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karatecatman
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Joined: 19 Dec 2006
Posts: 5233
Location: Chennai -- INDIA
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 Posted: Wed Sep 03, 2008 1:23 pm Post subject: India's cargo market-- boom or bust? (Long article) |
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www.aircargoworld.com/features/0908_2.htm
Boom or Bust?
India could become a key growth market for air cargo, but is overcapacity going to spoil the party for freighter operators
Peter Conway
India traditionally has been a useful market for freighter operators between Europe and Asia. Since the country declared open skies for cargo in 1995, European and Asian carriers have been able to stop their freighters there on the way to and from China and the rest of Asia, helping address imbalances on those routes, or providing a useful source of revenue on a refuelling stop.
Now should be a boom time for those freighter operators, as India's economy diversifies and becomes an economic power. But a rapid increase in belly capacity and competition from Middle Eastern carriers is threatening to undermine that scenario. India could be in danger of following the familiar air cargo route of excess capacity and plummeting rates.
There are reasons for established freighter operators to India to be worried. First, there is the rapid expansion in long-haul belly capacity out of the country, as India's fast-growing airlines seek to establish themselves on the world stage. OAG, a sister company of Air Cargo World, shows a 34 percent increase in passenger flights to and from India on the July schedules when compared to the same month last year.
Among the carriers ramping up passenger services are Jet Airways, which has daily flights to Toronto, Newark and New York's JFK International Airport via Brussels, as well as triple daily flights to Heathrow. In mid-June, Jet Airways started a daily flight between Mumbai-Shanghai-San Francisco.
Kingfisher, run by the charismatic Vijay Mallya, was to begin international A330 flights in late August to London, followed by A340-500 flights to San Francisco. New York, Houston, Hong Kong, Singapore and Kuala Lumpur were mentioned as possible future destinations.
Middle Eastern carriers are flooding into India, as new aviation trade agreements allow them greater market access. Following a new deal between India and the United Arab Emirates in April, Emirates Airlines is in the process of adding 18 flights a week to India, bringing its total to 132, all operated by belly-cargo friendly 777s.
So great is the increase in cargo capacity that Emirates has stopped operating freighters to India.
The carrier used to land two of its 747 freighters in Mumbai on the way from China to Dubai, but has since pulled the services. The carrier still stops in Mumbai once a week on the way to Hong Kong, but has ceased freighter services to Bangalore. Ram Menen, Emirates's divisional senior vice president cargo, said these moves were made to keep freight capacity to India steady at 2,000 tonnes a week.
Emirates is not alone in adding flights to India. Qatar Airways added Kozhikode in Southern India in mid-June, bringing its flights to 58 a week to nine cities. CEO Akbar al Baker said the carrier is eyeing more opportunities. Etihad also has an extensive network to India. But Des Vertannes, executive vice president cargo, said the narrowbody A320s have little room for freight.
To compensate, Qatar operates five A300-600 freighters a week to Chennai (Madras) with two of them going back via Bangalore. The airline also stops its MD-11 freighter to Shanghai in Kolkata (Calcutta) but this is more of a technical stop. Qatar Airways regards India as a key market for its A300-600 freighters.
Where does this leave the European and Asian carriers, which traditionally flew widebody freighters to India? Observers say these carriers maintain their market share, but report of growing overcapacity and pressure on rates.
Air France and KLM Royal Dutch Airlines have had enough, having ceased all freighter flights to India. The airlines' roster had included one weekly freighter flight to Bangalore, one to Chennai, two to Delhi and one to Mumbai, all of them turnaround flights paired with Middle East stops. Air France-KLM Cargo spokesman Jean-Claude Raynaud said one reason for the change was the retirement of AF's 747-200 freighters. The 747-400 extended range freighters are better suited to longer haul routes, he said.
That is not quite the whole story.
Raynaud said India is a "difficult market" with "significant imbalances and traditionally low levels of freight rates." Air France-KLM has been steadily building its passenger flights to India, with some routes offering up to 25 tonnes belly capacity.
Other carriers watch India carefully. Carsten Hernig, regional manager of India for Lufthansa Cargo, said air cargo grew 19 percent in the past year, but overcapacity is now running at 40 percent. He blames belly operators and Middle Eastern carriers for pulling down rates. But Lufthansa made no change to its freighter schedule of six MD-11 freighter flights to Delhi, four to Bangalore and Chennai, and three to Mumbai.
British Airways World Cargo also makes 10 stops a week in India with its 747-400 freighters, a schedule Mat Burton, its area manager India and Nepal, said has remained unchanged for two years.
Burton said the carrier's consistency in the market is one reason it maintains full loads on the flights; the other is a cunning piece of scheduling. Though two Delhi frequencies a week are used to boost the weaker, eastbound leg of services to Hong Kong, BAWC typically calls in India on the way back from Hong Kong and Shanghai. It has two calls in Mumbai, three in Chennai and three in Delhi in this direction.
BAWC has fifth-freedom rights between China and India. As such, it can fill 20 percent to 30 percent of its outbound flights from China with India-bound cargo. Burton said this market is extremely lucrative, and BAWC can both get good rates on the leg and use it as a carrot to get forwarders to commit to other legs of its freighter services.
BAWC can also make use of its extensive U.S. network to generate exports out of India. The U.S. has traditionally been by far the biggest market for Indian exports, Burton said, though it is now 50/50 between the U.S. and Europe. More Indian than Chinese traffic is bound for the U.S. and this is a reason to make space on westbound flights for Indian-origin cargo, he said.
Etihad's Vertannes said the carrier also uses niche markets to cope with origin cargo, currently flat demand and increased competition out of India. "We are fortunate that our network is expanding and so we can offer the market new destinations," he said. Eithad, for example, started a MD-11 freighter route to Lagos in April, which is proving popular for Indian exports.
India has been making a well-documented migration from dependence on garment and textile exports into hi-tech areas such as mobile phones, automotive, machinery and pharmaceuticals.
This is good news. Garment traffic has been adversely affected by the slowdown in U.S. consumer spending, and a good portion has migrated to sea freight because of high fuel prices.
Production of the newer air freight-friendly products trends appears to be concentrated in the south of India, with Bangalore and Hyderabad hosting such IT giants as IBM, Intel, and Compaq. Hyderabad also has pharmaceutical companies - which are big exporters to the U.S. - and Chennai is a hub for telecommunications, automotive and a wide range of other commodities. This accounts for the interest freighter operators are showing in these southern airports. While noting the rise of the south, Lufthansa's Hernig said Mumbai and Delhi remain the main markets.
The diversification of freight into new commodities could be good news for freighter operators. BAWC's Burton said it is getting more large-sized freight, which needs main deck capacity, such as aircraft engines for repair. Previously, he said, it was just a question of building large pallets of garments, which otherwise could have easily flown in bellies. The growth in pharmaceuticals also favours carriers with specialist cool chain products, though Burton admitted BAWC does not currently offer its Constant Climate product in India due to a lack of expertise there in handling Envirotainers.
Operators agree that exports outweigh imports, but that the balance is improving. Menen said it is getting closer to half and half, pointing to a lot of infrastructure and equipment imports, as the country modernizes. The problem with imports is that they are at very low rates.
"Historically, there was so much more capacity than demand into India that it kept rates low. It is hard to make freighters work at those yields and with current costs," Menen said.
Several operators talk about a growing middle class in India with rising spending power, but this appears to be wishful thinking.
One wild card on the horizon for all foreign operators is the freighter plans of Indian carriers. A year ago, nearly every passenger carrier in India talked of having a major freighter fleet. Air India made a start, converting three A310s and four 737s into freighters, the former for international service, the latter for domestic flights. The carrier is considering 40 freighters by 2015, and has definite plans to convert more A310s, 737s and six 747-400 freighters, which are being retired from its passenger fleet.
Other would-be freighter operators are legion. Jet Airways was at one point in talks with Lufthansa Cargo about a joint venture, but those plans were tabled, apparently. Jet Airways is reportedly about to invest millions of dollars in 737 conversions. Bangalore-based Quikjet Cargo started domestic service with three 737s, and Deccan Cargo, owned by the former head of a passenger airline that was bought out by Kingfisher, reportedly bought three A310-300s for conversion. Kingfisher also made bullish noises about freighters, but has recently gone quiet on the subject. Mystery also surrounds the plans of Flyington Freighters, which has 777 and A330 freighters on order.
Many of these freighters could be aimed at the domestic market, where poor road infrastructure and huge demand offer vast potential for overnight services. Only 12 freighters now serve this market.
Foreign carriers might be concerned by the prospect of Indian carriers with domestic freighter networks also expanding into the international space. Raynaud at Air France-KLM detects in the Indian government a desire to see its own carriers take a bigger market share. Jay Shelat, formerly with American Airlines and now vice president cargo for Jet Airways, said the domestic network "is the backbone that drives our international business forward."
Some observers question whether the Indian carriers, many of which are suffering losses from their domestic passenger business, are really in a position to expand into the freighter business. Others draw parallels with China, where initially disorganized local operators are now starting to take market share.
Lufthansa Cargo could form a similar joint venture in India to its partnership with Jade Cargo International, in which LC has a 25 percent interest. But Hernig offers little on this subject. "Before we can talk about partnerships, we will do some in depth analysis first," he said. "We have a strong position in the Indian market, and we will do what is necessary to strengthen that."
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karatecatman
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Location: Chennai -- INDIA
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HAWK21M
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Joined: 19 Dec 2006
Posts: 5122
Location: Mumbai, INDIA
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| Posted: Wed Sep 03, 2008 4:21 pm Post subject: |
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When Pax Airlines of India were struggling,only the Freighter airline of India was making profits.
Considering the vast potential, what is important is a good fleet,good Mx & determined & professional Mgmt.
Remember Cargo/courier rates don't drop & Hotel accomodation is no condition for delayed flights.Although on time deliverly of cargo is.
From the personnell POV,its def much more peacefull than working at a Pax Airline rather than dealing with the moods of various types of Pax.
Cargo Airlines can pay better salaries as they can afford to.
In the future....deccan Cargo,Quikjet,Jet Cargo & King Cargo should join Blue Dart in the domestic market.
9W has the easiest shift as the B737-700C is readily available & they operate with a similiar type so training of Flt ops/Mx is not an issue.
But to be successfull....One needs to have an excellent ground network too.
On the International front,I'm sure Cargo will be the future,As per the experts in the field....Cargo Airlines will increase in numbers more rapidly,but this will require tougher & faster screening methods to tackle acts of terror.
I feel Cargo has a great future.
regds
MEL
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