Airing the Cargo!

 

 

With the talks of green shoots of recovery deepening in India, it's not only the established players who are aiming for higher trajectories, the fledglings too are upbeat in spreading their wings. One such example is the domestic air freight and cargo industry. The industry, which is still at a nascent stage and largely unorganised (despite the fact that the Air Cargo Agents Association of India has a total of 420 members), has now got a new lease of life, all thanks to the renewed surge in the economic activities.

Apart from the major established players like Blue Dart and DHL Express India there are a host of aviators, who are queuing up to grab their share of the pie in the domestic air freight market. Captain Gopinath, the pioneer of low-cost carriers in India, has just started his second innings in the Indian skies through his cargo venture Deccan 360. And giving him company are all the major domestic aviation giants – the state owned Air India, Naresh Goyal’s Jet Airways, Vijay Mallya’s Kingfisher Airlines, Wadia group promoted GoAir, et al. Even the foreign cargo giants like FedEx, Malaysia Airlines (MAS) and Australia-based HeavyLift Cargo Airlines are all set to join the bandwagon. Explains Ashish Kapur – Cargo Manager, Cathay Pacific, “Accelerated by the strong Indian economy over the past few years, India has emerged as one of the strong contender in the global arena for air cargo.” The aspiration for the sector is so high that many newbies like QuickJet Cargo Airlines, Flyington Freighters, Avicore Aviation and Aryan Cargo Express have secured cargo flying licences way back in 2007, much before they finalised their plans for operations. And result; while most of them are yet to start operations, licences of a few have either lapsed or are on the verge of it. But still the race is on and new players are pouring in creating the question – what is so attractive about the industry, why are these players rushing into the segment? According to a recent Ernst & Young report, in India only one per cent of the cargo is moved through air as compared to the global average of two per cent, thus there definitely exists a huge potential. “Being an emerging business, the air freight and cargo business offers a huge potential in India. More so for the fact that in considering India's vast geography there exists a large number of inter-state business activities and lack of proper road-railway connection,” explains Hatim Broachwala, Aviation Analyst, Khandwala Securities. Moreover, as economy gains momentum, the scope and sphere of business will continue to grow bigger.

The latest data released by the government on cargo ferried through air was also very encouraging for the players. As per the data, the freighters carried 57,551 tons of cargo in August 2009, 20 per cent higher as compared to the corresponding period in 2008. “Our business will definitely get a boost once the market revives. With more purchasing power and high trading there would be the need to quickly transport the goods to the far off markets, thus fuelling our prospects,” claims Asad Cassim, CEO, Trans Globe Freight Forwarders. According to analysts, India’s air freight and cargo is expected to grow at a CAGR of 11.6% in the coming fiscal (8% currently), this further justifies the bullishness in the sector. The easy hand of the government in the form of liberalisation and de-regulation of air cargo sector has also opened up new avenues. Working on the same line the Civil Aviation Ministry under Praful Patel has recently decided to increase the foreign direct investment (FDI) cap from 49% to 74% in the air cargo sector to further encourage these players.

However, to have a fruitful journey, the first and foremost challenge that these companies will have to face is handling the price sensitive Indian consumers. With fuel prices surging it will be difficult for these players to keep the charges at lower levels. Apart from it lack of proper infrastructural support in terms warehousing, storage and processing facilities at the airports will also create hurdles for these aviators. N Sivasubramaniam, CEO, Air Connection Private Ltd. complains, “Lack of proper infrastructural facilities hinders our growth in the sector.” Suggesting a solution to the same Sivasubramaniam adds, “The government should work on increasing the number of airports and improving the existing ones through various public private partnerships to help the development of the air cargo sector.” Gautam Nath, CEO, DPD Continental Pvt. Ltd, however, poses a different view. As per him, "The challenges are many and these are interlinked. Much has been said about the lack of infrastructure but getting the infrastructure in place will not solve the problem."

There are opportunities galore and a huge potential is awaiting to be explored in the domestic air freight and cargo sector, but the obstacles are needed to be cleared before these aviators can have a safe flight. Thus the fledglings should wait till their wings are strong and the feathers are completely grown to fuel the flight. Else they might have a fatal fall.