Revolutionising Air Cargo
The birth of civil aviation is attributed to air cargo and mail. In the beginning,mail and air cargo were the important elements of early air carrier service than passengers .
Today air cargo plays a vital role in the development of world trade. In fact, one of the worlds leading cargo market observer Walter H. Johnson, Jr. past president of The International Air Cargo Associa-tion and 1995 recipient of the Air Cargo World Lifetime Achieve-ment Awards, predicts that the 18th Century was the era of full-rigged ship and waterborne commerce, the 19th Century the age of the steam-powered railroad, and the 20th century the century of motor carrier and the 21st Century, the century of air cargo .
Experts predict the worlds freighter fleet will double by the year 2014 with the biggest demand coming in the large 77+ tonnes range. Currently 35 to 40 percent of world trade by value is carried by air cargo. This is expected to increase substantially. The Boeing Current Market Outlook for World Air Travel and Airplanes Supply Requirements ( March 1996) predicts that the air cargo market will grow at 6.7 per cent per year between 1996 and 2015. This growth is a result of adaptation of better inventory management techniques, deregulation and liberalisation, national development programmes and never ending stream of new air eligible commodities.
Closer home, air cargo plays an important role in international trade. In the liberalised economy, both export and import have a very important role to play. Air cargo infrastructure becomes essential for growth of both import and export. It is estimated that only half a per cent of India's export by volume is transported by air, while in value terms, it is 42 per cent of India's export and is expected to grow at the rate of 10 to 12.5 per annum. Bulk of gems and jewellery, textiles, leather, perishables and pharmaceuticals in export value term are carried by air today. In spite of low rate of export growth this year, the long term potential for air cargo growth are good.
A study done by Foundation for Aviation and Sustainable Tourism (FAST) in April 1996, the total cargo handled was 6.8 lakh tonnes. International cargo out of this was 4.7 lakh tonnes and the domestic 2 lakh tonnes. FAST has projected a growth rate of 9.9 per cent for the ninth plan period. International cargo is expected to grow at 12 per cent and domestic at 4 per cent during this time.
The air cargo industry is rapidly evolving and gearing up for this anticipated growth. On the international side, the air cargo market is dominated by international carriers. The open skies policy announced by the government in 1991 permitted free entry of freighters into India. This was beneficial as the capacity has increased significantly. Without this policy, the growth in export and import achieved would have been much lower. One of the shortfalls of this policy has been ad hoc entry of carriers into India without any obligation to invest in any infrastructure or long term commitment for the development of cargo activities in the country. Foreign carriers are adapting to an opportunistic policy of selective entry during peak periods.
The policy also discriminates in favour of Indian privates carriers as it does not permit them to operate on a scheduled basis from India to other countries. Demand supply mismatch continues to plague the industry with wide rate fluctuation. Exporters are not in a position to forecast the rates affecting their profitability.
Government needs to recognise these anomalies in the policy and undertake suitable amendments. Considering the key role played by air cargo industry, it should be recognised as a infrastructure industry and offered similar benefits. Various infrastructure bottlenecks continue to hamper the growth of air cargo. There is an urgent need for simplification of documentation. Warehousing facilities need to be established. Cold storage infrastructure needs to be augmented to handle the anticipated growth in perishable exports. Government is undertaking many initiatives in this direction, with projects on EDI, Freight cities and cargo terminals under various stages of completion.
While the government needs to play its part, the industry players need to adopt more customer oriented approach. The air cargo industry has often been accused of indifference to its customers. A recent study conducted by UNISYS came out with a startling finding. According to the study the elapsed time of an average cargo shipment still took 6 days from origin to destination. A similar study done 25 years ago showed same elapsed time. Closer home, the slowdown in export has forced the government to study the dwell time. In August, the government set up an Export Promotion Board. The Board decided to take immediate steps to ensure quicker movement of air and sea cargo. It has initiated many steps to meet the target of export cargo clearance within 12 hours and import cargo within maximum of 24 hours.
As customers become more demanding and the market becomes more competitive, the industry will have to undergo significant changes to improve service levels. The customer is demanding faster transit times and information about his shipments. This has resulted in the growth of air express. Air express offers faster door to door delivery and track and trace. By controlling the entire door to door process, air express, offers higher level of reliability than conventional air cargo.
Today air express has emerged as the fastest growing segment in the air cargo market. According to Boeing forecast, international air express is expected to increase its share of total cargo market from 4.7 per cent in 1994 to 31.4 per cent in 2014. This is in line with what happened in the United States domestic market. Beginning with a 4 per cent share of the US market in 1977, express has averaged 25% growth per year and claims close to 60 per cent of the US domestic market today. The same effect is likely to be witnessed in the Indian domestic market. Express cargo is emerging as a separate distinct segment. Industries like office automation, telecommunication, engineering spare parts, pharmaceuticals and perishables are using express cargo increasingly in the domestic sector. Integrators in both international and domestic market are raising customer expectations of service.
The forward looking airlines are working closely with freight forwarders to streamline processes. Airlines are also increasingly developing and launching door-to-door services. Logistics is another area where airlines and large freight forwarders are working together to provide customised solutions. Information technology is also helping airlines and freight forwarders to improve their service. Track and trace has become a universal feature now. In the years to come, the airlines and freight forwarders will strive to integrate their services to offer more reliable service.
Almost all leading players have established their presence on the net. From the initial brochure like use of internet, it is today becoming an interactive communication media. Sites are offering track and trace, booking of cargo, rate quotations, flight schedules, customs clearance information and variety of other services. Internet is becoming the media of choice for offering high quality customer service at lower cost. The Indian air cargo community has been fast to realise the potential of this media and all the leading players have established their presence.
Benefiting from all this is the customer. Custo-mers today are looking at substituting other means of transportation with air cargo as it offers fastest and reliable means of transportation. As customers become more demanding, marketers are realising the importance of logistics. Companies are evaluating total market response time. In many product categories like computers, electronics and durables the product life cycle has shrunk. The product life cycle of a computer is today estimated to be 7 months. This kind of a market means shorter production runs and frequent stock replenishment. The solution is air cargo. All trends indicate that indeed 21st century is likely to be the air cargo century.
General Manager marketing, Blue Dart Express Ltd. The views expressed by him here are personal and do not represent the view of the organisation he represents.)