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
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.
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.
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.
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.