Episode Transcript
[00:00:02] Speaker A: Hello, I'm Mike King and this is a standalone version of my exclusive interview with Tom Bradley, director and GM of Amazon Air Cargo, which appeared in the very first episode of the Lodestar Air Cargo podcast. The episode was sponsored by Air Charter Service, the aircraft charter broker of choice for thousands of shippers globally. If a charter is the answer to your shipment, do contact Air Charter Service for a no obligation quote and that's it from me. Do enjoy my chat with Tom.
Okay, welcome back, one and all. I'm delighted to say that coming up is Tom Bradley, who joined Amazon in 2011 and currently serves Director and GM for Amazon Air Cargo. Prior to leading Amazon Air Cargo, Tom led businesses across Amazon's logistics and pickup division. Tom has also worked in the retail industry, focusing on home cell phones and mobile electronics. Tom, welcome to the Lodestar Air Cargo podcast.
[00:00:57] Speaker B: Thanks, Mike. Pleasure to be here.
[00:00:59] Speaker A: I guess why don't we start at the start? Tom, what prompted Amazon to enter the air cargo market in terms of offering capacity to third parties?
[00:01:08] Speaker B: Yeah, well, Amazon generally we kind of evaluate new businesses on three different criteria. You know, one, do we think that customers are going to love it? Two, do we think it can be a differentiated product and have its own value proposition? And three, does it have high growth potential? Can it be big? And so from a customer obsession standpoint, the Amazon air cargo business has been around for a few years actually, and we've had a couple of customers in the background that have been ticking along and they told us that the service was great. And in addition to that, we went out and spoke to quite a few different customers on the value proposition and they gave us positive feedback. So we had a high degree of confidence that customers were going to love the value proposition. And really the value proposition itself is the air network that we created for Amazon customers. It's a very dense, reliable, technology driven network and we have a high degree of confidence that the customers love that. And since kind of launching the business, customers have reaffirmed that they like the value proposition, they like the level of service, and all of that combines for high growth potential. And so we believe that Amazon Air Cargo will be a big business. And that's really why we decided now was the right time.
[00:02:20] Speaker A: So what do you think you're bringing to the market that maybe wasn't there before? And who do you see as that market? What constitutes that market? Who you're aiming your services at?
[00:02:29] Speaker B: Yeah, so from a unique value proposition standpoint, there are a few things that we bring to the market segment. So one is the network itself. The network is a very dense point to point and also hub and spoke network that gives a very, very wide variety of origin and destination pairs and you know, amongst the widest variety of kind of medium widebody origin and destination pairs in the market segment. So the network itself is, is a key part of the value proposition. I'll also add the cutting edge technology that we offer. So our network is run by a wide variety of machine learning models. We have a network control center that runs on proprietary software and everything that you would expect from Amazon from a technology standpoint runs our network. So real time decision making, advanced tracking and visibility. In addition to that, I would call out we have an incredibly flexible network and I'm sure we'll talk about this more. But we have a flexible network both from an air perspective and a ground perspective. So we can route Amazon packages in a number of different ways and that gives us the flexibility to, you know, move inventory from one airline to another airline or from an airline to a ground lane. And that means that we never have to bump third party cargo and all of that kind of combines to create a very reliable air service. And so that's really what we think we're bringing to the market. Like the network itself, high technology flexibility that all drive reliability.
[00:04:01] Speaker A: Just going back to one of your points there about this anticipation of this being a good growth market for you. Was it always the plan to offer third party services? I'll say that. I was talking to a shipping line the other day and they were saying, oh well, you know, if the Suez Canal opens up, yeah, there might be a bit of excess capacity. We've got these various strategies. I was like, well, obviously the simplest strategy wouldn't been to maybe not buy so many ships. Does that apply to Amazon? Did you overexpand your network and now third parties are being brought in to help fill out that excess?
[00:04:33] Speaker B: No, I think, you know, there's always going to be opportunity to utilize assets more if you have additional demand sources. Like it's just kind of a math problem. Right. And so Amazon is one demand source, but we have lots of different demand sources that enable us to, you know, both offer this network and set of capabilities, but also utilize our assets more. So I think it's a real combination of yes, we have a network that can take different demand sources, but Amazon has a long track record of building third party businesses. One of the best examples, or I'll give you a couple of examples, AWS is a great example. We build out technology for our retail business and then we realize that that has commercial potential and we go out and sell that to third parties and even the marketplace. The Amazon Marketplace itself started off as a retail business only where we purchased products ourselves and sold it on our retail website. And then we open that up to third parties. And we're taking similar approaches with our supply chain across a number of different areas and Amazon Air Cargo is one of them.
[00:05:42] Speaker A: Is this open to everyone or are you looking for major partners? So maybe like Kuna and Nagulu, I know you set up a Chinese e commerce service within the final quarter of 2024. Is that the way forward or is it, Is it a different proposition?
[00:05:56] Speaker B: Yeah, the short answer is that we can service any type of customer. We already serve a diverse set of customers. So we have large and small freight forwarders. We also have major postal integrators and we also have direct shippers as well. And so our aim really is to target customers who value speed, reliability, flexibility, regardless of the size. And so if any customer falls into that bucket of wanting speed, reliability, flexibility, they're a good customer to use. Amazon Air Cargo, I'm sure there's quite.
[00:06:26] Speaker A: A few that like those sort of things.
In terms of assets, you have over 100 freighters. But you touched on your network before and I was looking at this. Can you explain how it works? It seems to me that you have a series of intra continental networks. I was wondering, how do they interact with each other, how do they talk to each other? Say, if I'm a European or a US importer and I'm buying stuff in Asia, how does your network help me?
[00:06:53] Speaker B: Yeah, so our regularly scheduled network is primarily intracontinental. You know, as we kind of touched on before, that creates very dense networks with lots of different origin and destination pairs. And then the combination of the hub and spoke and point to point also increases that connectivity within the intra continental networks. We also are particularly strong in some of the more remote areas. So we have very regular service to places like Hawaii, Alaska, Puerto Rico, Cyprus, Malta. And so yeah, while it is intracontinental, the schedule service goes to far flung destinations that actually Greenland, that came up earlier with United. I bet it did, yeah, not Greenland today. But never rule it out. If the population of Greenland keeps expanding, then there might be opportunity. So yeah, those destinations actually can link to international legs as well. And you kind of mentioned Koonanagle earlier in the call. They partnered with us via Apex to set up an international product where they own the first leg into Alaska or Hawaii. And we own the second leg, thus creating kind of an international product. But I will say we also do operate internationally. For the most part, that's been ad hoc charters, but kind of watch this space for additional opportunities coming up. But you know, we've, we've flown to South America, Africa, China, and you know, most recently we were participating in the cherry season in Chile. And what we talked about previously in terms of the flexibility of our network allows us to do that. We can reroute Amazon packages, which frees up the capacity. So when customers need ad hoc charters and when the market conditions make sense, we can easily divert capacity to those, those locations.
[00:08:38] Speaker A: So the, the scheduled network essentially is intra continental, and then the international arm at the moment at least, is chartered. Is that right? Or are you looking at scheduling services on the international routes because they're the big key drivers of the air freight market?
[00:08:53] Speaker B: Yeah, I mean, the international market segment is an important market segment for us. As you rightly point out, it's the majority of the market segment and we see international as a key strategic growth area for us. Uh, so I can't go into specific details, but like I say, watch this space for some exciting stuff coming up.
[00:09:10] Speaker A: Okay, so you definitely didn't tell me that you might be doing international scheduled services in the near future. I, I'll stick to the chartering then.
I was quite surprised. You, you've done it. You did a thousand charters last year, and in 2023, was, was a lot of that. That did that number get so high because it was short all intra Continental or was some of this. How many of those were international? Can you give me a feel for that?
[00:09:33] Speaker B: I don't have the specific numbers in front of us, but a lot of those were intracontinental charters, you know, so from a pure percentage point of view, that would be the majority of them. But you know, really our strategy or our target from a customer's perspective is both scheduled service and charters, like the flexibility that we've talked about, both allows us to maximize customers who like our own D pairs for scheduled service and take capacity out of the network when it makes sense for our customers. And the flexibility of the network allows us to reroute Amazon packages to free up that flexibility. So really we're focused on both that scheduled service and building our trust business.
[00:10:17] Speaker A: Okay, okie dokie. Amazon Global logistics and Amazon B2C. How do those two things work for your air cargo customers? Or is that all separate?
[00:10:26] Speaker B: Yeah, well, I mean, on the Amazon B2C side, like really the heart of our Network is the network that's been built for Amazon B2C. Customers can put their ULDs, their inventory on the same planes that Amazon customers will have their inventory on. And we leverage all of the same technology best practices that we've created for Amazon.com for third party customers. You know, Amazon really is a customer obsessed company and we've built out an air network that prioritizes speed and reliability above all things. And so third party customers can gain access, easy access to that network and benefit from all of that technology that we've been built to serve Amazon.com customers.
[00:11:09] Speaker A: It sounds sort of similar to when I think of an integrator, it sounds sort of similar to that. How do you view yourselves today?
[00:11:16] Speaker B: We view ourselves as primarily an AI service provider. And that's the business that we have been focusing on. Ultimately, the air service that we provide needs to stand on its own. And so the majority of our customers use us solely as an air service provider and then link to whatever transportation, either the side that they need, either through third parties. We can facilitate trucking if customers need it. But yeah, we don't really kind of bucketize ourselves into being an integrator or anything. But our focus right now is building an air service that customers love and that's what we think we've got.
[00:11:50] Speaker A: Yeah, you guys are obviously really renowned for handling E commerce. What if I've got some more complex cargo? Maybe it's heavy, maybe it's perishable, maybe it's dangerous. Can you help me with that?
[00:12:01] Speaker B: So if I scroll back to two years or so, really our network was designed for E commerce. Amazon packages neat little boxes that were reliable and clean. And obviously the air cargo industry isn't neat little boxes that are reliable and clean. So really 2023 and 2024, we've been investing in building out just a really wide set of operational capabilities. And at this point we can handle almost all types of cargo. And so, you know, different ULD types, build and break capabilities, different types of specialized cargo, dangerous goods across like multiple classifications, heavy and bulky cargo, all of the kind of add on auxiliary service that you'd expect with screening active pharma. We can handle all of those kind of things. So we should be able to handle 90% of what customers need.
[00:12:50] Speaker A: Okay, I'll come on to your view of the market in a second, I promise. But one of the big fears expressed by many in the industry to Lodestar, and I know this also came up when you, you spoke at a conference in the US is how can Forwarders be sure that their booking with you won't be gazumped if you need the capacity for Amazon shipments.
[00:13:08] Speaker B: I'll be super clear on this one and we've kind of touched on it a little bit. But we do not bump third party cargo in favor of Amazon shipments.
I think something that sets us apart is that we have that flexibility that we've talked about. We can reroute Amazon shipments to different airlines and different ground networks. And in addition to that, the fairly unique thing is the timeframe that we can do that. We can make those decisions really up until about 24 hours before the flight leaves. So we've essentially got a reroute valve that we can kind of turn on at any point. And that gives us the flexibility that we need to be able to make statements like we will not bump your cargo. And, you know, that was one of the key bits of feedback that led us to enter the market segment is customers telling us that they were actually fed up of being bumped. And, you know, we have developed a solution that means that we can confidently say that, that we will not bump your cargo in favor of Amazon.
[00:14:07] Speaker A: How does that work?
[00:14:08] Speaker B: Yeah, I mean it's. We have again, going back to technology, we have a whole heap of proprietary systems that deliver customer promises on the Amazon website and we can change those promises up to 24 hours in advance and reroute more often than not. The promise doesn't change to a customer. We can still deliver in exactly the same time that we would of by changing routes and lanes. And so it's kind of the best of both worlds. Like we'll put an Amazon package on a different route that gets there at a very similar time and that frees up capacity on a particular lane if cargo customers need it.
[00:14:45] Speaker A: How are you seeing the market in 2025? Have you got specific targets for volumes or other KPIs you're looking to reach this year across your network? How are you looking at it internally?
[00:14:57] Speaker B: Yeah, I think one of the benefits of being in our position is we're a relatively new entrant to the market segment and so we're going to be in a high growth mode. So those kind of the trends that will impact more mature businesses won't necessarily impact us to the same extent. Our focus is on continuing to build out new capabilities, serving customers and really educating customers on our value proposition. That said, we see 2025 as a huge growth year for us. We're going to look to kind of double the business and 10x the number of customers that we serve. And really it kind of links to the value proposition that we've talked about. And so 2025, regardless of what we see in the market segment, is going to be a strong year for Amazon Air Cargo.
[00:15:39] Speaker A: Do you see that growth coming primarily from the US or is that a global target?
[00:15:43] Speaker B: Amazon Air Cargo operates across North America, EU and India. And so the doubling is a worldwide target doubling.
[00:15:53] Speaker A: You mentioned Amazon's rather famed ability to harness technology earlier and commercialize it. What are you bringing to our industry, say, in terms of generative AI from other parts of the AM Amazon business?
[00:16:06] Speaker B: First off, in general, like, I think generative AI is super exciting technology. You know, I do believe it's a generational technology like, like the Internet was. And you know, Amazon grew up initially in the Internet, the dawn of the Internet age. And I'm kind of excited to be at Amazon now through the generative AI age. And Jesse said something, one of his shareholder letters, I think it was on AI not being a trend for us. It's kind of foundational in how we operate our business. And that's true. Generative AI is, you know, there's a new tool launched in Amazon internally, you know, every week from, you know, reporting, analytics, network planning, all of these kind of things. And so it's an exciting time to be in the industry. And then for kind of the air freight, air cargo market segment, it's an interesting one in that it really hasn't been dramatically disrupted by technology historically. Like we're still passing bits of paper between humans to move inventory around.
[00:17:06] Speaker A: We've had an awful lot of people who say they're just about to change all that.
[00:17:09] Speaker B: Yeah, I'm sure. And there's been good reason in the past why the industry hasn't really had that watershed moment from a technology standpoint. And it's because we are very highly regulated industry for a good reason. You know, safety is paramount. Fidelity in that inventory is paramount. And really I don't think technology has been good enough historically to deal with that complexity and that risk. But I truly believe that generative AI will change that. And so like Gen AI is very good at taking those very complex data sets and creating reliable solutions off the back of it. And so we're really excited on a few different areas. I'll give a couple of examples, like safety. Safety for Amazon is the primary focus across our operations. And using gen AI to proactively detect safety anomalies and present the kind of operator with correction mechanisms is going to be huge. And you know, Know, we're also really excited about the potential for disruption management. You know, getting ahead of weather events and dynamic rerouting of inventory, like in real time, where it may have taken a team of people a morning to come up with a recommendation. Gen AI can create that recommendation and actually deliver the updates to whatever systems you need in real time. So, you know, we're really excited about the potential for Gen AI. Part of our aim as Amazon Air Cargo is to be at the forefront of that and, you know, really embrace that technology and utilize it for customer benefit, essentially.
[00:18:40] Speaker A: Is that where you see the differential on service provision and your ability to offer transparency and use this technology from other parts of the business? Is that the key for you?
[00:18:48] Speaker B: Yeah, absolutely. I mean, Even without generative AI, you know, we offer a suite of APIs that customers can integrate with for complete transparency on tracking. I mentioned our network control center that is a 24 hour major operation in the background that has kind of machine learning models and is starting to use generative AI and disruptive management and all of those types of things. So today I think that technology is already driving real customer benefit. And you know, Amazon being at the forefront of Gen AI is only going to improve that. So I do think technology will translate into real customer benefit.
Really focused around that kind of disruption management that drives reliability and then focused around complete transparency of the network, real time inventory locations and removing the need for kind of manual reporting in terms of that disruption.
[00:19:45] Speaker A: We've got a bunch of possible changes or disruptions to trade flows. I'll throw a few out there. Tariffs, de minimis rules, trade wars. We were going to have a port strike at the start of the year. That didn't happen. The airspace could open up at any moment. If we have P say in Ukraine. We discussed that early with Jan. Some of these are positives if you're in the business of trade, but they'll also be disruptive in many ways. So how are you geared up to handle these changes and how will you be communicating this to customers? So this is all transparent to them and they know where their shipments are?
[00:20:17] Speaker B: Yeah, I think. Well, I'll just say, you know, the air freight industry is volatile in its nature.
[00:20:25] Speaker A: You know the one normally how it makes a profit.
[00:20:28] Speaker B: Yeah. The one constant is change. Right. Like I said, the potential wave of changes that's coming in 2025 and beyond is just another example of that. And so what me and my team obsess about is how can we be the most flexible air service provider in the market segment. Like if we if we can be the most flexible, that allows us to adapt very quickly to these changes. And you know, we talked about how we're building a flexible network on some of the other questions, but that basically allows us to move capacity around very easily. You know, if there's a need for international flying or charters, we can move capacity out without impacting Amazon customers. If there isn't that need, we can move it back into a domestic service. And so our aim is to create that flexibility. That means that we can move very quickly regardless of the changes in trends or market segment types. And so, you know, that's what we obsess about, building that flexibility. That means that we can serve customers where they want serving and then to the prior conversation. For sure. Transparency is super important. So real time tracking across, you know, lots of different milestones. We have eight milestones in our API tracking that customers can integrate and see where their inventory is in real time. So yeah, that transparency and flexibility is going to be the key to adapting to whatever goes on politically or within the market segment.
[00:21:49] Speaker A: Tom Bradley, director and GM for Amazon Air Cargo, thanks for joining me on this inaugural episode of the Lodestar Air Cargo podcast.
[00:21:57] Speaker B: Thanks, Mike.
[00:22:00] Speaker A: Thanks to Air Charter Service for sponsoring this podcast, Karen Ball and Tom Mackeys for doing all the heavy lifting on production, and you all for listening. Bye for now.
