Over capacity, falling fuel prices worries air cargo industry

Published: Monday, March 14, 2016

Big airlines realize that fleets of five are non-sustainable in the
long run, but fear the entry of small operators

Despite dim signs of recovery, the global air cargo industry is still on shaky ground.

“The biggest challenge before us is maintaining stable growth in the generic cargo business,” admitted Dr Alexis von Hoensbroech, Member of the Executive Board of Products & Sales, Lufthansa Cargo AG, at the press conference called at the two-day Air Cargo India 2016 meet held in Mumbai in February.

In-charge of Global Sales and Capacity Management, Hoensbroech said he was worried about the slide in Lufthansa’s freight forwarding business from the world’s No.2 position to No.4 in the last couple of years. He said that the Gulf carriers have emerged as the biggest disruptors for the industry.

Maintaining that the airline’s cargo business is still stable in India, mainly due to the spurt in the export of pharmaceuticals from the sub-continent, in other markets they continue to face the challenge of overcapacity in the absence of demand. In pharmaceuticals, they continue to lead, because of the high standards of service we maintain in the transport of such temperature sensitive products. “Being Germans, that’s an aspect of our service, where we don’t want to compromise,” he adds for effect.

Other participants at the event also reiterated that while in other industries a decrease in input cost (fuel prices in case of airlines) has a positive impact on tariffs, in air cargo industry it can be a negative development due to steep surcharges.

The Indian market in comparison, continues to remain stable, indeed “vibrant and promising” enthuses the spokesperson of Cargolux, headquartered in Dubai that re-started its cargo operations in India (flying twice a week between Luxembourg and Mumbai) last year, after a few years of hiatus. Armed with a fleet of 25, nine products (including one for express delivery) Cargolux is presently running its operations in China, India, Middle East and Africa. Their main focus – transport of live animals. “We are growing three-four per cent above the market,” claims Cargolux spokesperson.

Sheraz Bahar, Director, International Business Development, Fast Logistics is also very bullish about the business he’s fetching from the subcontinent. Fast Logistics has been ramping up fast and has set-up offices in Chennai, Mumbai, Hyderabad, Bangalore and Nagpur. The ‘Make in India’ campaign feels Bahar is going to give impetus to their business in India and lead to massive hiring of dedicated local agents.

“From a zero base, we have come to a stage, where we expect to grow 50% in the second year, so anything that comes in between is a big plus,” he declares.

The sixth edition of the biennial Air Cargo India (ACI) exhibition-cum-conference that’s held alternatively in India and Africa saw massive turnout at Grand Hyatt, Mumbai, last month. This year’s theme for the three-day event was “make in India – Air Cargo Makes it Happen.” It witnessed participation of all stakeholders in the supply chain of air transport, which networked and brainstormed over the future of the air cargo industry.

The participants included 70 exhibitors, including top airlines such as Etihad Cargo, Emirates Skycargo, Saudia cargo, Kenya Airways Cargo, Ethiopian cargo, Cargolux, Oman Air, Skyteam Cargo, to cite a few. The event also featured round table discussions featuring The Pharma Air Shippers Forum and Air Shippers’ Forum that invited manufacturers from pharma, apparel, automotive, perishables, gem and jewelry and handicrafts industries to discuss their issues with the cargo carriers.