Bangalore’s commerce is finally going to get some relief, on the air cargo front. In the last few years, India, and Bangalore in particular, have arrived on the world stage. Air cargo has become an integral part of our daily lives. From cell Phones to car parts to computers, from garments to gold, from food to flowers, a wide variety of products are carried by air.
Bangalore has historically been a power deprived city. Consequentially, industry around Bangalore has always been “high tech”, whether it was telephones (ITI), aviation (HAL), electronics (BEL), machine tools (HMT, Widia, BFW, Ace, Fanuc, Siemens), precision engineering (the list is endless), medical, and now IT, BT, ITES, and Hardware. This in turn drove demand for well educated and skilled workers resulting in the colleges and vocational institutes that dot the map in and around Bangalore.
Given the high value nature of of our commerce, and the lack of a sea port or adequate rail infrastructure, Bangalore has always had a high demand for air cargo. By value, more than 50% of Bangalore’s total industrial output is sent by air. A staggering Rs. 50,000 Cr. The Customs in Bangalore collects almost Rs. 3,000 Cr. a year in duties. Both of these numbers are on the increase.
For much too long, Bangalore suffered from pathetic air cargo facilities offered by Mysore Sales International Limited (MSIL), and the Joint Working Group (JWG). As a result, almost as much cargo of Bangalore was diverted to alternate ports such as Chennai, as was transited through Bangalore. Despite a demand of over 200,000 tons per annum, these two operators manage only 120,000 tons.
Airbus, in its Global Market Forecast (GMF) predicts that domestic India FTKs (Freight Ton Kilometres) will increase at 17% per year average for the next 20 years. Freighter aircraft purchases will outstrip passenger aircraft purchases in India.
Airports in the 21st century are what railway stations were in the 19th and 20th century. Major drivers of a region’s economic growth engine.
Singapore’s Changi Airport is a great example of how air cargo drives growth. I have been visiting the Changi Free Trade Zone, since the mid 1990’s. Every year, a new cargo agents building crops up. Given the space constraints, Changi has gone vertical with two levels of high ceiling warehousing (equal to 2 floors each), with another 3 levels of office space. The latest addition is the Cargo Megaplex building. Changi now has capacity of 3 Million tons of air cargo per annum, with another 180,000 tons at the dedicated courier centre. Changi has the ability to handle any type of cargo that can fit in to an aircraft. In size, in weight, and in storage requirement (frozen, chilled, cooled, or normal, live or dead or inanimate). Singaporeans love their live seafood, so every day plane loads of live fish in sealed water tanks, come from all over the world.
As more companies began outsourcing their entire logistics operations, warehousing and delivery, an entire logistics park has been created in the Changi Free Trade Zone, and the Upper Changi area just outside the airport.
A similar situation has commenced in India, led by IT majors, especially in Bangalore. Today we have integrated service providers offering their customers all the services post production till delivery of product to the customer. Keeping in mind the rather convoluted nature of Indian Customs and Excise, these integrated logistics providers have set up large bonded warehouses where goods are cleared from “in-bond”, duty paid, and then delivered to the customer as required.
The BIAL consortium, promoters of the Bengaluru International Airport (BIA), very candidly admitted, that once they issued contracts to the cargo concessionaires, they completely forgot about cargo aspects of an airport, preferring to focus on passenger services instead. This resulted in a cargo terminal for airlines, but absolutely no facilities for the logistics agents and industry in Bangalore.
But all is not lost. Thanks to the delay in the launch of BIA, the two cargo handling concessionaires, Menzies Aviation and Air India SATS, who worked overtime along with some great last minute firefighting efforts by BIAL team, will offer cargo facilities, which while not world class, are a quantum leap ahead of what is presently available.
The cargo village is projected to be completed in the next 18 months, and given the demanding nature of Mr. Brunner and his team, I am sure it will.
When BIA commences operations, and given the capacity constraints at HAL, I strongly advocate going ahead on May 11, 2008, even if there are no festivities, cargo capacity will be at 300,000 tons per annum. One area of BIA, where capacity will not be overloaded on Day 1.
RGIA has stolen a march, but Bangalore has the pent-up demand to help BIA catapult over RGIA.
There are internal projections of at least 40% growth in the first year itself, and both Menzies and AI-SATS need to start thinking about expansion almost right away, to keep abreast of demand.
The food tastes of India is changing. The global Indian wants cheeses, fruits, vegetable, condiments, sausages, and meats from all over the world. Importers are bringing in refrigerator containers (reefers) by sea. Air cargo offers benefits of smaller shipments more frequently, resulting is less spoilage and wastage, which offset the high transport costs. Similarly expats want their speciality foods, be it American steaks, European cheeses, or Japanese fish. Small lots by air, makes sense. There are opportunities galore, and BIA, can become a “mini Changi” and a major distribution hub for India right away. This will require immediate attention, visionary planning, and serious work, by managements of BIAL and their cargo partners, Menzies and AI-SATS.
In the air cargo business, it is a perennial chicken and egg story. Cargo terminals are reluctant to invest in facilities before getting committments of business, and business is reluctant to plan, let alone commit, till facilities are in place.
BIAL, Menzies and AI-SATS should learn from the Changi experience, and I look forward to the day they deliver to Bangalore the true “world class” facilities which they are capable of.