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Saturday, October 31, 2020
Government Council Report: Operating agreements for Amazon's Alliance Airport project

Council Report: Operating agreements for Amazon’s Alliance Airport project

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AMAZON CARGO CARRIER OPERATING AGREEMENTS

At the Sept. 24 work session, the Fort Worth City Council received an informal report concerning a pair of related items:

*New cargo carrier operating agreements between the City of Fort Worth and Amazon.com Services Inc.’s Affiliate Airlines at Fort Worth Alliance Airport.

*A separate access permit between the City of Fort Worth and Amazon.com Services Inc. cargo carrier operating agreements.

Amazon.com Services Inc. is opening a regional air hub adjacent to Fort Worth Alliance Airport , and construction is nearing completion, with operations expected to begin by October. The City of Fort Worth will grant Amazon’s affiliate airlines permission to use the airport via a cargo carrier operating agreement, which will set the amounts for landing fees and other special charges assessed at Alliance.

“That’s the start of Amazon’s competitive initiative,” District 7 Councilman and Mayor Pro Tem Dennis Shingleton said. “All the orders will be filled right there at Alliance. There will be a lot of jobs. They’ve more or less outgrown that building they built a few years ago, and they’re having to expand.”

There is currently only one other operating agreement in place at Alliance, which is with Federal Express Corporation (FedEx), and which was executed on March 26, 1996. The FedEx Agreement is coming to an end on March 31, 2021, and negotiations have begun on a new operating agreement with FedEx that would begin immediately after the current one ends.

In order to provide the same landing fee rates for FedEx and Amazon, the operating agreements with Amazon’s affiliate airlines will only have a term for a year and a half and will have the same landing fee rate as the FedEx agreement of $1.49 per 1,000 pounds. Beginning April 2021, unless negotiated sooner, new operating agreements will be executed between the City of Fort Worth and both FedEx and Amazon’s affiliate airlines specifying uniform terms and new landing fee rate structures.

The agreements with Amazon’s affiliates that will be executed now will allow Amazon to begin their operations and flights out of Alliance while the longer-term operating agreements are being negotiated.

Amazon currently has two affiliate airlines that will be operating out of Alliance, Atlas Air and Air Transport Services Group Inc. Amazon Air is part of the company’s push into the logistics and transportation industry as well as to continue to shrink its own delivery times. Amazon recently acquired a minority stake in Canadian freight cargo carrier Cargojet as part of that strategy.

More affiliates of Amazon may be introduced later. The Airlines are entering into operating agreements with the City on the following:

*A term beginning Oct. 1 and expiring March 31, 2021.

*Landing Fees are based on the maximum landing weight of aircraft at a rate of $1.49 per 1,000 pounds.

*Special charges by the City of Fort Worth are assessed for: parking on a public ramp, special licenses and permits, special services requested by the Airline and costs for removing disabled aircraft. The rate for the special charges is based on documented out-of-pocket costs and expenses plus 12%.

The cargo operating agreement is projected to generate approximately $2 million over the initial term. About 300 jobs are expected to be created by the project.

Under the management agreement between the City of Fort Worth and Alliance Air Services (AAS), which manages Alliance, AAS receives 75% of funds collected under the cargo carrier operating agreements, and the City receives 25%. The funds are disbursed monthly to the City of Fort Worth Aviation Department.

“It’s a great thing. The primary focus for us is to make sure they have access to Alliance Airport,” Aviation Director Bill Welstead said. “What we see quite often is these companies enjoy the business atmosphere in Texas, and geographically there is an advantage to being in Texas.”

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