Cargo Hub

Forging India’s Cargo Might

AAI Focus

May 3, 2017

/ By

AIBM

April - June 2017



Air cargo represents about 10 pc of the airline industry’s revenue

Air cargo represents about 10 pc of the airline industry’s revenue

The aviation industry is lending impetus to a rapidly growing Indian economy. And, to further this upward curve, the industry is emphasising on logistics and cargo movement, within the country and beyond. With ambitious plans in the pipeline, India has reasons to be optimistic.

The strong relationship between growth in international trade and logistics infrastructure is widely acknowledged. Growth in trade-induced requirement for supporting infrastructure, while availability of infrastructure at competitive rates, promotes trade and improves global competitiveness of the country. Availability of infrastructure is also a key determinant for foreign direct investment (FDI) inflows. In developing countries like India, an efficient logistics infrastructure can reduce cost of transportation, which, in turn, can contribute directly to global competitiveness of the country. Efficient logistics industry acts as an economic catalyst by opening up new market opportunities, moving products and services with speed and efficiency.

Logistical Boom in India

The demand for air cargo transportation has increased significantly over the last few years, because product life cycles have shortened and demand for rapid delivery has increased. Changing business models, such as Just-In-Time Manufacturing and global outsourcing have contributed to the rapid growth of air cargo logistics business. In such a changing business environment, where speed-to market is a competitive imperative, movement of inventory is no longer viewed as a compartmentalised process. Rather, the sourcing of inputs, parts and components and the delivery of final product are all viewed as a continuous value-adding-chain. Efficient supply chain management, therefore, offers significant benefits, including lower inventory and intermediary costs; and, simplicity in order placement, delivery and management of suppliers and customers. These benefits directly contribute to making business more competitive.

Air cargo represents about 10 pc of the airline industry’s revenue. As 35 pc of the value of goods traded internationally is transported by air, air cargo is a barometer of global economic health. The fortunes of the transport and logistics industry are closely connected to the economic cycle. When economic activity is buoyant, demand for goods and services inevitably translates into higher demand for transport and logistics services.

Vizag Leading the Way

With an increase in the number of international flights at the Visakhapatnam (Vizag) International Airport, air cargo operations are expected to take off shortly. Nearly 50 flights operate daily to and from Vizag Airport, which will soon carry pharmaceuticals, machinery, spare parts, gems, jewellery, seafood and apparel. Domestic air cargo operations are already in full swing and international cargo operators are expected to soon start from a full-fledged cargo terminal at Vizag Airport. AAI has converted the old Pac Terminal into an integrated air cargo terminal to handle cargo operations, which has air-side/city-side connectivity and adequate parking space for cargo carrying vehicles.

While the airport handled nearly 1,107 tonnes of domestic air cargo in 2010-11, it increased the quantum to 1,823 tonnes during 2013-14. But, it fell to 1,244 tonnes in 2014-15, which is attributed largely to the disruptions caused by cyclone Hudhud. However, the tonnage has increased to 2,935 metric tonnes during the year 2015-16, which is a 136 pc growth, compared to the year 2014-15. Most of the domestic cargo is shrimp and frozen seafood, but, the last two years have also seen a spurt in merchandise from e-tailors using air freight. Domestic air cargo of 65-70 pc is routed to places such as Chennai, Hyderabad, Bengaluru and comprises of shrimp and frozen seafood. Expansion is the Name of the Game Air cargo towards Jaipur and Ahmedabad are expected to go up in the coming days. Three airlines – AirAsia, SilkAir and Malindo Air – connect Vizag with Singapore and Kuala Lumpur. There is a high demand in the pharmaceutical and seafood sectors, at present, which can be handled by these airlines. Most air cargo is shipped either to Chennai or Hyderabad, from where it is flown to international destinations. A direct connection from Vizag will also result in a drop in costs for customers when the international cargo facilities are put in operation. Presently, the city has CFS by Container Corporation of India, which is developing a huge container park in an area of 100 acres near the airport. There are very good prospects for more CFS and ICD as container traffic is eco-friendly and cost effective. The concept of Cargo Hub in India could be successfully launched by jointly working for the elimination of regulatory impediments, simplification of rules, regulations and procedures, abolition of obsolete practices, development of infrastructure and adoption of best practices in air cargo logistics supply chain. Vizag Airport has a huge potential to become a trans-shipment hub, given its geographically advantageous location.

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