News / As India gets behind air cargo, the country needs a long-haul freighter operation

Chennai - the 'Detroit of the East' - could be a good hub for a long haul freighter operation © Pontus Edenberg

India needs a long-haul freight carrier to enter the market, according to 45-year veteran of air cargo Tulsi Mirchandaney.

The managing director of Chennai-based Blue Dart Aviation told delegates at Cargo Facts Asia in Hong Kong: “Today, cargo is going through the Middle East for transhipment. We don’t have a long-distance carrier, so cargo is being consolidated out of the country.

She added: “If we had an anchor airline, with long-distance connectivity, it would be a huge opportunity.”

Ms Mirchandaney said that, with a healthy GDP growth rate of 7.9% this year, a steady uptick in freight volumes and relaxed air cargo investment rules, India was ripe for foreign players to enter the market.

“For the first time we’re seeing a government civil aviation policy with a lot of stimulus for air cargo.

“The industry is now recognised as having infrastructure status with a lot of tax benefits, including 74% foreign direct investment permitted in airlines and ground handling agencies.

“And 100% investment is now permitted in MROs and airports – so this is a great opportunity for people to invest in India.”

Until recently, Blue Dart was India’s only all-cargo domestic airline, enjoying 19% market share of air freight volumes. It is a subsidiary of express logistics and parcel delivery courier Blue Dart Express, which has been 70% owned by DHL since 2004 – a factor many see as the driving force behind the airline’s success and 7% yearly cargo uplift.

Asked whether Blue Dart is planning on expanding internationally, Ms Mirchandaney said it was focused on the domestic market, where the pharma and hi-tech sectors are driving strong growth, and would “leave the international routes to the international players, for now”.

However, she reiterated that India needed a long-haul carrier anchored at a successful transhipment and consolidation hub, citing Chennai as a potential candidate.

“It has the second largest GDP in the country, and the largest tourist arrivals, so it needs scaling up – it’s the ‘Detroit of the East’, with its many automotive factories.

“When you look at neighbouring hubs like Dubai or Singapore, which have long-haul connectivity, there is no domestic distribution, they rely on transhipment. In India the long-haul freight opportunity would include import, export, and value-added re-export.”

Meanwhile, like other regional markets the Indian economy is transitioning into the e-commerce age.

Last year, total e-commerce retail sales in India hit $17.5bn, up from only $2.3bn in 2012, with projections of $55bn in sales by 2018. Ms Mirchandaney said the major implication for Blue Dart was how its fleet may need to evolve to support the growing express delivery market.

“What we’re seeing is a change in our own practice, because these are very high-volume shipments, so will the same aircraft be able to service these in the future?

“Because we’re so used to having high-density loads, where we were going light by a single digit, now suddenly you find load factors have come down quite a bit.”

Ms Mirchandaney noted that air cargo in India still faced many challenges, including a lack of airport capacity, high fuel prices, state taxes and regulatory constraints.

“There are challenges, but therein lies the opportunity,” she said.

One challenge has come in the form of a new rival, Quikjet Cargo Airlines. Launched in February after an eight-year delay, the Bengaluru-based carrier will operate four daily flights connecting Delhi with Chennai, Bengaluru and Hyderabad, using a single narrow-body 737-400SF.

“In a sense, this is full-swing operations,” its chief executive, Preetham Phillip, told Livemint.com. “We have decided to take up this opportunity as we have already sold our aircraft space to Mumbai-based Sovika Aviation. We will take one more Boeing plane by April, taking the fleet to two.”

There are currently only seven freighters serving India, the world’s seventh largest economy.