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Air Cargo Project Final PPT

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Air Cargo Project Final PPT

  1. 1. Study on Future Prospects of Air Freight / Cargo Industry in India & Required Policy Intervention Guide: Prof. G. Raghuram (Public Systems Group) Members: Peeush Kumar (PGP-2) Samdish Chumber (PGP-2) (Term IV) A Term Course Project On
  2. 2. Logistics sector has failed to keep pace with the growth India ranks 54 among 160 countries in LPI index Average logistics costs as a percentage of GDP in India as compared to other countries (Source: Report of the Indian Foundation of Transport Research and Training) 0 1 2 3 4 5 Customs Infrastructure International Shipments Logistics Quality and competence Tracking and tracing Timeliness S Africa China India Germany Comparison of India on individual LPI components (Source: World Bank LPI Survey 2014) 07-11-2014 2 ©IIMAhmedabad,2014
  3. 3. RailandRoadcarryabout87%oftotalfreighttrafficin2007 Rail, 36.07% Road, 50.13% Coastal Shipping, 6.08% Inland Water Transport, 0.24% Pipelines, 7.49% Airways, 0.02% Modal Share of originating freight traffic in Net Tonne- Kilometre (NTKMS) (Source: Planning Commission) •Air cargo at present constitutes around 1% of total cargo volume but carries around 29 % of total trade value. •Air cargo involves high costs with typical costs in the range of 4-5 times of road transport and 12-16 times of sea transport 07-11-2014 3 ©IIMAhmedabad,2014
  4. 4. AirCargomarketgenerallyconsistsofinternationaland domesticcargo Air Cargo Market Domestic Cargo Market Regular Service Express Service International Cargo Market Regular Service Express Service Market Segmentation of Air Cargo Market (Source: Frost &Sullivan) 07-11-2014 4 ©IIMAhmedabad,2014
  5. 5. AirCargomovementinvolvesseveralintermediaries Complexinteractionbetweendifferentplayersaddstodwelltimeat airports Various Stakeholders Involved in the Value Chain (Source: Frost & Sullivan) 07-11-2014 5 ©IIMAhmedabad,2014
  6. 6. AirCargoinIndia:OpenSkyPolicyEconomicGrowth 1995-96 2000-01 2004-05 2006-07 2010-11 Domestic Cargo 0.22 0.33 0.49 0.57 0.89 International Cargo 0.46 0.57 0.83 1.03 1.5 Total Cargo 0.68 0.9 1.32 1.6 2.39 0.22 0.33 0.49 0.57 0.89 0.46 0.57 0.83 1.03 1.5 0.68 0.9 1.32 1.6 2.39 Cargohandledinmillionmetrictonnes The Open Sky policy of government of India adopted in 1990s has led to tremendous growth in air cargo segment Cargo handled at Indian Airports (Source: AAI) 07-11-2014 6 ©IIMAhmedabad,2014
  7. 7. Majorityofdomesticandinternationaltradeiscarriedby6 majorairports 6,44,826 6,05,699 2,92,079 2,42,391 1,28,523 86,670 Mumbai Delhi Chennai Bangalore Kolkata Hyderabad Freight handled at Metro airports in tonnes in 2013-14. (Source: CRISIL) Mumbai carries the majority of cargo among six major airports. Out of total freight carried by major airports, Mumbai carried about 32% closely followed by Delhi with 30% 07-11-2014 7 ©IIMAhmedabad,2014 GAP
  8. 8. Mumbai,Delhi,Chennai,Bangalorehandlemajorlytointernational freights 28% 36% 25% 38% 64% 43% 72% 64% 75% 62% 36% 57% Mumbai Delhi Chennai Bangalore Kolkata Hyderabad Domestic Freight International Freight Percentage of Domestic and International Freight handled at Metro airports in Tonnes in 2013-14 (Source: CRISIL) Hence, establishment of cargo hubs at these locations for the transshipment cargo has to be expedited 07-11-2014 8 ©IIMAhmedabad,2014
  9. 9. Amongnon-metroairports,manyairportsareemergingascargo centres 0 10,000 20,000 30,000 40,000 50,000 60,000 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Freightintonnes Total Freight Handled AHMEDABAD TRIVANDRUM CALICUT JAIPUR COCHIN PUNE LUCKNOW PATNA GUWAHATI Total freight (domestic & international) in tonnes. (Source: CRISIL) Airports handling total freight (domestic and international in tonnes) more than 15000 tonnes per annum OR with a CAGR of more than 10% over 2006-07 to 2013- 14 have been shown here 07-11-2014 9 ©IIMAhmedabad,2014
  10. 10. Theamountofdedicatedcargoservicesascomparedtobelly cargohasbeenontheriseduetogrowthofaircargobusiness Year Scheduled Belly Cargo (%) Scheduled Dedicated Cargo Operator (%) 2000-01 88.7 11.3 2004-05 85.8 14.1 2009-10 82.8 17.2 (Source: DGCA) Data reveals that foreign players have been steadily increasing their market share in international freight reaching 83.9% in 2009-10 (Data Source: DGCA) 07-11-2014 10 ©IIMAhmedabad,2014
  11. 11. Outboundcargohasbeenmorethaninboundcargoinvolume butinboundcargohasbeengrowingatafasterrate Year Outbound Cargo Inbound Cargo Total 1995-96 296 163 459 2003-04 435 266 701 2010-11 842 661 1503 CAGR 1995-96 to 2003-04 7.22% 9.78% 8.23% India’s Outbound and Inbound Cargo Traffic in ‘000 Metric Tonnes (Source: MoCA, 2012 Report) 07-11-2014 11 ©IIMAhmedabad,2014
  12. 12. Incaseofexportsbyvalue: USA,UAEandChinaarethemajorexportdestinations, WhileChina,SaudiArabiaandUAEarethemajorsourcesfrom whereairfreightoriginatesandreachesIndia Middle East, 43% Asia Pacific , 23% South and Central Europe, 14% UK, 10% Rest of the world, 6% US, 2% Canada, 1% Latin America, 1% In case of air cargo by volume • Middle East (43%) and Asia Pacific (23%) are the major destination countries from India. • The major destinations in Middle East include Dubai, UAE, Saudi Arabia. • The major destination from Asia pacific include Hongkong, China, Singapore.Country-wise Distribution of International Cargo (Exports) by Volume in FY 2013. (Source: Frost &Sullivan) 07-11-2014 12 ©IIMAhmedabad,2014
  13. 13. Shareofaircargoisminisculeintermsoffreightbyvolumebut intermsofvalueitisquiteappreciable Cargo Business Value v/s Volume Comparison. (Source: DGCI&S, MoCA, 2012 Report) Air Cargo is responsible for carrying high value but low volume and time constraint goods. It is imperative to contain any pilferage in transit and storage 07-11-2014 13 ©IIMAhmedabad,2014
  14. 14. Theairliftedcommoditiesrepresentedabout30%ofthetotaltrade inFY2013reaching$US233.69billion 410.39 361.09 425.32 498.84 542.77 136.42 167.98 196.2 239.58 233.69 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 CommoditiesTradeValue ($Billions) Commodities Potentially Non-Airlifted Commodities Potentially Airlifted 31.7% 31.6% 32.4% 30.1% (Source: Frost & Sullivan) Potentially airlifted Potentially not airlifted Precious metals and jewelry, textile and textile articles, perishable goods, pharma and medical products, electronics and engineering goods, leather goods and handicrafts. Mineral products, metals and articles of metals, transport equipment etc. 07-11-2014 14 ©IIMAhmedabad,2014 25%
  15. 15. Airliftedcommoditiesareexpectedtoreach$US315.42billion byFY2018(Forecast) 136.42 167.98 196.2 239.58 233.69 240.7 252.73 272.95 294.79 315.42 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Value($Billions) Commodities Potentially Airlifted (Source: Frost & Sullivan) 07-11-2014 15 ©IIMAhmedabad,2014
  16. 16. 52% 8% 13% 11% 4% 7% 5% Break up of airlifted commodities FY 2013 Precious metals and jewellery Pharma and medical products Animal and vegetable products Prepared food stuff and beverages Textile and textile articles Electronics and engineering goods Others Online Retail Order Goods, 20% Courier Documents, 20% Perishable Goods , 10% Pharma & Healthcare, 9% Electronics & Electrical Goods, 8% Auto Components & Spares, 8% Gifts & Stationary, 6% Jewellery, Fashion Accessories & Luxury Goods, 5% Textile & Garments, 5% Trade Samples, 4% Micellaneous, 5% CurrentScenario Precious Metals constitute of the majority of airlifted commodities. This share is expected to decline as animal & vegetable products and pharma categories expand In domestic cargo, online retail goods have emerged as a major segment over the past few years and mainly consist of electronics and electrical goods, jewelry, fashion accessories and luxury goods, and textile and garments. (Source: Frost & Sullivan) 07-11-2014 16 ©IIMAhmedabad,2014
  17. 17. AirCargosectorisexpectedtogrowataCAGRof11.2%over next20years 0 5 10 15 20 25 30 35 40 2010-11 2015-16 (E) 2020-21 (E) 2025-26 (E) 2030-31 (E) CargoHandledinMillionMetricTonnes(MMT) Forecast of Air freight Traffic throughput at Indian Airports Domestic Cargo International Cargo Total Cargo (Source: MoCA, 2012 Report) 07-11-2014 17 ©IIMAhmedabad,2014
  18. 18. Thegrowthofcapacityislaggingbehindtheaircargotrafficgrowthin absolutetermsinthenearfuture. Thiscallsforincreaseininvestmentsinthecapacitybuildingfront 5.1 5.7 5.9 6.1 6.2 6.4 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 CargoHandlingCapacity(Million Tonnes) Cargo Handling Capacity of Indian Airports (Forecast) (Source: Frost & Sullivan) 07-11-2014 18 ©IIMAhmedabad,2014
  19. 19. Airport Cargo Handling Capacity (Tonnes) Area for Cargo Operation s (sq. meter) Area for Perishabl e Cargo (Sq. meter) Internationa l Cargo (Million Tonnes) in FY 2013 Domesti c Cargo (Million Tonnes) in FY 2013 Total Tonnage Handled (Million Tonnes) in FY 13 *Throughpu t Efficiency (Tonnes / Sqm) % Utilizatio n of capacity CSIA- Mumbai 1,000,000 108,684 2,482 0.45 0.18 0.63 5.7 63.0 IGIA- New Delhi 2,200,000 73,643 1,127 0.36 0.19 0.55 7.3 25.0 Chennai 1,102,373 33,100 - 0.24 0.08 0.32 9.7 29.0 RGIA- Hyderaba d 150,00 14,330 - 0.04 0.03 0.07 4.9 46.7 BIA- Bengaluru 360,000 29,540 - 0.14 0.08 0.22 7.4 61.1 Kolkata 303,293 21,096 742.5 0.04 0.08 0.12 5.5 39.5 *Throughput efficiency is calculated without taking area for perishable cargo into account Comparison of Indian Metro Airport on Throughput Efficiency and Capacity Utilization.in FY 2013 (Source: MoCA, 2012 Report, Frost & Sullivan) Basedontheannualthroughput,Chennaihasthehighest throughputefficiency(asperWBBenchmarks) 07-11-2014 19 ©IIMAhmedabad,2014
  20. 20. DwellTime:Animportantparameterforefficientair freightlogistics Airport Dwell Time- Exports (Hours) Dwell Time- Imports (Hours) Sharjah 4 4 to 8 Singapore 6 3 to 6 Frankfurt 6 NA Incheon 2 to 3 2 to 7.5 Dubai 2 to 3 2 to 6 HongKong 3 to 6 4 to 8 Delhi 36 119 Mumbai 48 96 Chennai 48 72 Hyderabad 12 36 Kolkata 48 72 Bengaluru 36 48 Global benchmarks of dwell times as compared to Indian Airports (Source: MoCA, 2012 Report) Several factors which contribute towards the high dwell time at Indian airports include: •Lack of adequate facilities and trained manpower •Complicated custom procedures •No automation •Congestion created due to free period (72 hours) policy •Less availability of processing space due to multiple agencies occupying lot of spaces in cargo terminal •No standardization of process •No synchronization among the multiple agencies 07-11-2014 20 ©IIMAhmedabad,2014
  21. 21. Key Issues Infrastructural Bottlenecks Possible Reasons Inadequate and Overloaded facilities • warehousing, parking bay, cold storages, truck parking terminals, connecting roads, etc • inappropriately planning for express & normal cargo operations, volume & mix of cargo, nature of cargo-palletized or loose Lack of adequate screening facilities and trained manpower • Old machines, problems of breakdowns, unable to process heavy and palletized cargo • Unavailability of on-site service engineers & trained manpower in dangerous goods case Lack of off-site facilities for cargo processing • AFS (Air Freight Station): lack of custom procedures, legal frameworks, conflicting views: delays due to congestion replaced by delays due to extra operational steps • Existing ones (ICD mulund, virugambakkam) are non operational due to technical issues Lack of special cargo facilities • Not all airports operating possess cold storages- integration of cargo difficult Air side and Land side infrastructure • allotment in unused old buildings near the airport, EDS companies required to invest, short-term tenure, low commitment & service levels Other Important Issues: • Delays due to examinations- not moving shipments until all are marked • Documentation process- cumbersome documentation & duplication across various agencies • Congestion - due to practice of cargo tendering during peak hours 40% (0800-1400 Hrs), 60% (after 1400 hrs) • Unavailability of offices of multiple agencies at the site- Drug controller, Port Health Officer, Quarantine dept 07-11-2014 21 ©IIMAhmedabad,2014
  22. 22. Case: SardarVallabhbhaiPatelAirport ,Ahmedabad • Key Facts: • 8th busiest airport in terms of passenger traffic • 4 terminals : domestic, international, one back up and cargo • GSECL (Gujarat State Export Corporation Ltd.) maintains and operates the cargo terminal of SVP airport • 45000 square feet area • 3 level stacker on mezzanine floor • Major Cargo: Pharmaceutical & Engineering goods • Facilities: up-to-date & approved by EU as RA3 complaint warehouse • Pile up Issue: • Airlines having issues with hubs/destinations • Customs holding up the cargo for queries • Documentation problems • Typical Cargo Documentation Process: • Filling of shipping bill by custom agents • Processing by GSECL, data transferred to EDI servers • Challan generated & printed, handed to agent to offload goods • Cross verification of goods against details mentioned in the challan • Examination by cutoms • After clearance from customs, agents handover the documents for processing it to airlines • Airlines manifest’s the cargo for onward shipment towards the destination 07-11-2014 22 ©IIMAhmedabad,2014
  23. 23. KeyRecommendations Integrated approach for aviation industry infrastructure • Considering overall supply chain while planning, long term investments, multi-agency dependent industry, common platform & transparent processes Creating of central systems • Central systems, verification of various agency vendors, simplification customs procedures, database creation for cargo facilities Creation of cargo hubs • Increase in transshipments, boost in trade & economy, location advantage • Establish major & minor hubs (Exhibit) Dedicated facilities for different types of cargo • Minimum mandatory requirements to be established for all airports- first step in integration of cargo across country • Creating additional facilities in accordance with the economics of the region (hyd-pharma, mum-sea) Process standardization & accountability • standardization of process and procedures across all airports & across complete supply chain • Clear standards of performance, Education & training infrastructure • Inadequate manpower, un-attractive for talented people • Establishing Nat. Avi. Council of India for skill dev. Programs Technological upgradation & easy financing • Cargo operation is investment intensive- availability of easy financing for technical investments , modernization & upgradation Offsite facilities • Globally in operation, successfully implemented for ports in India Regular audit & use of unused spaces • For adequately utilizing the unused spaces as in Ahmedabad & Chennai Synchronizing Working hours or 24X7 operation • unsynchronized working hours among various agencies created problems of pile up during peak time of the day Reducing free period • reducing the free period from existing 3 days to further below & changing the tariff structure (revenue + push for clearance) 07-11-2014 23 ©IIMAhmedabad,2014
  24. 24. PotentialMajor&MinorCargo Hubs 07-11-2014 24 ©IIMAhmedabad,2014 Major- Delhi, Mumbai, Chennai, Bangalore, Nagpur; Minor- Lucknow, Guwahati, Kochi, Ahmedabad The yellow circle indicates the potential cargo network in India. *White dots indicate the cargo hubs (Source: www.mapsofindia.com)
  25. 25. Thank You 07-11-2014 25 ©IIMAhmedabad,2014

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