017 @09:36AM (#53787513)
      "They would have to be increasing their shipping output to create 2,000 new jobs. Instead..."

      Considering Amazon has double-digit revenue growth, and it's reported that they "shipped more than 1 billion items around the world for the holiday season, more than five times its sales last holiday season [usatoday.com]", it's obvious that they are increasing their shipping output, by a lot.

      • Re: They are not creating 2,000 jobs, duh. (Score:1)

        by Anonymous Coward

        Unfortunately, their increases may not be net gains, as numerous other retailers are foundering and more than a few directly attributed Amazon and other online institutions.

        So to put it more specifically, they have to increase their shipping over and beyond what they claim from others, and that is not evident.

    • Re:They are not creating 2,000 jobs, duh. (Score:5, Informative)

      by bluefoxlucid ( 723572 ) on Thursday February 02, 2017 @09:44AM (#53787561) Homepage Journal

      It's better than that.

      Jobs are a function of what can be bought and technical progress. That is to say: for a person to purchase good or service, a variety of economic activities must occur (business management, transportation, infrastructure, manufacture, retail). These activities are the product of human labor; the technology employed by that labor determines how much is produced per labor unit and, by reciprocal, how much labor is consumed per unit.

      Labor incurs wage. Wages and profits in aggregate are the complete price of a good or service--the minimum viable price is the wage-labor cost.

      Being that wages are paid from revenue, revenue is obtained from spending, and spending is made out of wages, money is only a mediator for the (uneven) exchange of human labor. Because of this, the amount of money spendable in a given time frame is finite: between two points in time (say, the entire year 2015), only a fixed amount of money can and will be spent. (Unspent money goes to savings to be spent later; inflation erodes its purchasing power, while trade and technical progress further erode the labor-hours it represents but increase its purchasing power.)

      Since the spendable money in a time frame is finite and wages are paid from revenue, the number of jobs available in any given time frame under given conditions (trade, technical progress, population) is finite. QED.

      You don't "create jobs"; you employ people. When you employ people, you may be consuming the growth in a market (trade, technical progress, and population growth allowing more purchasing, more jobs, etc.), or you may be out-competing a competitor as said competitor's ability to employ people falls (those jobs eventually go away, yours replace them; this may happen backwards because businesses have savings, too).

      It's even possible to do it backwards. If you implement protectionist policies and increase the cost of goods, fewer goods are bought, and less infrastructure is needed. The number of purchaseable goods of the sort reduces as factory worker wages increase, reducing the number of factory worker jobs created by "bringing jobs back" as well as the number of jobs in supporting infrastructure. Paying low enough wages can increase total jobs, although even paying minimum wage increases the cost of goods produced and the number of working hours every person at every income level must expend to afford the previously-imported good, making every person at every income level poorer. Paying higher wages increases that wage-hour cost even further.

      The punch line here is that the labor market adjusts in a few short years, and the number of jobs sought moves toward about 5% (U3) unemployment, so you can't even affect total unemployment long-term.

      We need to focus on creating wealth and stabilizing the economy, not "creating jobs". You create wealth by trade and technical progress; you stabilize the economy by making sure those things don't happen all-at-once so as to reduce the volatility in employment, as well as by having good welfare policies.

      • Labor incurs wage. Wages and profits in aggregate are the complete price of a good or service--the minimum viable price is the wage-labor cost.

        What about natural resources. While labor is required to extract and refine them, governments create a market for them by allowing land to be owned. It's even true of things like spectrum. These effect the cost of goods since the value of the land can lower with significant resource extraction. At a minimum there is the cost based on alternative uses of the m

        • What about natural resources. While labor is required to extract and refine them

          That's about where you can stop. You do know you can create gold using a coat hanger and a glass tube, right? The problem is it takes a hell of a lot of energy--it's actually less labor-intensive to mine gold.

          governments create a market for them by allowing land to be owned.

          Governments are also the product of labor; although that's not the issue here. You're talking about markets, while I'm talking about the actual capacity to produce things at a given price.

          Consider cost and price as an exchange of labor, instead of an exchange of money. If you make chairs by the

          • That's about where you can stop. You do know you can create gold using a coat hanger and a glass tube, right? The problem is it takes a hell of a lot of energy--it's actually less labor-intensive to mine gold.

            No I didn't know that was possible... What you probably want to say is that those resources, such as land, are really just savings from previous labor. Clearly not all labor is equal.

            Governments are also the product of labor; although that's not the issue here. You're talking about markets, while

            • No I didn't know that was possible... What you probably want to say is that those resources, such as land, are really just savings from previous labor. Clearly not all labor is equal.

              Those resources are really just one way of producing a thing, and happen to be the cheapest way. Making certain things out of metal was the cheapest way to do it until we figured out how to make plastic--although it was impossibly-expensive to make cheap metal work before inventing modern hot-blast furnaces.

              Governments are necessary to form stable markets. I you want to produce and sell things, you are probably going to want stable governments.

              That's true; my point is you can't magically wave away economic foundations such as the time required to make a thing and the wage of the laborer working for that time by talking about other factors

              • Higher salaries for some subset of people can be beneficial. For example, increasing the minimum wage can boost consumption and stimulate the economy. In many ways it's just a transfer of wealth from the richer to the poorer. Fortunately, the poorer are better consumers and they stimulate the economy creating need for more stuff and maybe more jobs.

                This is actually not true.

                Give some research that backs up your claims. https://www.bloomberg.com/news... [bloomberg.com] http://www.epi.org/publication... [epi.org] https://www.wash [washingtonpost.com]

                • So it will happen, but we just shouldn't worry about it.

                  It's not guaranteed to happen; it's unlikely to happen in the foreseeable future. That is: it's as likely to happen tomorrow as it was yesterday; it's as likely to happen in 500 years as it is today. The transition requires entirely-new technology of a form largely different from what we have today, and technology is not something that happens by brute force; it's a constant gamble with results mediated largely by luck.

                  Give some research that backs up your claims.

                  It's generally complex, but shows a trend of minimum wage increase causing job loss [frbsf.org].

                  • Success, you pulled me back in.

                    It's not guaranteed to happen; it's unlikely to happen in the foreseeable future. That is: it's as likely to happen tomorrow as it was yesterday; it's as likely to happen in 500 years as it is today

                    There is an argument to be made here, but you need to make it. Instead you try to say something clever that on inspection is either wrong or very wrong.

                    The transition requires entirely-new technology of a form largely different from what we have today, and technology is not some

                    • There is an argument to be made here, but you need to make it. Instead you try to say something clever that on inspection is either wrong or very wrong.

                      The argument is that we're not sitting right on the edge of deployable technology that requires less human labor to accomplish all the things humans do today and will want to do with the new technology. We're refining existing technology (which is itself producing new technology--better $OLD_THING is $NEW_THING) and making it cheaper to use it, reducing jobs required to produce the outputs of that technology; and that means people can more-easily afford luxuries like fast food (instead of cooking your own

                    • You've got some good ideas and a compelling presentation. I think you need think through some issues a bit more, but that's what makes this stuff fun. I've been guilty of some hypocrisy on the whole teaching thing, but live and learn. Anyway, this has caused me to think through a bunch of issues, which was my purpose, so thanks for that.

    • Re: (Score:1)

      by Anonymous Coward

      Robots. Soon, even those 2,000 won't be needed. As more and more jobs are cannibalized, more and more people will be out of work, and have to shop at places like Amazon and Walmart to get the cheapest possible products. Until, one day soon, it all collapses. The 0.1% will have everything and the 99.9% will have nothing. Will the police state be enough to protect them from the 99%'s righteous vengeance? Some might escape, but they will be hunted down in the after-time. Nowhere will be safe for them. New Zeal

  • I thought the Ohio River separated the two states.

    Not that this would stop them, but it seems mighty inconvenient.

  • Considering the size of the investment. Not a surprise, there will not be any significant job-creation in the US industry ever again. That is unless a total collapse happens.

  • Amazon is planning to build a $1.5 billion air cargo hub in a spot that crossed the Cincinnati and Kentucky border

    I'd have thought it was quite difficult to build on land that moves around like that.

  • I looked at Cincinnati/Northern Kentucky International Airport on Google and saw that there is already a large facility for DHL there. Is Amazon buying it out, or are they going to build an additional large facility there?
    https://www.google.com/maps/pl... [google.com]

    • CVG expansion plans say Amazon is going to be building in the field west of DHL's facility, as well as the infield between runways 36C and 36L.

      • Thanks. I was wondering about the infield area as a possibility. With all the airbase closings, like Rantoul/Chanute in Illinois, I wonder why they didn't use one of those instead. I guess the logistics of what is already available, and proximity to freeways?

  • What's so special about this facility that would make it cost $1.5 Billion?
  • Woo Hoo! 2000 shitty paying jobs in slave-like working conditions. Woot!
  • Do you know what spot crosses the Cincinnati and Kentucky border? The Ohio River. Are they building a floating warehouse? The author should have done some more homework before writing that they will build on land that does not exist. The source of the confusion may be that the airport that services the Cincinnati region is in Kentucky. Local politicians fighting kept it from being built in Ohio. It is like the New York football stadium which is actually in New Jersey. Another thing that makes that airport

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