Pramod Gupta has recently taken over as the Executive Director, Sales and Marketing for Air India Cargo and here he tells us the future of the Air Cargo Industry in India and how Air India is preparing itself to address the current boom in the Air Cargo Industry.

Tell us about Air India Cargo(AIC) and your role as the Executive Director?
Air India Cargo or AIC is a stand alone strategic business unit which is part of the six SBUs(Strategic Business Units) created under the merge entity of the erstwhile Air India and Indian Airlines called NACIL. NACIL is the acronym for National Aviation Company of India. AIC is a profit centre in itself and the responsibility is to generate cargo and tap the existing potential of cargo in the world today, both on the domestic as well as the international front. SBU Cargo is headed by Mrs Anita Khurana and I am an Executive Director, Sales and Marketing and my portfolio is to promote the AIC SBU both within India as well as on the international front. Our long term plan as AIC is to make it a separate profit centre and everything that we do will be evaluated in terms of cost and profit. Till the time the merger is fully in place, within the organization NACIL has two brands which is NACIL A and NACIL I where A stands for Air India and I for Indian Airlines although to the outside world we are known as one common entity which is NACIL.

What is the percentage of revenue that an airline earns from the Air Cargo segment?
The revenue from Air Cargo is generally a small percentage with the exception of airlines like Lufthansa, Air France, Singapore Airlines and similar carriers who have been in the freighter business for a longer period. Most of the carriers have not given due importance to cargo as cargo is always interdependent on the passengers' capacity. Cargo is invariably a low priority for an airline as the highest priority are the passengers due to the higher yield and this followed by passenger baggage and thereafter whatever space is left is taken by cargo. As a result cargo has never been a dominant role player in the revenue of an airline except for airlines who operate dedicated freighters or all cargo flights whether they are companies into cargo traffic only or even commercial airlines who have an independent fleet of aircraft dedicated for cargo handling only. Such airlines definitely have a larger revenue share from cargo traffic.

It is very difficult to tell you the exact percentage of revenue as it would be dependent on various factors which would include the routes, the marketing strategy of airlines, how many aircraft, the type of aircraft being used for dedicated cargo services and so on. However, generally speaking for an airline which is into passenger services it would range from 5 % to 6% and go up to a maximum of 10%. It is the endeavour of airline to carry high density cargo just as you have airlines trying to sell more of the first class and executive class. Obviously, not every cargo is high density and during the peak season there is problem of capacity as the passenger loads are also higher and in the lean period there aren't enough passengers. Hence, unlike passengers, cargo is unidirectional business. It's only lately that the imbalances are being resolved to a large extent. Otherwise outgoing exports were higher than imports and because of the high cost of air transportation, exporters and importers preferred using sea transportation which is unlike the passenger side of business where a passenger wants to reach a destination in the shortest possible time, have a meeting and come back. Cargo industry has always faced a problem of having higher exports than imports out of India and as a result they try to balance it out and they lose, thus it is not economically viable. So as an airline one has to look at alternatives, such as high density cargo, courier business , postal mail, perishables which are going to result in high yields.

Currently Air India operates how many freighter flights and what are the plans of Air India to address the growth in the Air Cargo Industry?
At present we are operating freighter services for Department of Post & Telegraph (DOPT) with one Boeing 737- 200 aircraft. That aircraft is operating between Kolkata, Guwahati, Imphal and Agartala which is in the North East area of India. We have plans to operate 5 freighter services with Boeing 737-200 Aircraft in joint venture with Gati Ltd with Nagpur being the hub of which one Boeing 737 has already commenced operation on the Delhi-Mumbai-Bangalore-Delhi route. Nagpur is going to be identified as the nodal hub where aircraft from Mumbai, Delhi, Kolkata and Chennai will come in, discharge pallets, exchange pallets and cover the entire network across India.

Nagpur has been the focal point and is ideally located around Central India and is being identified by both Boeing and Airbus to start ventures in the area. It has the first freighter service and mail service which has started from Nagpur. We also have two Airbus 310 passenger aircraft which were converted to freighters in late 2006 and from June/July of 2007 we are operating these aircraft on the Chennai- Mumbai- Bangalore route to Europe via Dammam. These are the present operations.

How much is the Air Cargo Industry grown and what is the estimated growth of the industry in the coming years and what are the major challenges?
We expect the market to grow ex-India at the rate of 11% per annum. India and China are emerging market and this growth will continue @ 11% p.a. until 2010-11 and thereafter by about 12% until 2015-16. The open sky policy has always been beneficial but there are pitfalls. The benefits are whether its passenger or cargo, is that the consumer has better options, the quality of service overall has improved, it is generating employment and the reach within the country is improving as the aircraft don't just fly the major metros but to smaller towns as well. And as the passenger traffic has grown in the last couple of years, there is greater capacity for cargo as well and all this augurs well for the country and the economy. The pitfalls, of course is that infrastructure has not kept pace with the growth that we have seen which results in congestion not only on the ground but also in the air resulting in higher fuel burn. Then there is shortage of Pilots, shortage of qualified staff and today with the competition, the prices are going downwards whereas the fuel prices are on the rise resulting in the yields going down. So the challenge is to have lower expenditure for if airlines can't increase revenues given the competition and to reduce expenditure one has to lower salaries and if salaries are lowered there is an acute shortage of qualified staff and qualified staff would like to move on to jobs where they are better remunerated and this becomes a vicious circle. As we are part of the circle, we are contributing in our own way to overcome these difficulties. There are training institutes that are coming up who are training graduates and people who cannot make it for the traditional academic programmes due to limitation of seats in reputed colleges. When you put all these factors together, students do find opportunities in these service industries. Before there weren't institutes worth its name but today you have some very good institutes where people have opportunities to learn about various segments of the aviation industry, be it passenger or cargo.

What is the growth of the Air Cargo segment vis-à-vis the Passenger Segment especially in India?
The passenger segment is definitely growing at a much faster pace as cargo is dependent on the international value of transport. If the freight prices go up, the cost of manufacturing goes up, then it is not viable to sell the product in the international market beyond a certain price. However, the same is not the case of passenger traffic as today a business traveller is not travelling as much to neighbouring countries. Instead they are travelling to Europe and US and irrespective of the cost of a ticket, he is travelling with the effects of globalization. On the other hand, if the freight costs increase substantially, the cost of the final product will go up and may eventually not be saleable in the international market. The government is doing their bit by offering export incentives as we have a lot of competition especially from our neighbouring countries and this is of great relevance to us that the freight prices need to be controlled to make the export of goods viable in the international market. At the same time it is important that the goods being manufactured are uplifted in time to be made available in the global markets. Passenger capacities are on the increase with the A380s and hence the opportunities are far more. In fact, the people who are promoting cargo are the business passengers. They travel often to finalize their business deals thus resulting in growth in cargo traffic as well although not at the same pace as you see the growth in passenger traffic.

The domestic air freight has grown by 10.6 % from 2003-04 until 2006-07 and 90% of this growth is from the six metros of India and the expectant growth in the coming years should be around 10% to 12% which is on par with the growth in international freight. Overall as an industry, the domestic cargo has grown by 34% in the last year with a total tonnage of 10.3% which is higher compared to the growth in cargo by sea and rail which stands at 9.2%.

How has Air India fared compared to other international carriers?
Air India so far has not been a major international role player in the Cargo market. Even on the domestic front the aircraft being operated by the erstwhile Indian have not had adequate capacity in the lower route. The capacity offered on a particular route is also dependent on the total passenger load and then the baggage. For example, on the international sector we have been allowing 32 kilogrammes of baggage which resulted in more space being occupied in terms of volume as well. Now we have got it at 23 kilos which gives us excess space for cargo. Now with the creation of the SBUs and the fact that cargo is a growing market, we are now seriously looking at exploiting this market and in this direction we have started two freighters already and we also have two more A 310s which are already going for conversion to freighter flights and will be available to us for operation by latest by July or August 2008. We also have plans of converting Boeing 737 aircraft which are with the erstwhile Indian and this is going to be done in two phases. The entire 737 fleet is going to be converted and in Phase I seven Boeing 737s are going to be converted within this year and in Phase II four Boeing 737s are going to be converted by 2008-09 which will create an extensive network within India with Nagpur as a hub. Eventually when Nagpur becomes an international hub, it will offer convenient connections from all over the world into Nagpur. We are overall looking at 40 aircraft and by 2015 we expect 5 weekly freighter flights between Nagpur and other major cities within India with a capacity of 15 to 25 tons between Nagpur and the six major metros. On the international front, we have shortlisted various segments and we are looking at various potential markets. The major challenge for us is that the two major aircraft manufacturers Boeing and Airbus are overbooked and even if we place an order with them today, we would get the aircraft only after 2011. In the meantime, we are looking at the conversion of the B737 and A310 aircraft and also the conversion of B747-400 aircraft to meet the increasing capacity.

What are the career opportunities in the Air Cargo Industry and what are the areas that need to be addressed for meeting the growth of Air Cargo in India ?
There is a requirement for qualified staff especially as the industry is growing at a pace never seen before. There will be increasing demand for Dangerous Goods qualified personnel as there is a scarcity of DG qualified staff and hence there is a lot of scope for those who qualify in Dangerous Goods (DG). I must add that glamour is not with Cargo and hence people shy away. However, those who make a mark for themselves in Cargo can definitely rise to greater heights. There is immense potential in the Cargo Industry and this is where the money lies in the long run and hence people should look at Cargo as an industry with great future. Airports too are providing more and more space for cargo clearance and government is also taking initiatives to ease out the congestion by reducing the dwell time so that cargo can move and be cleared within 72 hours. Electronic systems are being introduced and you would be able to file a bill of entry before an aircraft lands here and the moment the shipment takes off, electronically you can submit your air waybill. So various systems would be in place to ease out the bottlenecks for the clearance of cargo. The Air Cargo Agents' Association of India (ACAAI) has an annual convention where they discuss issues which are connected with the industry, trucking is coming up in a big way because of the connectivity issues as all cities in India do not have airports . Even for long haul where there is no capacity, goods are brought into Mumbai and then trucked. In Europe trucking is common. The IT part in the Cargo industry is lacking to a large extent. The pace of growth of IT in Cargo is comparatively slow although the Cargo Accounts Settlement System (CASS) is cleared and will soon be implemented by IATA in India.

In terms of remuneration, no doubt in cargo the starting salaries may be lower than those being offered in travel and tourism. However, as one rises and reaches a senior position, those in cargo equate themselves with those working in travel at the middle management level as well as at higher positions. Qualification does play a major role and today there is a need for qualified people in the cargo industry.

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