“ AIR CARGO INDIA 2006”

INAUGURAL ADDRESS

By

Dr. S.S. SIDHU The Governor of Manipur

AIM

AIM To share some thoughts on the subject

with the Captains of the air transport sector

and key players, managers, experts in the Air

Cargo Industry.

Highlight the Importance and Growth of the

Industry.

Flag the Major Issues/Challenges enroute

sustained growth.

PREVIEW

PREVIEW Importance of Air Cargo Industry.

Growth of Air Cargo Industry.

Global Scenario.

Regional Position.

Indian Scene.

Challenges to Air Cargo Industry.

Concluding Observations.

Importance of Air Cargo Industry

Importance of Air Cargo

Industry The Air Cargo Industry acts as an engine of growth for the air transport sector and economic growth. Aircraft carry 2% of international trade by volume, but 40% by value.

Growth of Air Cargo industry is directly related to the GDP.

Integral part of Supply Chains of many manufacturers and retailers- allows range of sectors operating in lean inventory environment.

Importance of Air Cargo

Industry Fast , frequent, and predictable transit between different parts of the world, as an increasing number of companies out-source to remote locations.

Decreasing product cycles for high value, high-tech goods have made fast delivery to market essential. Even perishable commodities / periodicals can be delivered worldwide while still fresh / current.

Vital to development of Global Economy.

Key to on-going success of Globalisation.

Growth ofAir Cargo Industry

Growth of Air Cargo Industry De-regulation and liberalisation of air Transport Industry.

Global interdependence helped by world trade agreements (thru WTO) or increasing regional accords such as EU, NAFTA, ASEAN, etc.

International production and sales of goods and services.

New inventory management concepts such as“Just-in-Time” and “Zero” stocks.

Growth of Air Cargo Industry

New air-eligible commodities.

The vast development of high value and limited time-consumable commodities – high value commodities are central to today’s expanding economy.

Global Scenario

Global Scenario Since 1970, The Air Cargo market has doubled in volume over ten years and is expected to continue growing at an average annual rate of 6.5 per cent over the next two decades. Boeing forecasts that 60 million tonnes of cargo will be transported by air in the year 2017, thus tripling 1977 volumes.

The past trends show that cargo traffic growing faster than passenger traffic. Within the cargo traffic, the international component increasing faster than the domestic component.

According to ICAO “Outlook for Air transport to the Year 2015”, the international cargo traffic likely to increase by 5.8 per cent per annum.

Global Scenario Two major technological developments are likely to enhance the importance of cargo traffic-these are the use of IT in cargo handling and Radio Frequency Identification or Smart Card technology.

The most important aspect of air transport is speed. Unlawful activities (Terrorism) have seriously affected the aviation industry. Apart from severe inconvenience it has retarded its speed. Various measures taken by the governments have added to the costs.

Another factor which may affect the future of air cargo and also passenger traffic is the likely increase in fuel prices. For the time being, the fuel prices have stabilised but nothing definite - whether the worst is over.

Regional Position

Regional Position Among the regions, Asia-Pacific poised for a much higher growth in air cargo vis-à-vis others. The table indicates the trends till 2010.

ICAO REGIONAL FORECAST OF AIR CARGO FOR 2010

(Freight Tonne – Kilometers in millions

1989 1999 2010 Rate of Growth

1999 -2010

Africa 1,176 19,693 3,440 5.0%

Asia-Pacific 15,634 37,564 83,000 7.5%

Europe 19,246 31,193 52,120 4.5%

Latin America 2,626 4,221 6,950 4.5%

North America 15,962 29,028 51,000 5.0%

Regional Position According to Boeing’s recent forecast, “Air Cargo markets linked to Asia will continue to lead other markets through 2025, led by the highest growth in intra-Asia and domestic China traffic”.

With double digit growth rates, USA/ Asia/ Europe/Asia and intra-Asian markets considered by far most dynamic.

By the year 2017, the Asian share of the world air cargo market likely to increase from 42 to 50 per cent.

Indian Scene

Indian Scene In the past, the growth in air cargo had been faster than the growth in passenger traffic. The trend has changed. In recent years Passenger traffic, both international and domestic increasing at a higher rate than the Cargo traffic.

According to AAI forecasts, the Passenger traffic is likely to increase by 18.8 per cent per annum during the Eleventh Five Year Plan (2007 to 2012), where as, Cargo traffic is likely to grow only by 11.4 per cent.

International Cargo Traffic likely to grow at the rate of 9.8 per cent while the Domestic Cargo Traffic expected to increase by 8.4 per cent.

PERIOD PASSENGER CARGO

International

Domestic

Total International

Domestic

Total

2006-07to

2011-12

15.9% 19.9% 18.8% 12.1% 10.1% 11.4%

2012-13to

2016-17

13.3% 16.2% 15.5% 9.8% 8.4% 9.3%

Indian Scene

The Air Cargo industry in India poised for significant growth in the year 2006-07 after having achieved a growth rate of 20% in the year 2005-06. With further liberalisation of the economy and open sky policy adopted by the government on the air traffic in India is experiencing a boom and there is significant growth across all categories of traffic, aircraft movement, cargo traffic, etc.

The forecast again a double-digit growth in air traffic this year.

Indian Scene

Currently about 50 carriers operate cargo and passenger services to and from India. Few more have announced their intention to enter the growing Indian market.

Open Sky Policy-with 86 operational airports in the country, development and growth of a number of export promotion zones, better infrastructural facilities, all-round economic growth will provide further impetus for growth of Air Cargo industry.

Indian Scene

Government, in consultation with all concerned is constantly reviewing the need for further liberalisation of the economy and take steps towards globalisation of Trade.

Of late, with the liberalisation of the economy, the imports are growing faster than exports.

Indian Scene

Challenges to Air Cargo Industry

Challenges to Air Cargo Industry

India has achieved significant progress and the Air Cargo Industry is actively involved in this effort. However, when a comparison is made with countries like China, Brazil and Gulf countries, the achievements look smaller. In fact, there is a feeling that India could have achieved more.

From the Air Cargo point of view- the problems we face, the road blocks for further progress, need careful review, full involvement of Government. Joint efforts ofall concerned including Government machinery, Air Cargo Agents, Airlines, etc. essential to achieve the desired effect.

Challenges to Air Cargo Industry

• Cumbersome Procedures and Delays related to numerous clearances-need for simplification

- Complex procedures of processing Cargo.

- Approx 30 signatures are required for exports and 35 for imports.

• Adverse effect due to lack of Support Systems.

- Uninterrupted Power Supply.- Better net work of Roads, Ports & Transportation facilities.- Cargo Hubs.- Cold Storage facilities, etc.

Challenges to Air Cargo Industry

• Low Growth and Profitability.- Lack of modern technology / systems in

the work place.- Lack of adoption of operational and

marketing methods that cater to the specific and extensive needs of the customers.

• Information Management in Systems and Communication.

- Critical role in Global trade- Urgency for introduction of e-commerce

in world trade as the exclusive means of documentation and processing.

Challenges to Air Cargo Industry

• Diminishing Returns to all players in Industry.

- Airlines are squeezed of profits.- Ever increasing cost of operations worry

the Agents.- Shippers & Exporters are aggrieved on

account of increase in freight and other costs for exports.

• Clear-cut Policy about ground handling of cargo at the airports- issue needs special attention.

Concluding Observations

Concluding Observations

Close linkage of Air Cargo growth to world GDP; almost a leading economic indicator.

Corporate focus on “Lean” has driven international air cargo growth.

Air Cargo is rapidly growing niche in total cargo market.

Used PAX aircraft converted to freighters are Cost Effective.

Concluding Observations

World airline PAX traffic forecast to grow 1999-2010 @ 4.5%.

World air freight growth 1999-2010 forecast @ 6.0%.

Asia-Pacific Region expected to dominate air freight growth market.

Unit costs (Operating cost per available tonne-kilometers) declined at an average annual rate of 3.0% for period 1960-1999).

Larger, more efficient freighters are making air freight more competitive.

Thank You!