Touch Base with Indian A&D Industry

Iconic business strategist Ram Charan is boarding Capt GR Gopinath’s start-up logistics company Deccan Express as an advisor. The new
venture is expected to kick off in May next year with a fleet of six cargo aircraft connecting 14 locations and supported by a trucking service that will reach out to 68 places across the country.

“Ram Charan will be on the company’s advisory panel, guiding the CEO and operational team every quarter. We are gearing up to launch services in May-June, with a fleet of three Airbus 310s and three ATRs having 14 air touchpoints. We will be the largest and double the size of existing industry players on day one,” Capt Gopinath, chairman & managing director, Deccan Express Logistics, said. Three more ATRs will be added to the fleet subsequently.

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Several Indian and international aviation and logistics companies such as Air India, Singapore Airport Terminal Services (SATS), Menzies, Bobba, Swissport, Bird Group and Worldwide Flight Services (WFS) have responded, individually or through tie-ups with each other, to two requests for proposals (RFPs) to set up a new cargo facility at Delhi airport and upgrade the existing one.

The RFPs were sent by Delhi International Airport Limited (DIAL), the GMR-led consortium that is modernising and operating Delhi airport. The last date to submit the bids is February 16.

Delhi accounts for around 25 per cent of total air cargo transported in the country.

An executive close to the development said Air India has tied up with SATS, Bird Group has tied up with WFS and Menzies with Bobba to bid for the cargo project.

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In a surprise move ensured to delay its air cargo plans for quite a while, Indian flag carrier Air India has decided to exit the cargo space and lease out its freighters. This, even though, cargo is a big revenue earner.

According to reports, Air India is seeking to lease two of its Airbus 310s, which were converted to freighters. The carrier is also converting six Boeing 737-200s into freighters, each with a payload capacity of 12 to 15 tonnes, which will bring its freighter fleet strength to eight.

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World-class cargo facilities at the Rajiv Gandhi International Airport (RGIA) here has opened up exciting opportunities for large-bodied freighter planes with the first two air charters-Boeing 747-200 freighter and -Boeing 747-400 F-landing at the airport.

“These flights mark the first step in GMR Hyderabad International Airpot Limited’s (GHIAL) endeavour to make RGIA a world-class cargo hub in this part of the country,” GHIAL Chief Commercial Officer Viswanath Attaluri said in a release.

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India accounts for a meagre three per cent of an estimated 27-million-tonne global air freight market. This, however, does not deter foreign air freight operators from expanding their services to and from the country. As Malaysia Airlines Cargo (MASkargo) acquires on lease a new A300-600 freighter, it plans to expand its services to various destinations, including Chennai. MASkargo already runs services to and from Chennai.

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Deccan Express Logistics, an air and ground distribution network company formed by Capt. G.R. Gopinath, plans to raise $200 million to fund the project, which is expected to become operational by the first quarter of the next financial year.

The company has appointed Edelweiss, an investment banking and financial services company, to arrange for funding from private equity and help it with a business model to run its fully integrated logistics service.

Capt Gopinath told Business Line that he hopes to raise $70 million in the next four months, while the remaining funds were expected to be arranged within three years with the help of Edelweiss.

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GMR Hyderabad International Airport Limited (GHIAL) has decided to set up a world-class centre for perishable cargo (CPC) at the Rajiv Gandhi International Airport (RGIA) here.

The CPC will be designed to handle 13,000 tonne per annum of perishable cargo under phase-I (up to 2011) and the capacity will be raised to 25,000 tonne per year under phase-II (2013-14).

“It will give a boost to the movement of perishables and will aid horticulture sector in the state to be more competitive,” GHIAL chief commercial officer Viswanath Attaluri stated in a press release.

The projected investment for the phase-I of the project is Rs 40 crore with a subsidy component of Rs 20 crore from the Agricultural and Processed Food Products Export Development Authority (Apeda).

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A modern storage system is being installed at the N S C Bose Airport to maximise the utility of perishable import and export goods.

The Airports Authority of India (AAI) is setting up a Centre for Perishable Cargo with the help of Malaysian technology for preserving 80 tonne of perishable goods daily.

“This is a Rs 10 crore project funded by the Agricultural Product Export Development Authority which will have an extensive system where goods will not only be loaded and unloaded from planes, but it will also be checked, weighed and stored,” Senior Manager (cargo), K J Raju said.

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Mumbai-based Topworth Group of Companies is set to foray into air cargo business in association with an US firm by early next year with an investment of $100 million.

After getting the NOC from the aviation ministry, Topworth Group of Companies along with Avicore LLC has formed a joint venture, Avicore Aviation, for this business and expects to record a revenue of Rs 500 crore in the first full-year of operation from the venture.

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The Air India will launch its much-awaited cargo services within the country from July 1 and will connect six major important destinations, a top official said.

The Air India has completed converting its four-737 boeing aircraft which will be pressed into service from July 1 from Delhi, Kolkata, Chennai, Mumbai, Bangalore and Hyderabad, Air India Airport Director I J K Dhas said.

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The Thiruvananthapuram-based IBS Group has inked a deal with Tokyo International Air Cargo Terminal Ltd (TIACT) for deploying its cargo terminal operations (CTO) module of iCargo, a new-generation cargo management system.

The airport, which is currently being expanded in terms of both capacity and technology, will see the iCargo CTO module to be up and running when it is fully functional by October, 2010.

According to V K Mathews, chairman and CEO, IBS Group, "the software will manage the new cargo terminal at Tokyo International Airport, also known as Haneda Airport. Haneda is ranked among the world’s busiest passenger airports and will be the first neutral ground handler to use iCargo’s CTO module."

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The cargo airline proposed by Capt G R Gopinath would work with SEZ developers and retailers such as Reliance and Bharti to provide end-to-end and integrated logistics solutions. The new airline will have pan-India connectivity and operation in remote areas with rich resources. The proposed airline will initially serve on both metro and non-metro routes with 10 medium and small-size aircraft.

“We have formed a team of about 50 people who are exploring markets. Though our service would be in line with other air cargo majors such as DHL and FedEx, our reach would be quite larger. We plan to operate to still unconnected areas, coastal and mountain areas,” said Mr Gopinath.

The new venture is understood to have mandated Edelweiss, a financial services firm, to bring in equity in the new venture. The proposed cargo airline which obtained no-objection certificate (NOC) from the civil aviation ministry a week back is expected to take wings in the next few months. Unlike Air Deccan, the cargo airline would be a full-service carrier with focus on profitability.

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Indian low cost carrier, SpiceJet, has announced the launch of domestic cargo operations, which it said will cover eight major cities initially. It said, eventually, it intends to network 18 destinations for freighter operations.

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Airport developers, such as GMR, GVK and CIAL, would now have to provide comprehensive cargo facilities at all new greenfield airports. The government is planning to make this condition mandatory in the proposed air cargo policy which is to be finalised within three months.

For business reasons, many developers are already building cargo facilities, however, they are not bound to do so. The proposed policy will also stipulate dedicated cargo area at all existing airports, including those being developed by private operators.

A consultant may be brought on board for advising on making cargo facilities mandatory in the new policy. Airport developers would also shoulder the responsibility of suggesting measures for reducing dwell time at airports. A separate system to speed and spruce up ground handling facilities would also be suggested by the consulting firm.

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The air cargo industry has asked the government to provide for a designated area around major international airports, for exclusive use as air cargo terminals. The industry has asked the government to provide land near the international airports in Mumbai, Kolkata, Delhi and Bangalore to set up air freight stations.

The industry has also asked the government to allow cargo terminals to be set up only in consultation with cargo agents. It is expected that such terminals will enable exporters and importers to cut transaction costs and save time spent on freight movement.

With Indian freight traffic expected to record growth of more than 20% per annum, industry sources said, the need for agent-bonded terminals is growing significantly.

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The air cargo industry has demanded that the government build air freight stations, or agent bonded terminals, on the lines of the container freight stations at seven major ports in India. The industry wants the government to provide for a designated area around major international airports which will be used exclusively for cargo operations.

The move could enable industry, especially exporters and importers, to cut transaction cost and save time spent on freight movement. The air cargo industry has sought land near the international airports at Mumbai, Kolkata, Delhi and Bangalore to set up air freight stations. The industry is of the view that cargo terminals should be provided for and made at the new privately-run airports of Mumbai and Delhi in consultation with cargo agents.

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Ramesh Natesan of Quikjet wants to play GOD. Not literally. He just means Guaranteed Overnite Delivery. “Exactly the kind of God that customers want,” quips Mr Natesan, the 57-year-old CEO of Quikjet, a new domestic air cargo venture expected to initiate operations next month. Plans for the launch have been firmed up.

Quikjet intends to initiate operations with the first of its fleet of five B737-300F aircraft on the Chennai-Mumbai-Delhi-Mumbai-Chennai route close to mid-April. Almost a month from now, Quikjet intends to introduce the second aircraft to add Bangalore to the network. The company expects the third aircraft no later than in three months after the arrival of the second, when it shall add some more touch points to the network. “Our plan is to get all aircraft into service in the next 14 months,” says Mr Natesan.

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The International Air Transport Association (IATA) has urged the air cargo industry to try to improve customer service and competitiveness. This is because the industry is projected to grow at four per cent this year when the world trade grew by 7.5 per cent last year. This means other modes of transport, particularly by sea, are gaining in market share. The shipping sector, it might be noted, has not only introduced modern faster vessels but also succeeded in lowering costs through various innovative solutions.

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As part of its diversification plans, low-cost airline SpiceJet is aggressively looking at cargo business and has already started putting in place the necessary infrastructure.

“We are aggressively going behind cargo business. For that we are developing our own infrastructure at various ports, our own x-ray machines and other set up,” SpiceJet Executive Chairman Siddhanta Sharma told PTI.

He said SpiceJet has already won the bid for India Post courier contracts along with Jet Airways. The airline has been carrying courier for some time and now wants to augment its revenue from the cargo segment.

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It is an idea that he has been incubating for over two years now. For Capt GR Gopinath, executive chairman of Deccan Aviation, it is also a second life. An idea that ‘hit him between the eyes’ even as one of his aircraft made an emergency landing after one engine shutdown on a flight from Delhi to Kolkata. But more about that later.

Today, as he disengages from his role as entrepreneur evangelist for the price-warrior airline that he founded five years ago, Capt Gopinath says he is firming up plans to launch a project that will be “much wider in size, scope and reach than his first love ever was.”

The new venture stems from the need in the Indian market for a good multi-modal logistics operator. “Warehousing and inventory costs are making business expensive and most companies have moved to smaller cities like Nashik or Pant Nagar without a proper logistics backup,” he says.

The new company could offer clients a benefit of 30% cut in their logistics cost by taking over their transport needs. Though he is not willing to part with too much information, he says the cargo airline is just a part of the proposition. He has negotiated with Vijay Mallya to ensure that the new venture will not be a part of the Kingfisher/Deccan grouping and will evolve as an independent company.

Capt Gopinath’s thrust into the logistics arena is partly a result of what Air Deccan went through as a low-cost airline, and the process of operating out of eight bases around the country on wafer-thin margins. Like any other airline, Deccan often faced emergency ‘aircraft on ground’ situations that needed a good inventory pipeline. “We were a start-up that competition was trying to bury alive,” he says. “Resources were low and we could not afford to have expensive spares at every base.

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