Excess capacity fuels competition on almost all routes and softens cargo rates
India is still a relatively small exporter by world standards, so the upside is huge. For instance, all imports and exports from and to India by all carriers and from all airports last year totalled 1.3 million tonnes, according to the Director General Civil Aviation Web site.
Chennai, Sept. 27
The growth story has lead to air-cargo carriers making a beeline to India for a share in the pie. The excess capacity has fuelled competition on almost all routes and softened cargo rates.
In Chennai, for instance, the current capacity out of Chennai is about 12,000 tonnes a week, while the weekly throughput is between 7,500 and 8,000 tonnes.
Industry sources said that cargo capacity has grown by 5 per cent in Chennai while tonnage has grown by just 1 per cent.
Mr Rupert Bray, Country Manager (India, Nepal and Bangladesh), Cathay Pacific, said that Cathay Pacific India is beating tonnage forecasts this year; however, the impact of falling yields has significantly eroded the performance of the routes.
He said, "The stronger imports from China have helped the airline balance weaker-than-expected exports."
He said that Cathay Pacific has seen a toughening of conditions in the worldwide cargo market this year compared to last year. The world's main economies have slowed, but cargo capacity has continued to be added, Mr Bray said.
Impact of a weaker dollar
Mr Bray said that a weaker US dollar has had a negative impact on earnings as the Hong Kong dollar is pegged to the US dollar.
He said that there are benefits and challenges with the open-skies policy. The main challenge for carriers is that demand is not growing as fast as supply.
He said that it was a temporary phase, as India was essentially a closed economy for many decades.
"While there will undoubtedly be additional players coming into all the major metros, it is unlikely that there would a repetition of the explosive addition of capacity that was witnessed in the past 24 months.
India is still a relatively small exporter by world standards, so the upside is huge. For instance, all imports and exports from and to India by all carriers and from all airports last year totalled 1.3 million tonnes, according to the Director General Civil Aviation Web site, where as Hong Kong handled over 3.4 million tonnes. Cathay Pacific as a single airline carried just over a million tonnes, he said.
Mr Bray said that China exports continue to grow at an astonishing rate, and there is no indication that these are set to slow. Provided the world economy, and particularly the US economy, continues to remain stable, the growth in China exports looks sustainable.
US security requirements
Another issue that has impacted air cargo is the new US security requirements. Recently, Great Wall Airline, a joint venture between China Great Wall Industrial Corporation, Singapore Airlines and Temasek Holdings' unit Dahila Investment, suspended operations to Chennai and Mumbai, a week after it started.
The suspension comes as a result of the sanctions imposed on Great Wall Industrial Corporation by the US.
However, Mr Bray said that Cathay Pacific does not expect any long-term impact from the additional security requirements.
He said that this was not the first time security requirements have changed; the airline was adept at adjusting its procedures to meet new ones.