AirAsia has been keeping its head and hopes high since the COVID-19 crisis and continuing with cargo-only flights by transporting essential commodities and pharmaceuticals to find a functional cure amidst the challenges of a massive decline in passenger traffic, high costs, and capacity crunch. The India subsidiary of the Malaysian low-cost ailrine handled 39,000 tonnes of cargo on its network during FY2019-20. For FY2020-21, the tonnage stands at 32,369 tonnes of cargo, said Shekhar Mohanty, AirAsia India’s Head of Cargo. Not only did the carrier introduced new cargo categories including dangerous goods, wet cargo, valuable cargo, e-commerce shipments and postal mail to ensure consistent pre-COVID growth but also launched an exclusive cargo website where customers can swiftly book cargo online. Adding to it, the airline has so far successfully transported over 10.6 cr doses of COVID-19 vaccines. In an exclusive interaction with Ritika Arora Bhola, Mohanty discusses about the significance of collaboration amongst the industry stakeholders for growth and to bring in efficiency, while revealing about the carrier’s freighter operations plans for the near future, investments in technology to boost operations, and priorities and strategies devised to move forward.
How was the FY 2020-2021 for AirAsia India’s cargo operations? Tell us about the volumes handled during this period. And how is the carrier gearing up to achieve pre-COVID growth in the near-term?
Though AirAsia India does not operate freighters, the airline has undertaken several cargo-only flights in an endeavour to transport life-saving medicines, PPE kits and COVID-19 relief material across the country for both the government and private sectors. Our sustained efforts during the pandemic empowered greater connectivity and aided in the transportation of essentials across the country.
AirAsia India handled 39,000 tonnes of cargo on its network during FY2019-20. For FY2020-21, the tonnage stands at 32,369 tonnes.
We have introduced new cargo categories for transportation including dangerous goods, wet cargo, valuable cargo, e-commerce shipments and postal mail – to ensure that we achieve consistent pre-COVID growth. We have also introduced an exclusive cargo website where customers can swiftly book cargo online. So far, we have successfully transported over 10.6 cr doses of vaccines in our fight against COVID and will continue to move ahead stronger on this.
Could you tell us about preighters operations in case it is being used by the carrier?
AirAsia India was equally impacted by the decline in passenger activity in 2020 and 2021 and operated cargo-only flights where either the flight was operated with only cargo in the belly, and in some cases, the cargo was carried on seats too. While we continue to operate passenger aircraft, we have the capabilities and process in place to operate cargo-only flights using the same aircraft. Having said that, as the pandemic recedes and commercial passenger flight capacity starts returning to pre-COVID-19 levels, we expect adequate belly capacity to become available for cargo in passenger flights itself.
How is the airline digitalising its logistics and supply chain processes? Could you throw light on the best practices and latest technology for efficient and resilient operations?
At this juncture of digital convergence and technological innovation, the future will be revolutionised with the power of digitisation. We understand the importance of these and accordingly investing in the same.
AirAsia India uses a state-of-the-art cargo booking system to encourage paperless cargo booking. Our reliable, integrated system encompasses end-to-end transparency that helps customers while tracking cargo on the network.
Apart from the exclusive cargo website, we have developed an application to be used by our operations team for real-time tracking of each activity for an aircraft turnaround on the ground to ensure on-time performance for passenger and cargo. We are also working on overhauling our cargo revenue management system and practices to maximise cargo revenue. Concurrently, we are exploring a predictive analytics model to estimate the capacity available for cargo in each flight based on the passenger load, flight plan, etc. and thereby improve our cargo uplift predictability.
Additionally, all our cargo handling staff undergoes required training and refresher courses to ensure that they handle cargo with optimum efficiency.
How important it is for the stakeholders across the aviation value chain to work together to deliver cargo seamlessly across continents faster?
Collaboration across all stakeholders in the air-cargo ecosystem is critical not only for growth of air cargo in the country but to bring in efficiency and reduce the cost of logistics. Air cargo can play a critical role in the economic growth of a nation, and for a country the size of India, opportunities abound for air cargo.
While airlines need to continue investing in processes and systems for offering better services to air cargo shippers and customers, it needs to be supported by contributions from other stakeholders too – better infrastructure and equipment from airport and cargo terminal operators, smooth and transparent regulations from the regulatory bodies, efficient and safe processes by ground handling agencies, and adoption of technology by carrying and forwarding and cargo agents.
Do you think that the time has come when each player should work towards enhancing the performance of others in the ecosystem, by improving their overall performance, leaving behind the competition and standing in solidarity? How will such a stance benefit the industry?
Yes, as a key contributor to the aviation ecosystem, it will be beneficial for all players to stand together to enhance efficiency of the ecosystem rather than concentrating on just oneself. It is certain that such a stance shall benefit the industry. To cite an example here, during the transportation of COVID 19 vaccination across the country, aviation fraternity including MoCA, Airport Authority of India, airline operators, cargo terminal operators, cargo agents, pharma companies came together to ensure that the vaccines are delivered on time at all centres – this movement ensured 100 cr plus vaccine doses administered to native Indians and a sizeable number abroad.
Could you elaborate on the advantages of SAF and the new trend of CO2-neutral flights being followed by carriers?
AirAsia India does not operate freighters but has pledged to support the cause to reduce CO2 emissions and has taken small steps towards that as part of its core value ‘Sustainability Spirit’. As a young organisation, we have embarked on our sustainability journey by embedding sustainability principles at the core of our business. Under the able guidance of Tata Sustainability Group, we have identified material sustainability issues for the airline, enabling long-term success in identifying the right metrics for each issue, setting the relevant targets based on industry analysis and arriving at action-based plans to achieve targets based on good practices from the aviation industry.
Given the technology choices we have at our disposal, we can reduce considerable amounts of our CO2 emissions by deploying various emission reduction levers such as use of a modern fleet, efficient flying, and emission offsetting.
Beyond the noise, what do you see as the challenges and trends shaping up tomorrow’s air cargo world?
Air cargo post-COVID-19 will become an important revenue source for airlines that for the first time saw such a long collapse in demand due to the pandemic. Air cargo has turned out to be a hedge for airline operators.
Going forward, we see a few noteworthy trends for 2022.
A continued artificial demand due to resurgence in the global large economies and also the paucity of supply of air cargo capacity, with either bankrupt or near-bankrupt airlines operating with smaller capacity and with the supply chain crisis caused due to imbalance of ocean containers and even ships to carry them.
Air cargo capacity will remain constrained although not much as it is currently. As long as passenger flights capacity remains constrained, the demand-supply balance of air cargo capacity and yields is likely to start taking place. Supply will be greater than demand, hence a reverse situation of lower rates. Network revenue and product definition would be the key for airlines to keep up with better price positioning then.
E-commerce is growing in double digits and the trend is expected to continue in the coming decade. The average size of the shipments is going to become smaller and airlines that do piece-level tracking would be perceived as a better choice for this growing segment.
So, going forward, what should be the priorities to be undertaken by stakeholders of the industry?
As per IATA reports, in 2020, the air cargo industry generated US$129 billion, which represented approximately a third of airlines’ overall revenues, an increase of 10-15 per cent compared to pre-crisis levels. Airlines need to maintain the momentum established during the crisis and continue building resilience post-pandemic by prioritising the following:
- Including air cargo prospects in their overall planning.
- Implementing latest IT systems that offer seamless service and visibility to customers as well as data driven decision making on revenue optimisation for airlines.
- Building air cargo community systems, with customer NPS scores for greater transparency.
Amid all these, what do you identify as the biggest opportunities for airlines as well as for yourself?
In addition to passenger traffic, the air cargo business will be a very important business for AirAsia India. India is looking to double its economy to US$5 trillion in the next 5 years. This means air cargo will present many opportunities for AirAsia in building its market shares through domestic and International air cargo movements.
Going door-to-door and putting belly capacity to use beyond airport-to-airport services will also be the key. In the last 2 years, we have seen a sharp spike in yields in domestic space. In the next 2-3 years, as things get back to normal and with more competition from new airlines, the trends in the supply and demand will undergo significant changes. Along with this, there are a lot of improvements in road transport infrastructure. This will also add to the competitive landscape.
For the immediate future, indicators such as inventory levels and manufacturing output are favourable. World trade is set to grow at 9.5 per cent this year and 5.6 per cent in 2022. E-commerce continue to grow at double-digit rates, and demand for high-value specialised cargo such as temperature-sensitive and healthcare goods is rising. Demand for airfreight is also seen growing in automotive and industrial sectors as well as for plastics and chemical goods, as companies restock inventories with economies bouncing back faster than expected.
Overall, the outlook for air cargo in the short-term is strong. For the long-term, recovery has to be brought in by bringing value-added services and key customer interactions and contracts that serve e-commerce demand chains.