Predominantly driven by the passenger side, the aviation industry came to a standstill and made airlines across the globe rethink their strategy when the pandemic hit the wheels hard. We witnessed air cargo operations take the charge and help the aviation industry stay resilient. We reached out to the cargo head of India’s low-cost carrier Air Asia to better understand the situation.
Shekhar Mohanty, Head – Cargo, Air Asia India, in this exclusive interview, talks about the impact that the pandemic had on the cargo operations, how collaboration helped in maintaining efficient operations, steps were taken by Air Aisa to strengthen its cargo footprint and much more. Edited excerpts:
The outbreak of the pandemic exposed several vulnerabilities of the air cargo industry. Elaborate on the exposed vulnerabilities of the segment and what significant measures have been undertaken to bolster it and ensure safe and secure transportation to any destination, both globally and locally?
The impact of COVID-19 was first felt in China due to the role it plays in global manufacturing (with Wuhan, the epicentre of the pandemic, playing a particularly significant role – more than 200 Fortune Global 500 firms have a presence there). China is also a major consumer of global commodities and agricultural products. Disruptions to manufacturing in China rippled through global supply chains. There was a huge backlog of Cargo at China’s major cargo ports. owing to travel restrictions that led to a shortage of truck drivers to pick up containers, and ocean carriers have cancelled (or blanked) sailings. The resulting shortage of components from China impacted manufacturing operations overseas. Major industries around the world, including automotive, electronics, pharmaceuticals, medical equipment, and supplies, as well as consumer goods, were affected.
The pandemic spread to the rest of the world, leading to lockdowns and border closures that restricted the movement of goods. Additional protocols (such as social distancing at warehouses) introduced to ensure the safety of workers contributed to bottlenecks for freight.
Logistics companies involved in the movement, storage, and flow of goods, have been directly affected by the COVID-19 pandemic. As an integral part of value chains, both within and across international borders, logistics firms facilitate trade and commerce and help businesses get their products to customers. Supply chain disruptions to the sector caused by the pandemic could, therefore, impact competitiveness, economic growth, and job creation.
Air Cargo Volumes fell by 19% in March 2020 due to a sharp reduction in passenger flights (which carry freight as belly cargo). However, as shippers and governments turn to air cargo for essential goods, air freight rates have increased—some carriers are seeing delays with increased congestion at airports. Mid-April saw an increase in capacity, as well as a recovery in volumes transported. The overall reduction in capacity is greater than the net reduction in demand, which supports higher air freight rates. Cargo on seats has been on-demand as passenger flights were cancelled due to which airlines resorted to carrying cargo on the seat to transport essential COvid relief material, pharma, testing kits, and sanitizers.
Air cargo has played an important role in the growth of the e-commerce sector. Throw some light on how the Covid driven boom in the e-commerce segment increased the sector’s reliance on air freight? Will this continue in the post-pandemic times?
The Indian e-commerce market is likely to increase from US$38.5 billion in 2017 to US$200 billion by 2026 mainly due to the rapid increase in Internet and smartphone penetration. Online retail market sales increased to US$32.7 billion in 2018. Internet connections and smartphone shipments increased to 760 million and above 50 million by mid-2020. The e-commerce sector saw new developments during the pandemic. For instance, Flipkart acquired a 7.8% stake with an investment of US$203.8 million in Aditya Birla Fashion and Retail in the third quarter of 2020. Flipkart also partnered with PayTM to increase its market. Amazon India invested over US$95.4 million into its payment unit, Amazon Pay.
The e-commerce and aviation industry saw a disruption at the start of the pandemic. However, with the Govt easing lockdown and transportation resuming for essentials such as Covid 19 Relief material and Pharma, major e-commerce players have engaged with Airlines to operate Cargo on Seats/Freighter flights across India and globally as these companies are customer focussed and have managed trade-off by shifting to Air Cargo to ensure Customer promises are maintained and to be able to hold their market share. With the Ecommerce market share bound to spiral in the future to ensure customer delight, Air Cargo and Ecommerce are bound to grow hand in hand in the coming years.
Technology and collaboration have been the two buzzwords during the pandemic, which helped keep the operations running. How has leveraging tech and taking a collaborative approach helped AirAsia India operate efficiently?
Air Asia India has always emphasized the importance of making air cargo inclusive of technology. Our state-of-the-art cargo management system gives customers the edge to book cargo with a single click of their mouse at their offices avoiding jostling with physical papers and other formalities at the Cargo terminal. We recently collaborated with Tata Digital to develop our new website which serves as a one-stop-shop for all customer requirements from booking tickets to booking cargo online. This has brought us closer to the customers to ensure that we cater to various customer needs and provide them resolution at the click of their mouse. Beyond this, the next horizon is analytics, which involves, among other efforts, using data in smarter ways to enhance decision making, requiring some investment but yielding significant payoffs.
How did India’s decision to ply cargo on seats help convert the crisis into an opportunity and help recover the pandemic-induced losses?
The change in the behaviour of passengers following the COVID-19 crisis, travel restrictions, and the ensuing economic crisis had resulted in a dramatic drop in demand for airline services. India’s decision to ply Cargo-On-Seat flights changed the dynamics of the aviation industry by providing transportation solutions for various industries especially Pharma and Ecommerce by utilizing the passenger aircraft to carry cargo and generating revenue for the airlines which otherwise were financially constrained.
As global passenger traffic is set to reduce, airlines are already utilizing the Cargo on Seat and have operated various flights transporting essential medical supplies, Covid19 vaccination, and perishables. Though most airlines are utilizing 40-50% of the current fleet however due to cargo demand and cargo on seat initiative, airlines have seen an increase in their cargo revenue by almost 20% which is significant in supporting otherwise financially ailing airlines.