Amazon on Maui

With some helpful intel from friend Charlie Buckingham at Colliers Maui, I’m finally starting to put together the pieces of Amazon’s operations on Maui. Starting with incoming freight delivery, when Amazon’s daily cargo flights arrive in Kahului, packages are offloaded from the plane into a portion of Aloha Air Cargo’s warehouse right off the tarmac. From there, packages are diverted to USPS where they await delivery. Unlike mainland markets, Maui doesn’t deploy a small army of drivers to deliver packages, opting instead to run things through the trusty ‘ole US postal service.

Compared to Honolulu, where a major distribution center is being built on Sand Island, Maui’s daily freight load is small enough to warrant a much leaner operation. The entire transition of packages literally happens within yards of the runway. Although rumored to be looking, Amazon doesn’t currently own a facility on the island, nor apparently see the need for a separate facility outside of the airport for longer term storage and sorting needs.

Part of this insight underscores Amazon’s efficiency in handling smaller package volume on an island like Maui in order to meet the next day delivery expectations demanded by customers. The speedy timeline stems from direct daily flights from Riverside, CA to Maui as opposed to routing packages first through Honolulu (for unpacking and repacking) and then onto other islands via an expensive air freight option operated by a separate company. This is the mode of transport for bulkier items carried through ocean cargo.

While the logic behind this operation makes total sense, I find it surprising excess cargo space in Aloha Air Cargo’s warehouse can meet the demands of a daily 737 flight full of packages. Let’s assume for a second that Amazon isn’t operating loss-making flights just to keep its delivery promises to all customers, regardless of whether they live on a remote island in the middle of the Pacific Ocean. Leasing from a 3rd party must be the compromise they live with to i) gain access to a lack of available warehouse space right off the runway and ii) avoid a costly and time-consuming intermediate step of transporting packages to an off-airport storage facility after unloading the plane and before driver delivery pick-up.

I’m guessing that as US consumers increase e-commerce purchases, the delivery volume to places like Maui, whether it be for residents or visitors, would rise to a level where Amazon decides to build or lease its own dedicated warehouse. An interesting trend to follow, especially as Amazon will inevitably outgrow it’s space within Aloha Air Cargo’s warehouse in the coming years. Alternatively, they may just decide to buy-out all their competitors and take over the entire airport warehouse space on Maui. Not a totally far-fetched idea in light of the roughly $40B+ currently sitting in cash on their balance sheet.