A market that just keep on rocking and rolling

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Indian airfreight is booming and according to analysts Frost & Sullivan the air cargo market for the country of 1.3 billion people, reached 2.52million tonnes in 2014-15.

International traffic makes up a major part of this, taking a 61 per cent share and key markets include the United Arab Emirates, Hong Kong, UK, Germany, Singapore and Qatar.

Frost & Sullivan’s senior consultant for its transportation and logistics practice, TJ Sivan, believes much more is to come with the market reaching 2.8 million tonnes in 2018, 3.8 million tonnes by 2020 and a sizeable 10 million  by 2027. India is at present the second fastest growing air cargo market in the world.

Sivan says the freight categories expected to drive this growth include precious metals and jewellery, electronics, pharmaceuticals, textiles, leather products and perishable goods. and he adds: “E-commerce has also emerged as a key driver.”

However, challenges to growth remain and Sivan identifies a lack of “enabling infrastructure such as dedicated airfreight warehouses and terminals”, complicated regulatory processes and procedures and inadequate and poor quality of human resources deployment. “A lack of effective technological enablement of the cargo handling supply chain is another challenge,” Sivan also notes.

In an effort promote air cargo growth, the Indian Government announced a National Civil Aviation Policy in June. As part of this policy the Air Cargo Logistics Promotion Board (ACLPB) has been constituted for better coordination among various government and private agencies involved in the air cargo market.

According to Sivan, the ACPLB is “likely to focus on growth by improving efficiency and simplifying procedures and other administrative hurdles, which are contributing to higher cost”.

The Indian Government’s move to attract more foreign direct investment (FDI) by relaxing regulations around it is another major driver. This includes the allowance for 100 per cent FDI in existing airports and 100 per cent tax exemption for infrastructure projects for the next decade.

Other notable developments as part of the civil aviation policy include moves towards adopting paperless airway bill technology, free-trade zones and the streamlining of customs processing procedures.

The Indian Government’s ‘Make in India’ campaign, which aims for manufacturing to represent 25 per cent of the country’s gross domestic product (GDP) by 2022 compared with 15 per cent at present, is another boon. As part of the drive the government recognises the need to improve the supply chain and infrastructure.

Cathay Pacific Airways believes the Make in India programme will provide a huge boost to Indian airfreight. “The Make in India plans and FDI in various key sectors are going to be key drivers to yield strong growth in air freight,” says Mark Sutch (pictured), Cathay’s general manager for cargo sales and marketing.

He adds: “With the Make programme we note that there are few plants being built in India. There may be growing semi-finished or even raw materials to feed these local factories in the future.”

Cathay is becoming a more frequent visitor to India. It has both passenger and freighter services to New Delhi, Mumbai, Chennai, Bengaluru, Hyderabad and Kolkata.

“We are seeing increasing volumes of finished electronic products and their accessories, IT hardware and infrastructure project equipment into India and garment, leather, pharmaceuticals, auto spare parts and perishables out,” explains Sutch.

“India is one of the fastest growing economies in the world. The growth from key sectors namely retail, manufacturing, automobile and pharmaceutical drive exports. For imports the growth is driven by higher purchasing power of Indian local people who crave modern electronic products made abroad particularly mobile phones. The more stable Indian currency also gives a good boost to the purchasing power,” he notes.

Sutch also praises the improved warehousing facilities and airport infrastructure in places such as New Delhi, Bengaluru and Hyderabad.

Looking to the future, Sutch says Cathay will keep abreast of global trade flows before deciding whether to permanently increase their freight operations in India. “In recent months we have increased our scheduled flying into India to accommodate for increased trade flows. This has been more on an ‘as-need’ basis but we would be prepared to grow with the market and demand.”

0ther operators benefiting from the growth in the sector include Indian express cargo carrier Blue Dart (pictured), which posted a 49.7 per cent increase in profits for the year ending 31 March, helped by growth in the business to consumer segment particularly e-tail.

Blue Dart has seen steady growth since entering the market 20 years ago and looks ideally placed to grow as the Indian market expands. It was boosted in 2004, when DHL took a majority stake in the carrier’s parent company, Blue Dart Express, which has helped it achieve growth of  around six per cent over the last few years.

From its Chennai base, Blue Dart launched with a single Boeing 737-200 Freighter, but has since upgraded to larger 757 freighters with bigger payloads – a decision driven by the shortage of landing slots at key hubs.

It is clear that India looks like a market of opportunity and growth in the years ahead.