Carrying the burden

Airlines are reluctant to fly cargo aircraft into India due to the high cost of operation. Costs are high primarily for two reasons: high fuel costs and airport congestion. In India, fuel makes up about 40 per cent of a cargo airline8217;s operating costs, compared to 15 per cent abroad. Says Hwang Teng Aun, president, Singapore Airlines: 8220;Returns don8217;t cover the cost of capital.8221; Moreover, congestion at airports forces planes to keep circling, needlessly increasing fuel consumption.

So, though air is the quickest mode of transportation, it is also the costliest. Says Jasjit Sethi, chief executive officer, TCI Supply Chain Solutions, a logistics service provider: 8220;On the Delhi-Bangalore route, it costs Rs 50 per kg, compared to Rs 3 by road and Rs 2 by rail.8221; Ship is even cheaper. Mumbai-Singapore is seven hours by air, seven days by ship. If time is not of essence, a ship makes sense.

Such trade-offs happen frequently, and air cargo loses out. Typically, air cargo comprises goods where the emphasis is on time and security like gems and diamonds, gold, currency, fruits and flowers, newspapers, small machine parts, electronics, computers and medicines. Within India, many of these are transported by road. It8217;s only when they have to be moved at a short notice do senders take the air option. Says Snehal Parikh, director, DHL: 8220;The huge outlays to develop India8217;s road and rail infrastructure, the advent of privatised rail containerisation, new-generation trucks and better regulation of road transport will increase competition to air freight.8221;

In order to tap the potential of the air cargo business and achieve its target of 20 million tonnes by 2020, the government is planning an air cargo hub in Nagpur, which is adjacent to civil aviation minister Praful Patel8217;s home turf. Word is that the government is talking to logistics majors like UPS and FedEx to develop this hub.

Much like Memphis or tiny Hong Kong number two in 2005, 3.4 million tonnes or Anchorage in Alaska number three, 2.6 million tonnes, a good cargo hub can decongest existing domestic airports and serve as a nodal point for cargo airlines flying the world. Says Kapil Kaul, CEO Indian subcontinent and Middle East, Centre for Asia Pacific Aviation: 8220;The next two to three years should see three to four new cargo airlines.8221; The demand, experts say, is there. Adds Tulsi Mirchandaney, senior vice-president marketing, Blue Dart: 8220;Whenever we have added new aircraft, it started operations at a load factor of 80 per cent. This shows the sector has latent potential.8221;

Other flanks also need to get better. Fuel cost needs to come down. As does turnaround time. Says Parikh: 8220;Even after four decades, a shipment spends only 6 per cent of its time in the air and 94 per cent on the ground. To decongest airports, cargo terminals for forwarders should be made available at or near major airports. There is a need for improved security screening equipment to speed up the process. Electronic data interchange EDI should be made available.8221;

EDI, a system by which paperwork between all parties involved in transporting a shipment is done electronically was introduced by the Airports Authority of India in India in 2004 for export shipments of domestic players in the four metro airports. Says K.S. Kunwar, general manager cargo, AAI: 8220;The turnaround time has reduced from two days to 1-1.5 days.8221;

The International Air Transport Association IATA is looking to integrate the networks of all stakeholders in the cargo business across the world. Termed 8216;e-freight8217;, the linkages are expected to be in place by 2007. Says Robey Lal, country manager, IATA: 8220;e-freight will reduce paperwork 8212; currently, 38 documents are required 8212; by 80 per cent.8221; Much is required to be done if India is to overtake the likes of Memphis and Anchorage.