Mar 2, 2010 4:00 AM AWST

Lack of facilities in India keeps air cargo stalled

Lack of infrastructure continues to be a roadblock for the Indian air cargo market, slated by industry estimates to touch Rs 13,300 crore by 2011-12, a growth of 20 per cent.

Earlier this month, Air India had announced its decision to hive off its cargo business into a separate entity by April.

Kingfisher Airlines launched Kingfisher Xpress – a door-to-door cargo delivery service.

There were also reports of Jet Airways being in talks with a foreign logistics company to float a dedicated cargo service.

Yet, the sector struggles for proper cargo warehousing facilities and multi-modal links for local distribution.

Passenger airlines in the country, till recently, did not look at the cargo business seriously. The cargo division contributes only 5-10 per cent of their revenues. According to Ms Anita Khurana, Director, Air India's air cargo division, the country has only about 20 freighters.

Most cargoes are transported through the belly of aircraft.

However, companies are now focusing more on this space, according to industry experts, as they are realising it has a good margin business.

“Though the passenger traffic has started picking up and the yields are improving, the reality still remains that Indian airline companies are sitting on huge losses.

“They need additional means to boost their revenues and that is the reason they are now looking at ground handling, cargo and maintenance,” said Mr Sushi Shyamal, Partner, Transaction Advisory Services, Ernst and Young (E&Y).

Integrated approach

On the recent cargo-related announcements by airline companies, he said these are very “peripheral changes”. What India needs is “an integrated logistics approach that covers the first mile and last mile connectivity.”

In terms of capacity, experts say there is enough in the country.

There is sufficient aircraft belly capacity which if utilised efficiently can make good business opportunity for the airlines, said Mr Chethan Kambhi, Frost and Sullivan's Senior Research Analyst, Aerospace and Defence.

gestation period

“The Indian air cargo industry is still in a gestation period. Entrants like Deccan 360 or players like Kingfisher are still trying to understand the real dynamics of the business,” said Mr Kambhi, adding it will take at least three to four years before it starts picking up.

Other Steps

Other efforts to develop air cargo market in India include the increase of foreign direct investment in cargo and non-scheduled airlines to 74 per cent.

Plans are also on fordeveloping Nagpur as a cargo hub through large-scale investments into MIHAN (Multimodal International Hub Airport) project.

According to E&Y, investments of more than Rs 900 crore have been planned for development and upgrade of cargo terminal facilities at the Mumbai and Delhi international airports.

Similar investments would be required for the facilities at Chennai, Kolkata, Hyderabad, Bangalore and other airports, the consultant said.