Cargo loaded with opportunities
The Indian air cargo sector, despite, growth through e-commerce and government support, is still not being utilised to the fullest. There are challenges galore but the opportunities also need to be capitalised.
Air cargo sector has come a long way. From carrying small shipments to large-size and extra heavy cargoes, the sector has attracted many international cargo operators. Despite the fact that it is the fastest mode of transportation, the sector accounts for less than one per cent of total freight carried in terms of both volume and weight. Undoubtedly, air cargo is a specialised sector and its development requires deep focus. CARGOTALK explores the journey of air cargo in the last decade; game changers, opportunities and challenges.
Sharing his thoughts, Keku Bomi Gazder, CEO, AAI Cargo Logistics & Allied Services, says, “Indian air cargo segment grew in leaps and bounds in the past several decades. The air cargo operations started by folding the seats in the passenger cabins in the 1950s on airlines. Now the segment has grown to be one of the key and promising markets globally. The overall trade in the cargo segment has picked up in a big way.”
“Though the volumes kept rising, none of the Indian all-cargo operator could sustain because of the low yields. The national carrier’s subsidiary Air India cargo operated till 2012; Deccan 360 from the old Deccan Aviation though started on a high note in 2009 seized its function in 2011.
There was Aryan Cargo Express which operated for less than a year in 2010. It is a similar story with Sovika Group’s domestic freighter operations; started operations in February 2016 with a leased 737-400F from Quik-Jet. It offered overnight connections to Delhi, Chennai, Bengaluru and Hyderabad. However, the operations were wounded up within a short span of time. That is the history of all-cargo operators in India. However, all airlines still continue to carry cargo in their bellies,” explains Gazder.
Explaining with the charts, Cyrus Katgara, Partner, Jeena & Co. says, “To put the growth in Indian airfreight industry in a global perspective we need to look at reference countries with similar scale of size, population and economy. It can be seen from the charts (shown above), that while India is one fourth of China in GDP in PPP terms, its size of the airfreight is almost one tenth. Comparing to US the performance is still worse. While US airfreight Industry looks to be stagnant or declining, China is showing the fastest growth; an average of 12 per cent and India only has a modest growth of average of nine per cent. It can also be seen from the second figure that airfreight has been highly volatile and sensitive to the economic trends, so entails a lot of expensive excess capacity.”
Vipin Vohra, Chairman, Continental Carriers Group, tells, “The last decade (2008-17) has been very challenging, eventful and rewarding for air cargo industry, world over. While the beginning of the 21st century promised growth and opportunities, in 2008 the world encountered the worst recession and slow-down of international trade; resulting in sinking of economy, even for the strong economies of the
world. International trade remained dull for three years and started showing signs of recovery towards the end of the year 2010. Post-recession, last seven years witnessed recovery from the impact of slow down and many firms those wound up their operation re-started their business.” T.A. Varghese, President, ACAAI, notifies, “There has been a noticeable growth in exports from our country during the last decade, which has resulted in increased volumes of airfreight. Many airlines have increased their cargo capacity ex India through freighter operations or by using larger aircraft such as Airbus380 for their operations to and from India. However, the infrastructure for efficient cargo handling even at the major airports has not kept pace with the growth in the cargo volumes. As a result, there are problems of congestion, bottlenecks and delays in the despatch of the goods in a timely manner.”
“International air passenger growth has led to increased cargo carrying capacity of passenger aircrafts resulting in reduction of use of freighters. While the aggregate imbalance that existed traditionally between exports and imports tonnages has been corrected and we have more or less balanced movement of cargo both sides. There are many sectors where huge imbalance has been created such as Hong Kong, China account for huge imports but there are negligible exports,” adds Katgara. “The industry has experienced dynamism, evolution, technology, certification, standardisation, multimodalism, increase in bonded trucking and challenging traditional transport geography have all been the hallmarks of the air cargo industry over the past few years,” says Samir J Shah, Partner, JBS Group of Companies.
According to Sushant Nigam, International Aviation Consultant, “Air cargo in India has undergone enormous changes in terms of business volumes, modernisation of infrastructure, introduction of electronic and simplified processes and the credit goes to a highly collaborative approach of all stakeholders during the last decade.” He adds, “Privatising the major airports and establishing two competing cargo terminal operators, thereby breaking the monopolistic situation, has brought in modernisation/upgradation/automation of the cargo terminals, duly supported by the offerings of world class services at competitive yet capped rates of various services. Indian airports have continually been striving innovatively to ensure the biggest share of the pie.” GAME CHANGERS OF THE SECTOR:
Gazder listed few major developments took place in 2017: The establishment of an air cargo route between Kabul and India was a significant step as the two countries circumvented Pakistan. Lenient policies and regulatory measures, increase in export volumes have persuaded the foreign cargo operators to turn their attention more on India. With the expansion of the JV Air France KLM and Jet Airways, more direct flights are expected between two nations. India is one of the main regions of Pharma manufacturers for the EU and US markets. The network of KLM and Jet Airways is a perfect answer to the needs of the pharma industry to deliver a fast and reliable service with temperaturecontrolled solutions. Recently, the Agricultural and Processed Food Exports Development Authority (APEDA) facilitated the trial shipment of green chillies by air from Varanasi Airport. It is now agreed that an exporter will now source chillies, green peas from Varanasi for Dubai. Spice Jet has agreed to facilitate the shipment.
“The National Civil Aviation Policy released by government of India in 2016 includes several initiatives for air cargo which are likely to be bring about major enhancements in this sector in the coming years,” advises Varghese.
According to Shah, “The setting up of a department of logistics by the government of India and the continual dialogues between the service providers and civil aviation will go a long way in bringing about a great change in this segment. The recognition of and setting up of Air Freight Station (AFS) and simpler protocols for bonded trucking coupled with the governments shift from regulating to facilitating are changing the way air cargo is being handled in India.”
“The beginning of the current decade has witnessed the emergence of ‘e-commerce’ which turned out to the game changer for air cargo, both in domestic and international sectors. Secondly, government’s
Keku Bomi Gazder CEO AAI Cargo Logistics & Allied Services If we take a long-term view, the cargo movement may grow between nine to 10 per cent over the next five years
Cyrus Katgara DDP Gallery of Legends 2017 & Partner, Jeena & Co. To put the growth in Indian airfreight industry in a global perspective we need to look at reference countries
Vipin Vohra DDP Gallery of Legends 2015 & Chairman, Continental Carriers Group The last decade (2008-17) has been very challenging, eventful and rewarding for air cargo industry, world over
T. A. Varghese President ACAAI There has been a noticeable growth in exports from our country during the last decade, resulted in increased volumes of airfreight
Samir J Shah DDP Game Changer 2017 & Partner, JBS Group of Companies Setting up of a department of logistics & the continual dialogues between the service providers and civil aviation will go a long way
Sushant Nigam International Aviation Consultant Air cargo in India has undergone enormous changes in terms of business volumes, modernisation of infrastructure, to name a few
‘Regional Connectivity Scheme’ is offering flight operations to and fro remote and underdeveloped areas and interiors of the country. This will certainly promote not only passenger movement but also cargo traffic from place to place. Further, government plans to create common user cargo terminals at 17 selected airports for promoting cargo movement to and fro hinterland. And, the impending digital transformation and growth will see technology taking over supply chain linking and integration with all value chain partners,” enumerated Vohra.
.“Government is proactively coming forward to talk to the stakeholders and understand their needs for betterment of the business. Government is also partnering with industry stakeholders to produce skilled manpower to give a new dimension of professional services in this highly serviceoriented, economy boosting and employment generating industry. Interconnecting all regulatory bodies with Customs for effecting Single Window clearance electronically and vetting of hard copies of various documents through digital signatures are not only saving of papers but also saving heavily on manpower, legwork, time and cost. These measures are maturing day-by-day and likely to stabilise in the near future to change the game for economy-boosting EXIM trade,” opined Nigam. ROAD AHEAD
“It is estimated that India’s freight movement would grow three-fold in next 10 years,” tells Vohra.
Varghese believes, “The Indian economy is likely to show healthy growth during the next few years. Initiatives such as ‘Make In India’ are likely to boost manufacturing activities in our country for domestic consumption as well as for exports.”
“If we take a long-term view, the cargo movement may grow between nine to 10 per cent over the next five years. So clearly, we expect a healthy growth,” mentions Gazder. On the other hand, Shah shares, “The Trade Facilitation Agreement and the need to have simpler transhipment norms will all ensure that the dynamism of this segment remains uncontrolled.”