The Hindu Business Line : Air-freight market — Thriving in competitive environment

Room for growth at the Air Cargo Complex, Chennai: Freight forwarders today have the double advantage of more airlines to choose from and freight rates that have levelled off at realistic levels.

THE opening up of the aviation industry has brought about a more competitive environment, not only in the passenger segment but also in freight traffic. Exporters today have a greater number of airlines to choose from. Airlines, on the other hand, are willing to negotiate rates to attract more customers. Freight forwarding companies, who negotiate with the airlines on behalf of exporters, said their clients are in a win-win situation. This is especially true of Mumbai, which has seen the arrival of a number of new airlines in the last 12 months, including Virgin Atlantic, bmi, Jet Airways, and Austrian Airlines.

According to an official with Bax Global, a freight forwarder, exporters have benefited in two ways from competition in the sector. They have more airlines to choose from and freight rates that have levelled off at realistic levels.

Industry officials in Mumbai said that while the aggregate cargo carrying capacity out of the city has increased by around 25 per cent, certain new carriers are quoting rates at least 10-15 per cent less than the established ones.

As per data with the Airports Authority of India, during calendar year 2005, approximately 1.62 lakh tonnes of export cargo was lifted from the Chhattrapati Shivaji International Airport in Mumbai. This was 14.08 per cent more than the 1.42 lakh tonnes exported in 2004.

The rates are more competitive on routes where capacity has increased substantially. For instance, the Mumbai-London route has seen a lot of additional capacity over the past 12 months with three airlines — Virgin Atlantic, bmi, and Jet Airways — commencing services in the sector.

Similarly, the Far Eastern sector has seen a lot of action with carriers such as Air India and Singapore Airlines adding to their existing frequencies. Jet Airways and Indian Airlines have also commenced services on the sector.

An official with East West, a freight-forwarder, said that while established carriers such as Lufthansa and British Airways do not resort to cost-cutting, the new entrants are not averse to quoting lower rates to attract customers.

The city has 52 foreign airlines serving it, 16 of which operate freighters into the city. Lufthansa is the largest cargo carrier out of the country, offering a capacity of nearly 50,000 tonnes annually. The German airline expects to carry 65,000 tonnes of air cargo out of the city in 2006.

Mr Dilip Rane, Cargo Sales Manager, Western region, Lufthansa, said, freight rates have gone down by as much as 25 per cent since the cargo is now handled by a lot more carriers. He estimates that the total cargo carrying capacity out of the city has increased by 15-20 per cent.

However, he pointed out that Lufthansa has not lowered its freight rates as its customers patronise it for high service standards. While the average freight rate to Europe is about Rs 75 per kg, Lufthansa charges Rs 95 a kg, he said.

A freight forwarding agent agreed that the German carrier is a premium player with strength in garment and pharma shipments.

In spite of the huge price difference, the German carrier is able to sell all its available cargo capacity of approximately 700 tonnes each month out of Mumbai.