FROM MAGAZINE: Indian Air Cargo awaits a paradigm shift
Indian government’s decision to disinvest Air India will hopefully bring the debt-ridden airline on track. Air India has the capacity advantage over a network combined with 58 domestic and 29 international stations. Abhay Pathak, Executive Director (Commercial), Cargo Division, Air India, believes that Air India cargo will grow only if there is a freighter operation. In an exclusive interview with Indian Transport & Logistics News, Pathak speaks to Rashmi Pradhan on cargo trends in India, vision for Air India cargo and much more…
What kind of transitions have you brought in the cargo operations of Air India after you took charge?
I joined Air India cargo around seven to eight months ago and have been focusing on how to make things better. Everyone in the organisation is working in a conventional manner which is not their mistake. When I brought about the changes, obviously the team was uncomfortable. But when they realised that these changes are doable and resulted in getting revenue and achieving the targets, the team slowly started building up. Under the leadership of former Air India chairman Ashwani Lohani, cargo division received its due attention, as he realised that with little efforts, cargo can generate more revenue than passenger. At most of the international destinations (Korea, USA, Europe, Australia), we have appointed a GSA based on MGR (minimum guarantee revenue) policy. This concept has been implemented around four months ago and resulted in positive response and increase in revenue manifold. I have brought about many schemes to facilitate and motivate the distribution channel.
Elaborate on the schemes for distribution channels?
We are directly establishing relationship with corporates and incentivising them to convert them as loyal customers of Air India. We have launched many incentives to motivate the freight forwarders, small agencies and end users. If you make the business simple (with limited terms and conditions) there is always a room for growth. The objective of the various schemes (block a space, own a flight, monsoon maaza etc.) is to maximise revenue on each flight. There was no commission/incentive for dangerous and valuable goods. Both are high revenue and high yield segments. If I cannot motivate the freight forwarders then they will not come forward to do business with us. With these changes and initiatives things are going in the right direction.
What are the new initiatives in the pipeline?
We are aggressively thinking of developing a City Cargo concept at tier II and III cities. The connectivity from city to airport is a problem in small cities, hence we are looking at a single window facility wherein an agency will be hired to transport the cargo from the city and put on board and vice-versa. In addition, we are thinking of launching a mobile app for end users, for which bids have been invited. A complete state-of-the-art mobile app wherein the cargo can be tracked, traced as well as barcoding can be done. The selection of party will happen in the next three months. We want to make the business transparent and digital.
Please throw some light on the cargo trends in India.
Not much attention has been given to the cargo sector in India. We have started too late as compared to other countries. The logistics and infrastructure are the biggest problems in India. Most of the airports are not well equipped with cargo handling facilities. In our country cargo is not considered as a core product but a secondary product. The customer opts for air services due to the speed with which it delivers. Compared to passenger side of business, cargo will generate more profits in terms of revenue vs expenditure, if considered seriously. So far none of the Indian carriers are operating a freighter. If you do not look after your customers then someone else will. The entire cargo is taken away by most of the international players and, certainly they must be making money.
Wherever a new airport is built, the old airport is being converted into cargo hub without any proper infrastructure. The space has not been designed or allocated for cargo. There is monopoly at most of the domestic and international airports in the country as far as cargo handling is concerned. The warehouse management should have been more competitive or left with the airlines to run it. That is the prime area of concern. The warehouse management charges are quite expensive. The warehouse at our airports are handled by Air India and we don’t charge for it, that is our USP in the domestic sector. The other airlines depend on airport operators or third party (appointed by the airport) on revenue sharing basis. At the smaller airports, attention is not given to cargo, resulting in primary cargo business of 70-80 percent from major metros. These smaller airports need infrastructure.
Although there is a growth in the market, the yields are going down due to unnecessary competition between the airlines. There is a need for stability in the market and require a paradigm shift in cargo operations and we are working on that.
Going forward what is your vision for Air India cargo?
Air India has seamless connections and has adopted a hub and spoke model of operations. Air India has direct connectivity to five-six destinations in the US. We connect to tier II and III cities in India directly to the US. We are a leading player in Europe from India. This helps us to build up our cargo network.
Air India cargo will grow only when we have a freighter operator. We are bringing cargo from all corners of India but the gateway is choked. We cannot carry more than 10 tonnes. We are examining the possibility of outsourcing Air India’s freighter operations (we will not make any investment). We are not looking at operating our own aircraft. There are many freighters who want to go for such arrangements. Air India could take a lead in this market and start operations with the US and Europe route. I feel there is a potential requirement. The demand needs to be created. We need to create perceptions in the minds of people. We need to be competitive in the international market. We are the largest airline catering to the e-commerce sector. The business opportunities are great. One must design, fit in, create a perception, build up a belief and make profitable returns. The bottom line is profits and profit comes not only from revenue but also cost. One should be conscious of cost. You may have revenue if the cost is high that doesn’t make sense.