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India's air cargo market to grow 15pc in FY2018

INDIA's air cargo segment is forecast to grow by 14-15 per cent in fiscal year 2018, up from 12 per cent growth the previous year, according to rating agency Crisil. The sector is expected to expand by double digits over the next five years in terms of both international and domestic volumes on the back of enhanced connectivity, a conducive regulatory environment and improved infrastructure.

The air cargo segment has been attracting more international cargo operators to India in terms of services, joint ventures and stake holdings given the conducive policy and lenient regulatory environment and rising cargo volumes. Plus, there is no Indian all cargo or freighter operators, reported Mumbia's STAT Trade Times.

The government in its national civil aviation policy has offered major thrust with an aim to boost air cargo business, especially against a backdrop of rising e-commerce activities and exports. The setting up of Air Cargo Logistics Promotion Board (ACLPB) by the Civil Aviation Ministry was a major step to ensure efficiency, reduce cost and improve inter-ministerial coordination to fuel growth.

MNC Aviation CEO Harish Shah was quoted as saying: "Huge growth potential exists for the air cargo industry especially with the growing e-commerce traffic within India and across the globe as a new market is opening up for the Indian exporters especially in Africa and South America.

"Existing markets viz Far East, Middle East, Europe and North America continue to grow. Pharmaceuticals, auto ancillaries and fashion products will continue to play a major role in the growth of the air cargo industry. The registered double-digit growth in air cargo justifies the growing potential," said Mr Shah.

Of the entire air cargo movement, international trade would account for 70 per cent and domestic 30 per cent, according to Crisil's prediction that the sector will grow by 14-15 per cent in FY2018.

Crisil research director Binaifer Jehani commented that the National Civil Aviation Policy 2016 paved the way for single window clearance and she believes it was a step in the right direction.

Ms Jehani said: "Clearly, the single window clearance means it is all on one platform and that the dwell time for both imports and exports have to come down. What we understand now is that the dwell time in practice has come down from 72 hrs to 48 hrs. In other words, it means that air cargo becomes much more competitive in comparison to other modes of transport."

These encouraging measures are the key points that are attracting more players into the country. While most of the international cargo operators are looking at increasing capacity, some major deals also took place. The latest is the enhanced co-operation agreement between the Indian carrier Jet Airways and Air France KLM.

The European carrier and the Amsterdam Airport Schiphol thought this alliance can help them tap into the cargo potential of India.

Amsterdam Airport Schiphol (AMS) director Bart Pouwels expects this joint venture will lead to more direct flights between two nations. At present there are a total of 14 flights from AMS to Delhi, ten flights to Mumbai and seven flights to Bangalore.

Mr Pouwels said: "India is one of the main regions of pharma manufacturers for the EU and US markets."

According to the data available, 80 per cent of the Indian cargo market (both exports and imports) is served by the international carriers, such as Cathay Pacific, Qatar Airways, Saudia, Etihad Airways and Emirates.

Emirates vice president Jassim Saif said: "Perishables such as fruits and vegetables, flowers, fish and meat constitute an important segment of the current air freight exports out of India exceeding on an average, 3,000 tonnes a month."

The majority of the airlines are stepping up capacity. "Cargo frequencies do not depend on bilateral rights. Hence, we are constantly studying the market and will increase frequencies or launch new destinations to meet the market demands," said Cathay Pacific regional cargo manager Anand Yedery.

Domestic carriers agree that there is an increase in demand for freighters in India. But whether the Indian market can afford the freighters still remains as a question mark.

Partner Sam Katgara at Jeena and Company, a leading Indian freight forwarder, spoke at length about the reasons why domestic airlines are pulling away from full freighter operations.

"Because the yield out of India when compared to many countries like Taiwan is much lower. Every operator's focus is on higher yields. Today Bangladesh's yield is much higher than India, certain cases China is higher than India," Mr Katgara explained.

To promote the air cargo segment, in August 2016 AAI Cargo Logistics and Allied Services Company Limited (AAICLAS) was incorporated as a subsidiary of Airports Authority of India (AAI). AAICLAS plans to utilise AAI's old redundant/unutilised domestic passenger terminals by converting them into cargo facilities, including domestic air cargo terminals.

AAICLAS chief executive officer Keku Gazdar said: "AAICLAS is examining various factors related to the establishment of dedicated cargo airports in the country by ensuring the commercial viability for airlines and availability of industrial and consumption clusters, besides well-connected rail/road and airport network for multimodal transport connectivity.

"The company will focus on three verticals including air cargo handling and allied services, warehousing and contract logistics and air cargo road feeder and air freight stations."

Mumbai International Airport Limited (MIAL) senior vice president Manoj Singh gave details of the airport's capacity enhancement plans. "As part of the master plan expanding the pharmaceutical terminal, building a new agro and mega cargo terminal, and relocating and constructing the Air India facility are a few of the major projects that will be executed in the coming years.

"For these upcoming developments, identifying appropriate locations, obtaining necessary approvals and acquiring land have already been completed."