For forwarders, 'a hot Q4' will be all about controlling air cargo capacity
“Capacity is going to be king for the rest of 2024.” That’s the word from forwarders ...
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Some airlines could face lower hi-tech volumes out of China after a move by India’s Tata Group to go vertical: its manufacturing arm looks set to seal “captive” volumes for its new subsidiary, Air India, in advance of its aircraft deliveries.
The January 2022 takeover of Air India by Tata, in response to a government divestment programme, proved a “watershed moment” for the Indian aviation industry, sparking a flurry of large-scale aircraft orders.
The expected capacity influx included some 470 aircraft from Airbus and Boeing by Air India and 500 from Airbus by its peer, IndiGo.
As competition heats up, Air India owner Tata has taken a manufacturing-led strategy for cargo volumes, as it expects belly cargo capacity to quadruple at full-scale operations.
Tata Electronics (TEPL) – the group’s manufacturing arm – has acquired Taiwan-based Wistron’s contract Apple iPhone manufacturing operations in India, a $125m deal that industry observers believe has the potential to contribute “captive” freight volumes for Air India.
Wistron’s presence in India includes four assembly lines in the southern state of Karnataka, with plans for another unit at the same location. And with the acquisition – touted as a majpr boost for New Delhi’s “Make-in-India” push, Tata became the first “home-grown” iPhone maker, alongside Taiwan’s Foxconn and Pegatron.
Notably, the Indian government recently announced some curbs, in the form of licensing requirements for the import of certain electronic goods, in order to encourage investment in local manufacturing.
“The Wistron buy will spur the next cycle of investment in the Indian electronics manufacturing ecosystem, and signals the maturing of the country’s contract manufacturing companies,” said India’s IT minister, Ashwini Vaishnav.
Supply chain industry stakeholders have also struck a positive tone about the manufacturing development taking hold in India.
“Tata’s acquisition of Wistron’s Bengaluru plant presents a promising opportunity for Air India, in terms of freight expansion,” Jitendra Srivastava, CEO of Mumbai-based freight forwarder Triton Logistics & Maritime, told The Loadstar. “As smartphone exports continue to expand, Air India’s involvement could become a key driver of growth for the airline and Indian smartphone manufacturing.”
Vineet Malhotra, co-founder and director at Kale Logistics Solutions, noted that, as Apple planned to shift some 25% of its manufacturing capacity to India, it would be interesting to see how Tata-led Air India leveraged its air cargo capabilities for iPhone exports, predominantly sold in the US, China, Japan and the UK.
He said: “While Apple estimates the demand for iPhones to increase in India as well as ASEAN countries in the coming years, carriers like Air India will have a major role to play, and the airline’s cargo capacity will exponentially soar.”
Air India has some 470 Airbus and Boeing aircraft on order, with deliveries mostly scheduled to begin in 2025, which the privatised airline estimates would quadruple belly cargo capacity.
Apple iPhone exports from India saw a four-fold increase in fiscal year 2022-23, year on year, hitting some $5bn by value, according to provisional government data. Additionally, Apple outpaced Samsung to become the largest exporter of smartphones from India in Q1 of fiscal 2023-24.
From a policy perspective, New Delhi wants to grab a slice of the trade migration from China, as the success seen thus far is way below its expectations, despite offering an attractive productivity-linked incentive scheme for investors. However, thanks to high import tariffs on smartphone imports, local contract production by foreign brands has gained pace – arguably making India the second-largest handset manufacturing hub in the world, after China.
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