Air cargo market in a tizzy as Jet grounding drives up delivery costs

Grounding of Jet Airways has hit the entire air cargo market, leading to logistics players running helter-skelter to get their cargo consignments delivered, although at a higher cost.

“Jet used to carry 10-15 per cent of the total air cargo, which was a high-yielding cargo. With the airline halting operations, it has obviously brought imbalance in the market,” Vijay Kumar, chief operating officer (COO) at Express Industry Council of India (EICI) told Business Standard.  

EICI is the apex body of leading express companies, including Aramex, Blue Dart Express, DHL, DTDC, FedEx, First Flight, Gati and UPS, among others. 

The nature of Jet’s aircraft routes was such that its early morning flight departures to some of the key markets were critical for logistic players as they ensured timely delivery of cargo. 

With the operations halting, there is a grave impact leading to delivery delays, said logistics industry officials.

Also, Jet being one of the largest cargo operators in the country, had flights to places where a major city was connected to a small or tier-I city. 

Those direct flights have been discontinued and logistics companies have to take the ‘via-flight’ option. This is means the transit time has increased, leading to delivery delays yet again, the officials said. 

Jet Airways has temporarily suspended all flight operations. In October 2017, it was the second-largest airline in India after IndiGo with around 18 per cent passenger market and operated flights to about 50 destinations.

“We as a major player, had relations with Jet and had back-to-back agreements with the airline. We catered to large volumes on that basis. With the airline shutting operations, it means that those agreements have no value and we have to find various ways to substitute those agreements with another option. This is the challenge now,” said Abhishek Chakraborty, executive director at DTDC Courier & Cargo.

Overall, on a blended-cargo basis, DTDC had a 12-13 per cent exposure to Jet Airways. In the premium cargo segment, the company had an exposure close to 18-19 per cent. Life-saving drugs, urgently-needed equipment, healthcare products, pharmaceuticals, mobile phones, raw material needed for pharma industry, ready-made garments and electronics items, among others, are some of the premium category cargo handled by the air cargo segment. 

Apart from delays in delivery of cargo, cost escalation is another area logistics players are grappling with at present. 

“There is a more indirect price increase in cargo since other airlines have already hiked their cargo rates. At present, the cargo price increase is about 4-5 per cent,” said Chakraborty. “We are waiting for the system to course correct and settle so that the real price scenario emerges then,” he added.

SpiceJet, Indigo, Go Air, Air India, Air Asia and Vistara are some of the other domestic airlines trying to tackle the spurt in cargo demand with their capacity. 

Meanwhile, some other logistics players have been more proactive in handling the situation.

“We had gauged this situation and made a switch (to other airlines) in December itself. We figured that something is going on when we were unable to send our entire cargo in one single flight of Jet, which was our usual practice,” said a senior official with BLR Logistics.

Missing the load

• 10-15% of total air cargo carried by Jet
• 4-5% cargo costs escalated with delays in delivery
• Logistics firms feel real cost picture will emerge by mid-May