India’s Cargo Carriers Grapple With Market Limitations

The Changing Face of Cargo

Aviation Week & Space Technology Mar 22 , 2010 , p. 52
Neelam Mathews
New Delhi

India’s cargo carriers face hurdles, but new players see opportunities
Printed headline: Inhibited by Infrastructure

The downturn in passenger and cargo traffic due to the global recession has had a dramatic impact on commercial aviation in India, whose airlines have lost more than $2 billion, shelved expansion plans and saw domestic passenger traffic fall by 10% in 2008-09. In addition, several of the 10 licenses held by cargo and regional passenger carriers have lapsed in the last two years.

Much like other airlines around the world, Indian carriers’ business is limping back toward recovery. There is, however, comparatively little air cargo traffic in India. The country suffers the additional pains of infrastructure challenges and an imbalance in imports versus exports. These difficulties are expected to ease in the next 3-4 years as the Indian economy grows and markets liberalize.

And, while a relaxation on the cap for foreign direct investment in aviation augurs well for the cargo market, international players have yet to take advantage of that, as inadequate infrastructure poses a major challenge to air cargo movement. Strong demand for faster delivery of goods is hampered by the lack of integrated air cargo facilities, including those for handling and storage, as well as insufficiencies in freighter aircraft, road and rail connectivity with cargo hubs, feeder networks, security and trained personnel.

But India’s recovery is in line with the recent forecast from the International Air Transport Association, which reports that passenger yields are expected to improve by 2% in 2010 over last year. At the same time, cargo yields are projected to rise 3.1%, according to Giovanni Bisignani, IATA’s director general and CEO. A report by Frost & Sullivan finds 1.77 million tons of domestic and international air cargo moved through India in 2007-08 and that figure is forecast to increase 8.3% annually to 2013.

Currently, the international cargo market for India exceeds 1.11 million tons per year. Fifty percent of cargo from India heads to the U.S. and Europe, 25% to Asia and 20% to the Middle East.

Few Indian cargo carriers, though, have been able to make a lasting impression on the market, and some have folded.

Current players include Blue Dart, which holds a 42% share of the domestic express cargo market, operating one Boeing 737-200 and one 757-200. Deccan 360, started by the founder of low-fare carrier Air Deccan, was sold to Kingfisher Airlines, which is now offering an express logistics service. Deccan 360 owns three Airbus A310s and five wet-leased ATR 42s that operate from a hub-and-spoke system based at Nagpur. Air India Cargo owns four A310-300s, two of which are leased out, and six 737-200s.

A new carrier, Aryan Cargo Express, will launch operations in April when it receives a third leased A310 from Air India. Mukut Pathak, chairman and managing director of Aryan, says his carrier will pay Air India $33 million per year for each leased aircraft.

Aryan has plans to add two MD-11s in July and two 737-400Fs for express and cargo markets in India and South Asia. “We’ll fly only at night to avoid congestion problems at India’s airports,” Pathak says.

Aryan plans to tap express cargo, and also pick up freight from South Korea, Thailand, Shanghai and Hong Kong as well as Delhi, Mumbai and Coimbatore in India. It plans to connect to ­underserved Nairobi, Kenya, as well.

Cargo traffic within Asia did not take as much of a hit as other areas of the world, says Pathak. He sees the U.S. market bouncing back and the European economy recovering soon, too.

Hyderabad Rajiv Gandhi International Airport is planning to build a cargo complex that will make it an important freight hub, since it is well-situated for connecting flights to Southeast Asia. The prospective facility will have a capacity of 100,000 tons, spread over 14,330 sq. meters (154,191 sq. ft.), and is expected to have a new cold storage unit.