Looking to Take Back Foreign Capacity

Imagine, for a moment, you operate a national airline. It's unsetting to look around -- in your own country -- and see how aggressively foreign carriers, are expanding cargo capacities, taking full advantage of your country's export boom.

You would probably decide now's the time to implement you own plan to get a piece of the action... and that is just what Air India is doing, launching its own freighter operations next month to regain its market share, which had been 30 percent in the early '90s, reported the Hindustan Times.

The first all-freighter aircraft, a conversion of an A310 passenger aircraft that will be deployed in the Kerala-Gulf sector, is a major component in regaining that all important market share. Air India announced the official arrival of the plane Tuesday.

Over the next three years, Air India plans to have a fleet of 10 to 12 cargo aircraft servicing the Gulf, the US, and Far East markets, with additional capacities to be leased in the future, according to Air India officials.

"India has been experiencing an upsurge in the import-export market," said Air India director finance and spokesman S. Venkat. "This is a step taken to cater to the growing import-export demand. There is lot of demand for exports of leather, flowers, vegetables and fruits, and high-value imports."

A full-fledged cargo operation can also improve the yields without the hassle of passenger operations.

"Currently cargo yield is 40 percent of the passenger yield, and passenger operations are always [more] rewarding than cargo service. But the yields can match, provided the load factor is high in an all cargo set up," added Venkat.

The break-even mark in passenger service is 65 percent load factor while it is higher, at 75 percent load factor, for cargo, reported the Hindustan Times. Cargo operations airlines see better revenue from transportation of high-value technology equipment rather than from perishables.

The advantages of cargo operations, in this case phasing out older aircraft from passenger operations, can be fewer technical snags that passengers hold the airline accountable for. Once newly-ordered Boeing aircraft join passenger operations, Air India will convert some of its Boeing 747-300 combi-aircraft into freighters to satisfy the European market.

Cargo operations also require fewer crew and maintenance issues are comparatively less.

Air India's current market share is 8 percent of imported cargo and 11 percent of exported cargo.

The Air India venture is in line with the government's liberalization policy in the cargo sector to address the problem of demand supply gap. Anticipating a boom in the organized retail sector, the government is also looking at raising the limit for foreign direct investment (FDI) in the air cargo sector from 49 to 74 percent.

In a recent market outlook for the next 20 years, Airbus said India's dedicated freighters will grow from the current eight to around 165 aircraft by 2025.

FMI: www.airindia.com, www.mapsofindia.com/maps/india/major-airports.html