Event Round Up

Freighter revolutions

The who's who of the air cargo industry were in Mumbai for the recently concluded two-day Air Cargo India 2008 where key challenges and opportunities related to the air cargo industry were discussed. By Chetan Kapoor

The Indian aviation industry's growth is on the increase as airlines constantly add more aircraft to their fleet. This increased capacity, in addition to meeting the growing demand by passengers, also brings in added belly space to accommodate cargo - thereby contributing a host of revenues to the passenger airlines besides the dedicated freighters. At the same time, it is pivotal to view cargo from an economic point of view and its contribution to a country's GDP.

Speaking at the Air Cargo India 2008, Dr S S Sidhu, governor of Manipur and former secretary general of ICAO said, "It is necessary for growing economic markets to have trade relationships with countries, and cargo plays an important role in their development. Air cargo, in particular, offers speed, security and reliability despite the cost involved. It is the engine of growth." Air cargo is an integral part of global supply chains and provides faster, frequent and dependable transportation to even remote locations to deliver perishable products like flowers, fruits, vegetables, as well as high-value commodities. With India's status of a manufacturing base on the rise, potential for cargo is no doubt growing.

Ram Menen, divisional sr. vice president - Cargo, Emirates Airlines, Stan Wraight, chairman of the board, Cargoitalia, Aleks Popovich. global head, Cargo, IATA and Madhav Thapar, executive director, Airfreight, DHL Lemuir Logistics at the roundtable conference

Walk the talk

According to statistics, the international air traffic in Asia is set to grow to 55 per cent by 2011, as compared to 45 per cent today. This seems ideal for air cargo movement as there would be more and probably better schedules favouring this movement between markets. However, air cargo faces a stiff competition by container shipping which is cheaper, and in the age of acquiring clearances, moves faster than the aerial means. "Sea freight is faster in comparison with air freight, which having to face new dynamics faces a further slowing of its processes. All cargo airlines fly according to market demands and in a world of commodity, the only way to compete is distribution," emphasised Stanley Wraight, chairman, Cargoitalia. Acquiring clearances is a cumbersome procedure with a lot of paperwork - 35 signatures - to be taken for allowing cargo to pass in and out of India.

Furthermore, with a barrel of oil coming at a price tag of US$ 100, it becomes troublesome for freighters to operate on less capacity and an ever-fluctuating demand-supply ratio. Adding to this are the constraints of air logistics, lack of better infrastructure, and competitive prices by passenger airlines for the belly space. Says Ram Menen, divisional senior vice president - Cargo, Emirates Airlines, "Asia, the Middle East, Eastern Europe, Africa and Latin America are emerging markets with an expected growth rate of 24-26 per cent by 2011. India and China would be the major players. However, Indian infrastructure is developing only gradually and is being built on past trends and not those of the future, in spite of it being the second fastest growing GDP and a favoured destination for FDI. There are also the issues of bureaucracy and application of technology. "

Infrastructural challenges were also addressed by other speakers at the conference. Remarked Carsten Spohr, CEO and chairman, Lufthansa Cargo, "The Indian infrastructure is not of acceptable service levels. India is miles away from other cargo and passenger hubs across the world. We see way too much capacity in this market and more aircraft put added pressure on poor infrastructure, which is already low on profitability."

Even complimentary infrastructure such as non-availability of road and rail connectivity, warehouses, competitive and cheap ground handling services, lack of freighter friendly airports, MROs, environmental restrictions - two per cent of the carbon footprint, bans on night flying and noise further cripple the air cargo industry, informed Wraight. The air traffic rights, too, are restricted and tied to passenger movement in case of some bilateral thereby putting dedicated freighters in a fix.

Stepping stones

Despite the above challenges, the air cargo industry is booming. According to Dr Dinesh A Keskar, senior vice president - Sales, Commercial Airplanes, Boeing, "Air cargo in Asia will continue to grow and will be the largest base with intra-Asia cargo growing at 8.6 per cent and that of Asia-North America at 7.1 per cent." Boeing's statistics reveal that by 2026, there would be a total of 3,980 freighters globally as compared to 1,980 in 2006. Also, passenger aircraft will increase from 18,230 in 2006 to 36,420 in 2026.

With free trade agreements sprouting between countries, globalisation is here to stay - resulting in developing key hubs for cargo and passenger movement. Looking at the global map, the Middle East and India seem to be the ideal hubs connecting the East to West. Keeping this in mind, work on the Dubai Logistics City is already underway. Spread across 140 square kilometres with six airstrips, it is a much-needed answer to today's congested skies. "Due to congestion and issues related to cargo clearances, it makes no sense in paying airfare when the products are grounded for two-three days. Dubai would make an ideal hub for logistics, being a rapidly developing city, and work on infrastructure underway for the next 50 years with a capacity to handle 150 million passengers and 12 million tonnes of cargo. By 2015, four airstrips and two terminals would be operational and this would ultimately be the main airport for Dubai," informed Michael Proffitt, CEO, Dubai World Central.

The Indian airports, too, have stepped up its efforts to overcome such challenges. With 449 airports and air strips that consist of 16 international and seven customs airports, the Airports Authority of India (AAI) manages 128 airports, out of which 90 are operational and 28 civil enclaves are with the defence airfields. According to V K Kalra, executive director - Key Infrastructure Development, AAI, "Air cargo has grown at the rate of 10 per cent in the last two years and with the rise in air traffic and delays in landing can be costly. The AAI is investing in upgradation of airports and has also identified 21 airports under the public-private partnership on build-operate and transfer basis. We are also enabling policy for private airports and promoting low-cost airports."

Given the upcoming developments in infrastructure, the question which needs to be asked is whether this growth would be profitable considering the slump in the aviation industry today. So, while on the one hand India seems to be the flavour of the season, the World Bank places it at 120th position when it comes to its Ease of Doing Business Index. "Forty-five per cent of the customers choose air cargo simply because of the speed it offers, while only 30 per cent are concerned about its cost as compared to shipping. Taking the latter into concern, if air cargo has to compete with sea freight, it is important to work in conjunction with consumer groups and supermarkets. Efforts like e-freight to reduce 50 per cent of documentation from the process will help in reducing costs and time, as also in tracking the freight," remarked Aleks Popovich, global head cargo, IATA. Currently, e-freight pilot is live in six locations - Hong Kong, Singapore, United Kingdom, Netherlands, Canada and Sweden, and 20 connecting routes, according to Popovich.

Today, the air cargo industry is at a crossroads as airline associations are more fixed on improving the passenger-side of the business through better airports and customer services, with only a handful of initiatives favouring the cargo segment. However, as the aviation industry adapts to this globalised world, acknowledging competition from global supply chains, there is no doubt that infrastructure will finally catch up with the growing needs of this industry.