Indian air cargo market to be among top 10 in 2016

India will be the second fastestgrowing market with a CAGR of 6.8 per cent to add 622,000 extra tonnes

The International Air Transport Association (IATA) in its forecast for 2014-2018 has indicated that nternational freight volumes would increase at a compound annual growth rate of 4.1 percent over the next five years. But what is music to the ears,at least in the Indian sub-continent, is that the region will experience substantial growth, driven by major economic activity. Leading the growth phase will be India which is
expected to catapult itself into the top 10 international freight markets by 2018. The signs are already there, driven by industrial output, e-commerce and surge in exports and imports.

What is noticeable is that emerging economies, particularly in the Middle East, Africa and Asia, will be among the fastest growing markets. . “Air cargo remains as vital to the global economic system as ever. This year, more than $6.8 trillion worth of goods, equivalent to 35 per cent of total world trade by value, will be transported around the world by air.So it is welcome to see a forecast for a return to growth for the air cargo sector after several years in the doldrums. An average of more than 4% growth for the next five years would be a marked improvement on the performance of recent years. Since 2011, for example, growth in freight tonnes has averaged just 0.63% per year,” said Tony Tyler, IATA’s Director General and CEO.

India will be the second fastest-growing market with a CAGR of 6.8 per cent to add 622,000 extra tonnes. Bangladesh (339,000 total freight tonnes), Ethiopia (319,000) and Nigeria (276,000) make up the remainder of the top five.

Transformation of Indian civil aviation market

Following the National Democratic Alliance (NDA) coming to
power under the leadership of Narendra Modi, there has been
an aggressive push for reforms in many sectors and one of
them is civil aviation. The revised draft National Civil Aviation
Policy, after industry inputs, is now with the government
to get the final seal of approval and the policy is seen as an
accelerator of the industry. The airlines are upbeat and have
announced major aircraft acquisitions such as IndiGo which
recently ordered 250 Airbus planes, adding to its existing
fleet of 100. IndiGo has already placed orders for another
180 Airbus planes. In the next five to10 years, the airline
should have 530 aircraft. Similarly, airlines such as SpiceJet
has bounced bank from financial difficulties and is also on
course to buy more aircraft. Then there are new airlines which
have also made their intentions clear on aircraft acquisitions,
though not the huge numbers of IndiGo, but then surely there
is advancement. Air Costa, Air Pegasus, Vistara, TruJet, and Air
Asia India have been active over the last two years and there
are more expected to join the regional bandwagon as there
are incentives galore to start regional airlines.

Every year, in India the number of air passengers is going up.
It has crossed 2.2 billion passengers flown annually, thanks
to low cost airlines, low fares, easier connectivity, speed, and
above all an aspirational class of people coming into their own
in India. Along with passenger growth, India is witnessing a
parallel growth of air cargo movement. Air cargo in India is mostly moved in the belly space of the passenger airline as
there are only a few dedicated air freight operators in India,
one of them being Blue Dart.

Indian market to expand by 8.5 per cent

Thanks to the constantly falling fuel prices, airlines are able
to offer low fares which has helped improve load factors, not
just passenger but also cargo. Airlines in India have started
seeing different avenues to generate revenue and one of them
certainly is air cargo. Internationally the total value of goods
transported by air is pegged at 35 per cent of all international
trade and this could witness upward trend, considering the
factors mentioned above. With a return to growth for the air
cargo sector after several years in the doldrums, and average
of 4 percent growth in airfreight is projected for the coming
five years. The Indian market is expected to expand by 8.5
percent per year for the next 5 years, besides the airlines,
air cargo operators and agents, there are other players who
are eagerly pushing the air cargo sector to grow fast and
spearheading this growth through various activities. The
mid-February event Air Cargo India 2016 is going to be one
platform which will help accelerate the growth market with its
lobbying with the government.

Air Cargo 2016, platform for push

The organisers of Air Cargo 2016 state that the world is
watching India with keen interest. “It is no surprise that the
world will gather here with the desire of setting up businesses
in this rising economic powerhouse. As a wave of reforms is
sweeping over India in terms of foreign direct investment (FDI)
policies, emphasis on public-private partnerships to improve
infrastructure, export tax rebates, etc. As industry players
seem to be a lot more optimistic with the demand of freight
picking up strongly boosting the airfreight market to 2.8
million tonnes by 2018. That’s a message for all of us because
according to experts what happens in the air cargo industry is normally reflected about six months later in the general
economy.”

Air Cargo India 2016 asks – Is India’s airfreight market
development a realistic goal yet…?

The answer is that India which represents a population of 1.28
billion in a continent notable for its large size and densely
populated (4.4 billion people) and that of Asia accounts
for roughly 60 per cent of the planet’s human population.
Knowing the economy is going to expand and that Asia is
leading the world out of the recession for many – representing
a seismic shift in the world economy. If you look at India, it is
under developed, now developing so the opportunities here
are phenomenal. Today within the domestic sector, 65 per
cent of freight is transported by surface and 4 0 percent of the
hinterlands do not have access to all-weather roads. These are
awful challenges in doing business with India, nonetheless,
one of the main reasons why cargo firms are so optimistic –
they feel faster, better prepared and more nimble than they
were so despite a lack of infrastructure in certain regions and
pockets of volatility, this is a nation that is beginning to show
signs of sustainable growth.

E-commerce, key driver

Industry body Assocham has in a report forecast that the
e-commerce sector in India will be worth USD 38 billion by
2016, a 67 per cent jump over the USD 23 billion revenues for
2015. “India’s e-commerce market was worth about USD 3.8
billion in 2009, it went up to USD 17 billion in 2014 and to USD
23 billion in 2015 and is expected to touch whopping USD 38
billion mark by 2016,” Assocham said in a statement.
Increasing internet and mobile penetration, growing
acceptability of online payments and favourable
demographics has provided the e-commerce sector in India
the unique opportunity to companies connect with their
customers, it said. There would be over a five to seven fold increase in revenue generated through e-commerce as
compared to last year with all branded apparel, accessories,
jewellery, gifts, footwear are available at a cheaper rates and
delivered at the doorstep, it added.

It noted that the buying trends during 2016 will witness
a significant upward movement due to aggressive online
discounts, and wider and abundant choice will hit the
e-commerce industry in 2016. It observed mobile commerce
(m-commerce) is growing rapidly as a stable and secure
supplement to the e-commerce industry.

“Shopping online through smart phones is proving to be a
game changer, and industry leaders believe that m-commerce
could contribute up to 70 per cent of their total revenues,” the
statement added. In India roughly 60-65 per cent of the total
e-commerce sales are being generated by mobile devices and
tablets, increased by 50 per cent than the last year and also
likely to continue upwards, it added.

It noted that the browsing trends, which have broadly shifted
from the desktop to mobile devices in India, online shopping
is also expected to follow suit, as one out of three customers
currently makes transactions through mobiles in tier-1 and
tier-2 cities. In 2015, 78 per cent of shopping queries were
made through mobile devices, compared to 46 per cent in
2013.

In 2015, the highest growth rate was seen in the apparel
segment almost 69.5 per cent over last year, followed by
electronic items by 62 per cent, baby care products at 53 per
cent, beauty and personal care products at 52 per cent and
home furnishings at 49 per cent. It revealed that Mumbai
ranks first in online shopping followed by Delhi, Ahmedabad,
Bangalore and Kolkata. The rest of India is also catching up and
once it connects, there is no stopping the explosive growth.