MORGAN STANLEY: Amazon might have up to 100 planes by 2025 - and that would slash profits at UPS and FedEx

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Amazon Air.

• Amazon may double its air fleet size to 100 planes by 2025.
• Amazon Air isn't likely to compete with USPS, UPS, or FedEx as a third-party air cargo provider, but it shows that it might be moving away from using the services.
• Morgan Stanley said the additional planes could be a revenue opportunity cost for both FedEx and UPS of around 10%.

Two days before Christmas, Amazon announced it would add 10 additional planes to its air fleet.

And a closer look at Amazon's leasing agreements with Air Transport Services Group and Atlas Air Worldwide Holdings, two aircraft leasing companies, suggests many more planes are in Amazon Air's future.

According to a Morgan Stanley investor note from January 7, Amazon's most recent agreement with Air Transport Services Group includes an option to lease 17 additional planes by 2025. Amazon's 2016 deal with Atlas Air includes a similar option to add 27 planes by 2025.

If Amazon were to take lease of all available additional planes, that would nearly double its fleet from 50 planes to 92.

Read more: Amazon posing a threat to FedEx is a 'fantastical' idea, CEO said - but the reality is much more complicated

Morgan Stanley analysts wrote in the January 7 note that Amazon's plan "puts them on an eventual path to 100 planes."

Amazon does have the space for all of that. It plans to expand its hub at Cincinnati/Northern Kentucky International Airport to three million square feet. The space could accommodate more than 100 Amazon Air cargo planes.

Meanwhile, last month Amazon announced it will expand its 72,000-square-foot cargo facility at Chicago Rockford International Airport to 200,000 square feet. It also announced last month it would build a new regional hub at Fort Worth Alliance Airport, and a new sorting facility in Ohio's Wilmington Air Park.

An expanded Amazon Air fleet is bad news for UPS and FedEx

Morgan Stanley analysts estimated that, if Amazon ramps up to 100 planes by 2025, for which Amazon has the space, that would be a revenue opportunity cost for both FedEx and UPS of around 10%.

Morgan Stanley analysts wrote earlier this month that Amazon saves $2 to $4 per package when using its private fleet. That's as much as $2 billion (6% of its shipping expenditure) in savings.

People often pit Amazon's private air fleet against UPS, USPS, FedEx, and the like. But analysts say Amazon Air isn't likely to compete as a third-party air cargo provider anytime soon.

But those shipping firms do depend on Amazon as a customer. Amazon comprises around 3-5% of FedEx's revenue, while Amazon's revenue percentage at UPS is around the low teens, according to Trip Miller, founder and managing partner of Gullane Capital. (Gullane Capital has shares in Amazon and FedEx.)