Budget airlines to start carrying cargo

Bleeding Indian budget airlines plan to carry express cargo as they look at alternative revenue streams to boost their financials amid falling passenger fares. Low-cost airlines such as Air Deccan, part of Deccan Aviation Ltd, SpiceJet Ltd and GoAir expect package and document shipments to make up at least 10 per cent of their revenue in their first full year of cargo operations. GoAir recently launched cargo operations while SpiceJet hopes to start in the second half of 2007 and Air Deccan plans to lift on-board courier from February 2007. Currently, air cargo within India is carried primarily by full service carriers Jet Airways Ltd, state-run Indian and express delivery firm Blue Dart Express Ltd. "Cargo revenue will rise substantially from next year, reaching at least a tenth of revenue," GoAir's Chief Commercial Officer Raj Halve said. "Cargo can chip away some of the difference between cost and revenue for low-cost carriers," Kapil Kaul, chief executive, Centre for Asia Pacific Aviation-Indian subcontinent & Middle East, said. Deccan Aviation reported a loss of Rs 3.4 billion in the fifteen months ended June 2006, while SpiceJet posted a loss of Rs 414.2 million in 2005/06.

Budget airlines need to turn around in 25 minutes to meet costs. But poor infrastructure at Indian airports means the turnaround time extends to at least 45 minutes. "The answer, use the extra time and underbelly space to carry goods," Kaul added. The reach also helps, a Spicejet spokesman said. "No-frills carriers fly to hitherto unserviced segments, the market is huge." Air Deccan, for instance, has the largest network in India covering 61 airports. Air cargo space is primarily limited to early morning flights and perishables. "Since the market is growing at a rapid pace it indicates the need to increase capacity," logistics firm Gati Ltd's Chief Executive Mahendra Agarwal said. DTDC Courier & Cargo Ltd's Chairman Subhasish Chakraborty added that only 70 per cent of the load offered is carried, with the rest delayed. "We need more space," he said. The Rs 22 billion courier industry and the Rs 40 billion express segment are expected to grow 20-25 per cent a year, according to a research report by Edelweiss Securities.

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