AN INDICATOR OF ECONOMIC PROGRESS

AIR CARGO

Role of Air Cargo in Economic Development

Air Service Liberalization

Improving Customs Quality

Reducing Corruption

Inadequate Infrastructure - Challenge to Air Cargo

Cargo warehousing facilities are not up to standards at India’s

major airports

Currently, India is upgrading its major airports, which account for

93% of the total international and 84.4% of the total domestic

freight handled

Once the infrastructure issues are addressed and the new cargo

airports are made operational, the market will witness tremendous

growth within the next 5years

Dwell time for import and export cargo at Indian airports is 3 to 5

days as compared to an average of 6 to 12 hours in other leading

international airports.

The state of customs clearing and delivery of cargo has remained

a rough ride for cargo operators

Recession Hits Industry

The airlines industry globally lost 50 billion dollar in the past 10

years, with 11 billion dollars in 2009 alone

Revenue declined by 80 billion dollar last year

Singapore airlines and British airways went into losses and Japan

Airways was forced to file for bankruptcy

The economic slump and credit crises have caused carriers 3 ½

years of growth in freight

Japan Airways this month became Asia’s first major flag carrier to

seek bankruptcy protection after 4 government bailouts failed to

revive it

About 34 carriers have gone out of business in 2008

Forecast for 2010

IATA forecast for a 2009 loss of $ 2.5 billion at this stage last year was swiftly overtaken

as the depth of the economic crisis emerged. But while the association has already added

$ 2 billion to its 2010 loss forecast since its September view. It hopes there will be no

repeat this year

It looks as though some of the risk we were facing this time last year , we may not face

this year

Two principal concerns : Fuel and Yields – We do expect there will be some improvements

but because of the weakness and yields and the increase in fuel prices, we do not expect

more than halving the losses

High fuel prices were the dominant factor in losses of 2008 and continued to haunt some

in 2009

Capacity and its potential impact on yields is still the biggest risk in 2010 mainly because

of low utilization of existing fleet.

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Forecast for 2010

Global economic projections 2010 are for a return to growth

The World Bank in its 2009 global outlook summary forecasts 2%

growth in world GDP for 2010,followed by 3.2% for 2011

It sees economic growth strongest in developing nations next year;

China and India are forecast to grow 8.8% and 6.5% respectively

Economic growth does not automatically translate to better airline

fortunes

“ITS ALL ABOUT WHAT HAPPENS TO CONSUMER SPEND”

A lot of air freight business has been in Asia, so for a lot of airlines in

the air cargo business, there is better news there because Asia will be

driving this business.

It maintained that worldwide airfreight traffic will triple by 2027 and

that “current near-term market weakness and worldwide economic

uncertainty” wont affect long-term demand significantly.

Source : World Bank

Growth and Current Air Cargo Traffic Figures

Dec 09 vs. Dec 08 FTK Growth AFTK Growth

Africa 33.00% 4.50%

Asia/Pacific 34.40% 7.70%

Europe 5.20% -9.50%

Latin America 37.40% 20.00%

Middle East 32.10% 13.70%

North America 23.90% -7.80%

Industry 24.40% 0.60%

AFTK: Available Freight Tonne Kilometers measures available total freight capacity

FLF: Freight Load Factor is % of AFTKs used

Source - IATA

Ground Reality - India Cargo

Even with Air cargo open skies , India’s air cargo growth barely kept pace

with the rest of the world

From 1991 – 1997 , the country reported an annual air growth of 120,000

tons ; from 300,000 to 420, 000

Even though this was a 40 % increase from the seven year period, it

translates to only 5.7 % annual growth ; well above world average GDP

and trade growth , but somewhat less than the air cargo growth for the

same period

By India’s own account , poor logistics infrastructure has impeded growth

In many developing countries, corruption and customs inefficiencies play

further debilitating roles.

Air Cargo Given Year End Lift But Concerns

Airlines around the world are breathing a sigh of relief that there was

something like normal air cargo peak season towards the end of

2009,but there remains profound doubts about the durability of the

recovery

Despite projections of a bloodbath, especially after the glut of airline

collapses in Autumn 2008,the number of airline failures in 2009 has

been relatively limited by comparison-in the region of 30 so far this year

Air cargo “Is kind of the tail of the dog”- The global economy is the dog

and when it is sleeping, the tail isn't moving anywhere anytime soon

Long -Term hopes :- In its latest 20 year forecast, its predicted that world

air cargo will grow 5.8% annually over the next two decades, down just

slightly from the 6.1% rate it projected in previous forecasts

Global Scenario

Air Cargo Market Opportunities in India

Air cargo market in India thrives with economic development and

rising international trade

Increasing globalization, establishment of manufacturing facilities and

India’s growing might in the IT sector have contributed to the boom

since 2007

International trade has boosted prospects for the air cargo market in

India

Export and import have registered a double digit growth rate of 23% in

2007

Air cargo enables nations, regardless of locations, to efficiently connect

to distant markets and global supply chains in speedy, reliable manner

Major policies include 100% FDI permissible for existing airports and

under automatic routes and 100% tax exemption for airport projects

over a period of 10 years

Air cargo is the means by which the globalised world moves its

valuable goods and manufacturing components

As per IATA the biggest drop in airfreight started in September

2008, a drop of 7.7% and October was 7.9%. This was when IATA

forecasted 5% drop in cargo over 2008

China the biggest player in air freight had a drop for 5 straight

quarters and a total drop expected is around 5% to 6 %

US meltdown has added to the woes of china basically since they

are the biggest buyers of consumer goods

Big players like FedEx / UPS and the freighter companies reported

a 22% decline in cargo freight not only in US but also in Europe

and Asia pacific regions. DHL losses in the US alone was $1.3

billion

Daily air shipments dropped from 1.2 mio to just 100,000

However the positive sign in this recession is that it has shown

strong recoveries from previous economic downturn such as the

Asian Economic crisis, the 9/11 attacks and the SARS outbreak

In our region India and China will continue to remain a source of

strong economic growth with substantial industrialization and

related investment

It has been predicted that the world freighter fleet from 1950

today will increase in 2027 to 3890 over the next two decades

Predictions today on the Indian market growth is around 6%- 8%

Government has planned GDP in the same range which means

that India will grow in the present conditions

Globally the growth is around 3% to 4 % which can grow if US and

China along with the G8 and G20 countries agree to settle the

differences

Thank You