Airlines, airports witness cargo growth

Published: Wednesday, May 11, 2016

Since the time e-commerce took off, there has been good off-take of air cargo and airlines and airports are benefitting from this trend

There is good news for air cargo operators as India is experiencing a surge in both domestic and international cargo. Realising the potential of air cargo, the Airports Authority of India (AAI) has set targets for eight international airports and they are Amritsar, Chennai, Coimbatore, Guwahati, Kolkata, Lucknow, Mangalore and Tiruchi. These are airports run by the AAI.

Since the time e-commerce took off, there has been good off-take of air cargo and airlines and airports are benefitting from this trend. And rightly the AAI has set targets. For instance a non-metro airport like Tiruchi the target set is 7,081 tonnes for 2016-17 with the monthly target being 590 tonnes. Tiruchi airport witnessed an impressive 34 per cent growth in freight volume handled in the 2015-16 fiscal as compared to the previous year. The airport handled 6,662 tonnes with export accounting for the bulk and this was above the target fixed for 2015-16 at 6,000 tonnes. The steady growth in export cargo has been despite the size of the airport which cannot handle wide-bodied aircraft due to shortened runway and also there are no dedicated cargo freighters operating from here. All cargo movement is through the belly hold of passenger aircraft.

Non-metro airports doing well

Kuala Lumpur-bound Air Asia which operates 21 services from Tiruchi tops in respect of lifting export cargo. This is followed by Colombo-bound Sri Lankan Airlines, Singapore-bound Tiger Airways, and Kuala Lumpur-bound Malindo Air. Air India Express, which operates flights to Dubai and Singapore from here, carries limited volume of cargo. Around 18 to 20 tonnes of export cargo was shipped every day through various overseas airlines. Perishables such as vegetables and flowers continue to occupy the bulk of export cargo shipped from here. It is said that there is heavy demand for cargo bookings from shippers but airlines are constrained as they have to give priority to passenger baggage. There are now plans to open international courier operations from Tiruchi and this should give fillip to revenues for both airlines and airports.

Similarly, Mangaluru International Airport handled 1,650 tonnes of domestic cargo in 2015-16. The airport commenced domestic cargo handling operations on June 26, 2015, said JT Radhakrishna, Director, Mangaluru International Airport. He said the airport expects to handle 2,500 tonnes of domestic cargo during the current financial year. Mumbai-based Cargo Service Centre handles the domestic cargo operations at the airport on behalf of the Airports Authority of India. The airport handled around 560 tonnes of international cargo in 2015-16.

As regards a major metro airport, the AAI said Chennai airport achieved a 12 per cent growth in passenger traffic and a 9 per cent increase in cargo handling during 2015-16 despite the ‘devastating’ effect on its operations due to floods in December. In 2015-16, the airport handled 15.3 million passengers as against 13.7 million in the previous year. Cargo handling was 200,000 tonne as against 184,000 tonne in the previous year.

e-commerce to touch $36 billion

Almost all airports are experiencing growth. In line with the potential the government’s policy is to expand the air cargo industry by developing cargo hubs, encouraging cargo villages, reducing dwell time, shifting to paperless cargo processes, having 24/7 processing and handling of cargo, developing free trade zones and provide space on long-term leases to express cargo freighters. One of the drivers for all this, is the growing e-commerce sector which is expected to reach $36 billion in India in 2016, up from $16 billion in 2014. According to Goldman Sachs this growth trend will continue and India will touch $100 billion mark by 2020.

SpiceJet ramps up cargo business

As airports, airlines are also cashing in on the trend. For instance, SpiceJet has ramped up its cargo business and has introduced door-to-door delivery service for its corporate customers from March 2016. With fuel prices down and fares declining, the airline is looking at various means to improve its topline and cargo business. “Cargo and logistics is a growing business for us. Earlier, we used to outsource the business but, now we are handling it ourselves. We have tied up with courier firms and hiring extra staff for door-to-door cargo delivery. Initially, the service will be only for corporate clients but later we might extend it for retail customers as well,” said Ajay Singh, SpiceJet’s Managing Director.

SpiceJet which was in a financial mess till the exit of the Sun (Kalanithi Maran) group has staged a resplendent comeback with passenger and cargo revenues looking good. In the beginning of 2015, SpiceJet’s revenues from the ancillary business stood at six per cent, which subsequently increased to 16 per cent of total revenues at the end of the October-December quarter of the current fiscal. With the airline returning to profitability, it is now looking at expanding its fleet base by planning to induct about 100-150 narrow body and turboprop aircraft in the coming years. The airline currently has 43 aircraft which includes a mix of Boeing 737, Airbus A-320 and Bombardier Q-400 aircraft. “We plan to add ten aircraft this year on dry lease and these will be both replacements for seven wet lease aircraft and new additions,” Singh said. He added there are several untapped routes and markets which have potential for growth. “I do not see significant revenue challenges but airlines will need to think beyond Mumbai and Delhi.”

SpiceJet has initiated talks with several ecommerce firms for tie-ups. “At SpiceJet, we are looking at getting into an exclusive agreement with ecommerce and other companies as we expect the use of airlines to deliver products to pick up further once the festive season approaches,” said Singh, adding, “Ecommerce firms need airlines to deliver their goods to their customers as well as get deliveries from various suppliers across the country. They want us to provide them air connectivity in the northeast.”

SpiceJet, has now started using IBS Software’s new-generation cargo management system, iCargoLite. With iCargoLite, a part of IBS’ iCargo solution suite, SpiceJet has automated its cargo business processes to support its aggressive expansion plans for its domestic cargo operations. “This will ensure an integrated management of cargo reservations and ground operations including flight planning, inbound cargo operations, billing and shipment tracking,” stated Singh. Singh added, “iCargo operations form an intrinsic part of our business. We believe this technology platform will add to our efficiency and will ensure the shipment/goods are tracked right from the point of booking to the point of delivery.”

IndiGo slimmer seats, carries more cargo

IndiGo, the country’s largest airline, has opted for lighter seats which would allow it to fly more freight and cut annual fuel costs by Rs. 40 crores. The operating weight of every aircraft will come down by about 700 kgs with this and it is expected to help IndiGo generate at least Rs. 200 crore of additional revenue. IndiGo reportedly carries over 12,000 tonnes of cargo.
It is not just these two airlines which are trying to monetise cargo movement, even the new players such as Air Costa are at it. There is so much to gain from, but one only requires a proper model. It appears the airlines are getting their act together.