For the air cargo business in the country, long content to remain on the sidelines, it was a new era, it was time to rejoice. But this has all quickly become a chapter from the past. The few homegrown air cargo carriers that seemed to have found their wings, thanks largely to the “India story”, have just as quickly lost them again.
It all started with First Flight, one of the country’s well-known express companies. Towards the end of 2007, the company disbanded its air express operations. It had started dedicated freighter operations with three ATP aircraft in June of that year. Strangely, the closure of the air arm happened when a number of start-ups had announced that they were getting into the air cargo business.
Then at the beginning of this year, the Hyderabad-based 3PL service providerGati, which had leased some of Air India’s Boeing aircraft, send a terse message toits investors: The company had incurredlosses of a whopping INR164.2 million(US$3.3 million) between July andDecember last year.
On-again, off-again Crescent
Among the handful of air cargo operators, the Chennai-based Crescent Air Cargo had started services after a number of fits and starts. Around the middle of 2008, it had started operating daily Fokker flights linking, southern India’s major industrial hub, Coimbatore to Chennai and Mumbai.
Crescent had been established in June 2000 by a group of airline pilots, butlacking the commercial skills needed to run it, they closed the airline. It was thentaken over by industrialist Santosh Ladwho has interests in mining, software,real estate development and air cargo. Herestarted operations from mid-2007.
Crescent’s CEO, Capt. Murali Ram had told this correspondent in May 2008 that the carrier would shortly be starting its freighter operations on the Visakhapatnam-Chennai-Kolkata sector. “Our services would be immensely beneficial for the growing markets of shrimp, tuna exports, garment industry and other perishable goods,” he had said at the time.
The carrier was operating with one Fokker F-50 with about 4 to 5 flights lifting about 36.3 tonnes of cargo a week. Loads were low and with fuel prices shooting up, the company was forced to wind up operations around September 2008. According to Capt Ram: “The investors in Crescent are still interested in running the operations, but as of now, the company has sold its lone Fokker.”
Quikjet slow to get off ground
While Crescent may not have had adequate finances to run the show, Bangalore-based start-up air cargo player Quikjet has strong backers. Promoted by leading logistics company and a pioneer in the express courier sector AFL Private Limited along with Singapore’s Cardinal Aviation, Quikjet would like to be known as a merchant air cargo carrier which is keen to open up capacity to all players in the market.
The gestation period for Quikjet has been long enough to see two CEOs. Former CEO Natesan Ramesh, who had been seconded from Cardinal, believed that Quikjet would achieve what the low-cost carriers had done in the Indian market.
Speaking to this correspondent around May 2008, he had said that, “we would try to open up the cargo space”. He had also mentioned that with the open skies policy as far as cargo is concerned, there were opportunities that still remained untapped.
Ramesh was forthright: “We believe that the market is sufficiently underserved,” he had said. Naturally, whether it was express or plain air cargo, all newcomers hoped to take a major bite of the pie.
Even Quikjet has not been able to take off despite the fact that it has a Boeing 737-300 freighter based at Chennai, which has clearance to operate from the Director-General of Civil Aviation. Two more freighters were expected to join the fleet.
Enquiries about future plans elicited little more than a perfunctory reply from the company’s general manager – sales, Prashant Kavi, who wrote in an email response: “Mr Niteen Gupte has succeeded Mr Natesan as the CEO of Quikjet effective August 2008. Also, we are presently maintaining a restricted media interface and hope to be able to tackle your queries and provide more information in due course of time.”
It is believed that Quikjet has changed its business model. Instead of the Boeing 737s, which can carry between 13-18 tonnes of cargo, it plans to fly the bigger Boeing 757/767s or A310s. The planes would provide long-haul capacities to fly as far as Rome, parts of West Asia and China. Apparently, the Quikjet team is grappling with the key question that all cargo carriers have to face day in and day out – particularly in this current climate – ‘will we beable to fill up the freighters?’
Aryan also yet to take off
If Quikjet’s plans to tap the market has faced obstacles, Capt Mukut Pathak with his yet-to-take-off Delhi-based Aryan Cargo Express (ACE) – the first flight was supposed to take place sometime between mid-August and mid-September 2008 – is optimistic even though he acknowledges that the economic downturn has affected his plans of starting ACE.
In response to Payload’s queries he said: “Our investors have decided to adopt a wait and watch policy with respect to funding the airline. They are waiting for concrete signals of revival in the world economy or at least the signs of stabilisation before funding the airline.”
Pointing out that the aviation business was in a bad shape all over the world, Capt Pathak highlighted that, “the cargo business is likely to affect a recovery much faster than the passenger business. In India, the cargo business is still strong and still showing a modest increase.”
The country, he said, is likely to emerge first from the global meltdown and “we expect a positive upward trend in the second half of 2009. Another silver lining has been the low ATF prices…keeping all these things in mind we expect to have our first flight in August ‘09.”
What then are the difficulties start-up cargo operators face? Capt Pathak has one answer. The key difficulty has been raising funds for the launch. “Though the banks are sitting on large funds, they are reluctant to lend to the aviation sector… In addition most people do not understand the differences between a cargo airline and a passenger airline. People at times cannot differentiate between apples and oranges,” he said, and “this has created additional problems for us.”
Don’t count Air India out
Again, perhaps, the fund crunch has forced the country’s premier operator, Air India to put brakes on cargo plans. In a move that has delayed its air cargo ambitions for quite a while, the carrier has leased out its freighters. This, despite the fact, that cargo was a big revenueearner for the carrier.
However, Anita Khurana, director commercial and SBU (Special Business Unit) cargo head, was emphatic that, “Air India plans to continue with its dedicated air cargo business. There are a lot of false rumours about Air India’s cargo operations in the industry and I would like to make it very clear, that AI’s cargo business is going strong and we are not relinquishing any of our future plans,” she said.
Pooh-pooing the idea that Air India had lost out to competition, she questioned: “Why don’t we say, that Air India is gearing up to face this competition?” She pointed out: “Air India has been the first Indian passenger airline to have commenced dedicated freighter operations within the country and also to international stations.
Which other Indian passenger carrier have such freighters? Why does one not recognise this fact about Air India and appreciate us for this achievement?” she asked.
Khurana is certain that Air India Cargo will not only make major strides in the air cargo market, but also bring India into the global map with the development of the Nagpur (in the centre of India) hub. “Only when we dream to reach for the stars can we expect to reachthe clouds,” she said.
Ambitious plans at Deccan
That dream has led the country’s pioneer of low-cost flying, Capt Gorur Ramaswamy Gopinath to set up his integrated logistics outfit, Deccan Express Logistics (DEL).
The operations were supposed to start last year but it has been deferred to sometime in May-June 2009. Capt Gopi was recently quoted: “We will be the largest and double the size of existing industry players on day one.”
He has his reasons. With the background work almost complete, the second-time start-up entrepreneur has been able to get some big names to advise him. Topping the list is the iconic Ram Charan. In addition, DEL has a team of 180 led by CEO Jude Fonseka, who was formerly the MD of sales for FedEx in India.
Initial reports state that DEL will have a fleet of six purchased cargo aircraft, all converted – three wide-bodied A310s with 35 tonnes capacity each and three ATRs with capacities of 5.5-6 tonnes each (three more ATRs will join the fleet in course of time). The first A310 will be in the country by the end of February.
Enter Paramount
The downturn is, however, being used as an opportunity by the Chennai-based all-Embraer fleet Paramount Airways to boost its financial position by launching a door-to-door cargo service. The youngest chairman to head any carrier in India, Paramount’s M Thiagarajan brushed aside the economic downturn.
“Paramount Airways has a niche market leadership in the southern skies,” he said. “Paramount Cargo operations is a natural extension that will add to revenue generation. We have launched our time sensitive cargo with inbound and outbound flights to destinations like Chennai, Coimbatore, Madurai, Bangalore, Hyderabad, Trivandrum, Kochi, Vizag, Tiruchirapalli, Ahmedabad, Goa and Pune.”
The carrier has started with the belly space of its five aircraft with a capacity of 100 tonnes per day. Speaking about the groundwork that Paramount has done, Thiagarajan said: “We have a dedicated warehouse at the Chennai airport that is well equipped with scanners and other equipment. With maximum flights per day to all the sectors in the south, we offer a distinct advantage on the B2B platform.”
Paramount hopes to enhance its 100 tonnes a day load to around 300 tonnes a day by the end of next year. “We don’t foresee any difficulties as systems are already in place and we are confi dent that it will do well as we will be able to provide branded cargo service to the end-customers to transport materials in good shape with timely delivery,” addedThiagarajan.
Cold storage for some
Paramount and Capt Gopinath may be the lucky ones, but most of those who conceived plans to start cargo operations on projections that the air freight market would grow at 15 per cent per annum like Jet Airways, Kingfisher, the Hyderabad- based Flyington Freighters, Reliance Industries Ltd, Avicore Aviation Pvt. Ltd and Shreyas Shipping and Logistics Ltd have had to put their operations in cold storage. Perhaps, when the situation betters, there would be more takers for air cargo.
On their part, aircraft vendors continue to be cautiously optimistic saying that the long-term projections for the business are intact. Boeing, for example, mentioned in its 2008 Current Market Outlook (CMO) for India – published around September 2008 – that the country would need only 24 freighters in 2008-27.
Incidentally, this was the same figure that Dinesh Keskar, Boeing’s senior vicepresident, sales, had projected in 2007. The 2008 figures, Keskar had told this correspondent, were “rooted not only in near-term realities”, but also recognised the nature of a long-term forecast. He went on to point out that Boeing could “revise the cargo projections upwards in future. But certainly not in large numbers”.
Before the slowdown, the Planning Commission, India’s top economic and social planning body, had forecast that the country’s air cargo movement would grow at a compound rate of 11.5 per centbetween 2008 and 2012.