Ded­i­cated freighters: Why doesn’t In­dia have them?

The prof­itabil­ity of belly cargo is ar­guably very high in In­dia. A few In­dian car­ri­ers also made an at­tempt to start their own freighters but due to the hos­tile mar­ket con­di­tions dropped the idea. CARGOTALK con­nects to in­dus­try ex­perts to know the mar­ket

Cargo Talk - - Front Page - KAL­PANA LOHUMI

Bharat J Thakkar Past Pres­i­dent and Per­ma­nent Mem­ber - Board of Ad­viser ACAAI and Joint Man­ag­ing Di­rec­tor, Zeus Air Ser­vices

More than half of air cargo in the world is flown in the bel­lies of pas­sen­ger air­craft and this per­cent­age will con­tinue to grow over the decades. There will be less in­cen­tive for com­bi­na­tion car­ri­ers to ar­ti­fi­cially ad­just their tar­iffs to sup­port their freighter fleets due to high fuel prices. The air cargo pric­ing has be­come more prej­u­diced by pas­sen­ger car­ri­ers be­cause of the flex­i­ble op­er­at­ing costs on a tonne/kilo­me­tre ba­sis. In­dia needs up­per deck ca­pac­ity, since ODC (Odd Di­men­sional Cargo) can­not be loaded on lower deck pal­lets of Pax air­crafts and In­dia is the des­ti­na­tion for car­ri­ers to op­er­ate freighters due to in­bound loads as well.

In case of an In­dian cargo car­rier, there are sev­eral ma­jor is­sues: Though FDI is per­mit­ted, they can only fly within In­dia and not over­seas, for ex­am­ple Blue Dart is not al­lowed to fly over­seas in­spite of up­lift­ing over 20 per cent of do­mes­tic loads and hav­ing a fleet of five B 757 freighters and have been in busi­ness much be­fore the pri­vate PAX air­lines started. We have bi­lat­eral, reg­u­la­tory and air­port charges is­sues amongst oth­ers, let us leave car­rier net­work to them. If a new cargo car­rier wants to start, the big­gest hur­dle is from reg­u­la­tors, as they do not have enough per­son­nel to travel over­seas for in­spec­tion of air­craft. In­spite of this, such air­crafts are flown within the coun­try by do­mes­tic air­lines for pas­sen­gers. This is an old re­quire­ment which needs to be ad­dressed.

Sam N Kat­gara

Part­ner, Jeena & Com­pany

In­dia be­ing one of the fastest grow­ing economies and with the to­tal air cargo of 1.5 mil­lion met­ric tonnes is con­tin­u­ously grow­ing at a brisk rate. In­dian air cargo share is two per cent of the world’s air cargo. De­spite be­ing one of the largest air cargo mar­kets in the South Asian re­gion, there are few air­lines based out of the coun­try that have ded­i­cated air freight ser­vices. In fact, ex­cept for Blue Dart no other In­dian op­er­a­tor has a ded­i­cated air freight ser­vice. This has al­lowed for­eign air­lines such as Emi­rates, Lufthansa, Cathay Pa­cific, Qatar Air­ways and Eti­had Air­lines to cor­ner a bulk of the mar­ket. To­gether they carry over 80 per cent of all in­ter­na­tional cargo to and from In­dia.

The ma­jor busi­ness rea­sons cited by In­dian op­er­a­tors time-on-time are non-con­ducive mar­ket con­di­tions, com­mer­cial and op­er­a­tional in­ef­fi­cien­cies, strin­gent rules of our avi­a­tion min­istry, acute short­age of trained man­power, re­stric­tions on in­ter­na­tional night oper­a­tions, lack of ded­i­cated fa­cil­ity and park­ing bays, un­avail­abil­ity of base load and not to forget high jet fuel prices.

Mid­dle East and Europe re­gions are the most im­por­tant re­gions when it comes to In­dian air cargo trade. Air­lines from the re­gions have been on the top in the In­dian mar­ket with their ex­pan­sions, tie-ups and ini­tia­tives, which is, of course, giv­ing tough com­pe­ti­tion to other car­ri­ers from Asia and Amer­ica.

Su­nil Kohli

Man­ag­ing Di­rec­tor, Ra­hat Cargo

Though there have been stray ini­tia­tives by a few air­lines in the past to orig­i­nate freighter oper­a­tions from In­dia yet their en­deav­our could not suc­ceed in the long run and the oper­a­tions got dis­banded. To op­er­ate a freighter, first and fore­most re­quire­ment is of hav­ing an air­craft at dis­posal which can ex­clu­sively be utilised as a freighter. In other words, an air­craft has ei­ther to be leased from com­pa­nies abroad or an avail­able pas­sen­ger air­craft has to be re-con­fig­ured as a freighter. Need­less to men­tion, both th­ese ac­tions re­quire ad­e­quate funds, the crunch of which is se­verely be­ing felt by all the air­lines at present. Se­condly, a freighter has to be op­er­ated by and large from point to point, that is be­tween ori­gin and des­ti­na­tion. How­ever, re­port­edly, the air­lines are not suc­cess­ful in con­sol­i­dat­ing a point to point cargo in large quan­tum to in­tro­duce a freighter op­er­a­tion. Fur­ther­more, if the cargo is uplifted for as­sorted des­ti­na­tions in a freighter, the sur­face trans­porta­tion is fur­ther ne­ces­si­tated to such places. There again such ar­range­ments have to be tied up abroad, thereby fur­ther re­quir­ing mo­bil­i­sa­tion of funds apart from hav­ing a tie-up with the lo­cals war­rant­ing again a fi­nan­cial outgo.

It is ev­i­dent that the mea­gre fi­nan­cial yields vis-a-vis the rev­enue ex­pected or earned out of a freighter op­er­a­tion by an In­dian-based air­line with its own air­craft seem to be the pri­mary rea­sons for the air­lines not to op­er­ate freighters cou­pled with the fluc­tu­at­ing cargo mar­ket prospects.

G Balaraju

Man­ag­ing Di­rec­tor, Sindhu Cargo

Only es­tab­lished air­lines hav­ing a large net­work can af­ford to op­er­ate a freighter. In ad­di­tion to that, freighter oper­a­tions re­quire a hub with air or truck­ing fa­cil­i­ties for smooth con­nec­tions. Since it is a cargo air­craft, min­i­mum of 80 per cent of to and fro load fac­tor is nec­es­sary.

Freight rates into In­dia are costlier than out­bound rates and it is a must to have at least 80 per cent of im­port load. This may be a dis­cour­ag­ing fac­tor for do­mes­tic play­ers to start and op­er­ate a freighter. In or­der to com­pete with over­seas car­ri­ers, In­dian car­ri­ers should have a well es­tab­lished net­work out of the coun­try in­clud­ing hub with air and truck­ing fa­cil­i­ties.

Ravinder Katyal Di­rec­tor UTi

Freighter de­mand is al­ways sub­ject to the de­mand and sup­ply equa­tion, plus avail­abil­ity of main deck cargo for in­bound/out­bound routes. Cur­rently, due to low de­mand and enough belly ca­pac­i­ties, as such not much freighter ca­pac­ity is re­quired, es­pe­cially for the gen­eral cargo but for the main deck/odd size cargo, we need freighter oper­a­tions.

Freighter oper­a­tions are al­ways vi­able for good mix ‘n’ match of in­bound and out­bound loads to gen­er­ate suf­fi­cient yields making oper­a­tions suc­cess­ful. In­dia is a well bal­anced mar­ket for the same.

Kawaljit Bagga

Man­ag­ing Di­rec­tor, AeroSail Ser­vices

Run­ning freighters at a profit is definitely more dif­fi­cult than a pas­sen­ger air­craft. That’s why the sched­uled freighters of for­eign air­lines put ad­di­tional ca­pac­ity or with­draw ca­pac­ity ac­cord­ing to the mar­ket con­di­tion and fuel prices. In­dian ex­porters and im­porters also ask for ad hoc freighters if the need arises and that suits their re­quire­ments.

Ear­lier fuel prices were a big con­straint on freighter oper­a­tions and presently yields are a con­straint. For freighters to be suc­cess­ful, cargo is needed both ways at a de­cent yield to make it com­mer­cially vi­able. Avail­able belly ca­pac­ity at com­pet­i­tive prices makes the task of start­ing sched­uled freighters dif­fi­cult. Fedex and Blue Dart run freighters suc­cess­fully be­cause they have fo­cused on ex­press cargo and pro­vid­ing door to door ser­vices.

Air In­dia had con­verted four of their air­bus into freighters and op­er­ated on the Chennai-Mum­bai-Frank­furt route. The freighters were able to man­age full load both ways and the yield and fuel prices made it com­mer­cially un­vi­able.

Even Dec­can 360 had started a full freighter ser­vice, but it did not prove to be com­mer­cially vi­able. So when In­dian com­pa­nies find a freighter ser­vice prof­itable at the plan­ning stage, they will start freighter ser­vice as no In­dian com­pany is obliged to run freighter ser­vices at a loss.

Col Ra­jen­dra Shukla (Retd.)

Sec­re­tary Gen­eral, DACAAI

In­dia, seem­ingly, has all the in­gre­di­ents to be one of the world’s great air cargo cen­tres. Speedy growth of in­ter­na­tional trade, a huge man­u­fac­tur­ing en­gine and a pop­u­la­tion of more than 1.25 bil­lion all bode well for the in­dus­try. But for many rea­sons, In­dia has not re­alised its po­ten­tial to be­come a global hub.

In­ad­e­quate in­fra­struc­ture in the coun­try fol­lowed by cost in­ef­fi­cien­cies and the need for govern­men­tal and tax re­forms are the ma­jor ob­sta­cles which im­pede us in com­ing up with our own freighters. But I am op­ti­mistic that the needed changes will even­tu­ally hap­pen.

He­mant Anand Vice Pres­i­dent – Cargo, Sovika Avi­a­tion Ser­vices

Freighters are the need of the hour. There is ca­pac­ity con­straint in the mar­ket and to­day a freighter would fit into this busi­ness mod­ule be­cause the re­quire­ment is there. The cus­tomer wants the cargo to be uplifted in one stan­dard/shot. There is lot of heavy cargo in­clud­ing dan­ger­ous goods which can­not go on the com­mer­cial flights.

We are also com­ing up with do­mes­tic freighters in In­dia; the air­craft are al­ready in ground, parked at DEL. We are ini­tially look­ing to start within the do­mes­tic mar­ket as we in­crease the fleet size in the com­ing few months. We would even look at the in­ter­na­tional mar­kets. With the ‘Make in In­dia’ cam­paign and e-commerce boom, a lot of man­u­fac­tur­ing is go­ing to take place and many new pro­ject­sare ex­pected to start, that’s why we are in­vest­ing into the freighter busi­ness.

Anand Yed­ery Re­gional Cargo Man­ager- South Asia, Mid­dle East & Africa, Cathay Pa­cific

There are sev­eral key poli­cies and fac­tors on the in­fras­truc­tural front that are in­stru­men­tal for any In­dian car­rier to start suc­cess­ful freighter oper­a­tions in In­dia. A strong cargo hub with state-of-the-art cargo ter­mi­nal, a com­plete cargo vil­lage fa­cil­ity, a strong do­mes­tic and in­ter­na­tional net­work, an en­vi­ron­ment with lower op­er­at­ing costs for air­lines and cus­tom free zones to name a few.

Reg­u­la­tory poli­cies need to be more busi­ness friendly and aligned to grow this in­dus­try in In­dia. We need more ini­tia­tives by the gov­ern­ment to cre­ate In­dia as a man­u­fac­tur­ing hub, thus trig­ger­ing con­sis­tent in­crease in im­ports and ex­ports.

Ajay Khosla DGM Sales – Delhi and Ut­taran­chal Jaipur Golden Trans­port Group

In 2012, the gov­ern­ment stopped the op­er­a­tion of Air In­dia Freighter due to ma­jor fi­nan­cial con­cerns. In the present sce­nario, Emi­rates SkyCargo has con­quered the skies and other air­lines from the Mid­dleEast have left no stone un­turned to mark their pres­ence and are con­tin­u­ously in­creas­ing their shares. All ma­jor car­ri­ers from the Mid­dle East such as Saudi Cargo, Qatar Air­line or Eti­had are tak­ing ad­van­tage of the op­por­tu­nity to ex­pand their busi­ness in In­dia. Al­to­gether, they carry more than 80 per cent of in­ter­na­tional cargo to and from In­dia.

Un­doubt­edly, In­dian skies of­fer huge op­por­tu­ni­ties for the air cargo busi­ness and the com­pe­ti­tion is neg­li­gi­ble. Also, the re­mark­able growth in the In­dian ex­port sec­tor makes this sec­tor more flat­ter­ing. And iron­i­cally, few In­dian air­lines have ded­i­cated air freight ser­vices. For 2014, In­dian car­ri­ers car­ried only around 18 per cent of to­tal freight move­ment in or from In­dia which shows that there is a huge gap in terms of In­dian car­ri­ers’ pres­ence.

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