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AIR CARGO INDIA 2006 INAUGURAL
ADDRESS By Dr. S.S. SIDHU The Governor of
Manipur
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AIM
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• 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.

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PREVIEW
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• PREVIEW
• Importance of Air Cargo Industry.
• Growth of Air Cargo Industry.
• Global Scenario.
• Regional Position.
• Indian Scene.
• Challenges to Air Cargo Industry.
• Concluding Observations.

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Importance of Air Cargo Industry
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• 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.

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• 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.

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Growth of Air Cargo Industry
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• 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.

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• 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 todays expanding
  economy.

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Global Scenario
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• 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.

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• 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.

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Regional Position
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• 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
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• Regional Position
• According to Boeings 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.

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Indian Scene
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• 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.

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Indian Scene
PERIOD PASSENGER PASSENGER PASSENGER CARGO CARGO CARGO
International Domestic Total International Domestic Total
2006-07 to 2011-12 15.9 19.9 18.8 12.1 10.1 11.4
2012-13 to 2016-17 13.3 16.2 15.5 9.8 8.4 9.3
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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.

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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.

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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.

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Challenges to Air Cargo Industry
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• 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 of
• all concerned including Government machinery, Air
  Cargo Agents, Airlines, etc. essential to achieve
  the desired effect.

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• 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.

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• 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.

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• 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.

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Concluding Observations
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• 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.

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• Concluding Observations
• World airline PAX traffic forecast to grow
  1999-2010 _at_ 4.5.
• World air freight growth 1999-2010 forecast _at_
  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.

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Thank You!