Demand for perishables has surged in many markets as lockdowns, meat plant infections and logistics problems aplenty – particularly a scarcity of uplift – have added to pressures on the supply chain, while the closure of many cafes and restaurants around the world has also significantly altered demand patterns – and the logistics behind their supply.
While airlines struggle to simply survive, the cargo sector has been innovating its way around the capacity crunch. Passenger aircraft flying scheduled routes and charters – but as cargo-only operations – have quickly become a practical and innovative strategy.
Perishable have been a good growth area, with higher profit margins, for an air cargo industry that is experiencing an overall slump in volumes.
In general, products transported by air, such as time-sensitive perishables and pharmaceuticals, and high-value materials including computers, consumer electronics and automotive spare parts were among the fastest-growing trade flows in the world even during the pandemic. This increase in demand for these products has in-turn, increased air cargo market growth against a crisis of uncertainty such as the COVID-19 pandemic, which arrived at overwhelming speed and enormous scale.
In developed countries, dedicated air cargo terminals are being designed in tandem with the increased air cargo volume to speed up the air cargo screening process as well as efficiently manage security threats. With the aid of advanced air cargo screening systems, new freight terminals are increasingly being established and expanded, which in a way is triggering the expansion of the air cargo market.
Movements exceeds from India
Perishables may be among the most taken-for-granted items that people consume around the world in more normal times, but their importance – and those who sell and transport them – has been cast into the spotlight in the course of the ongoing COVID-19 pandemic. Fears of potential food shortages led some already nervous consumers to panic buying, but have led more widely to a greater appreciation of simply having access to fresh food and the process that brings it to us.
Although global perishable markets were taking a hit – some because of scarce capacity and some due to dramatically changing coronavirus lifestyles – in which flowers, for instance, suddenly became frivolous, overall food and vegetable exports kept growing.
For instance, India’s overall food exports since March have increased 27 per cent. During the difficult time of COVID 19 pandemic, the country has sustained the world food supply chain and has continued with exports. For essential commodities such as rice, wheat and pulses, more than 100 per cent spike in demand has been registered.
India’s exports turned positive for the first time in the fiscal, registering 5.27 per cent growth in September.
Meanwhile, the Department of Agricultural Cooperation & Farmers Welfare (DAC&FW) under India’s Ministry of Agriculture announced that Indian exports of agricultural commodities during March to June earned Rs 25552.7 crore against Rs 20734.8 crore during the same period in 2019, displaying an increase of 23.24 per cent.
Grapes lead the chart in fresh fruit exports followed by mango, pomegranate, banana, and oranges. While in vegetables, onions, potatoes, tomatoes, and green chillies makes up the majority, says data from the Ministry of Agriculture.
Indian green chillies dominate the European market with most of the exports destined to the UK, Italy and France. But it is no more the case, as a few days back Pakistan started to export the same chillies with 40 percent low price.
However, exporters are blaming the yet to be stable air freight rates as it accounts for more than 40 per cent of the total cost and had been seeking government intervention. During April, air cargo rates to move perishables from India to European destination had spiked almost 200 percent from 80 rupees per kg to 250 rupees per kg.
Airlines keep pointing out the reduction of capacity due to grounding of passenger flights and the imbalance in volume of cargo available as reasons for different directions for the increasing freight rates.
While speaking at a recent web conference, Vandana Aggarwal, Senior Economic Adviser, Ministry of Civil Aviation, GoI said, “In September 2020, the Indian air cargo was operating at 85 per cent of what it had in September 2019.”
“We used to have six freighter aircraft and now we have 18 dedicated freighter aircraft moving around. The central government approved 150 passenger aircraft for cargo-on-seats operations. We had all the stakeholders coming together and fixing the glitches during the testing times and we are working on to institutionalise the same cooperation,” she added.
“From the Krishi Udan perspective, Chennai Airport did very well and showed a growth of 18 percent compared to last year. Varanasi, Lucknow, Patna, Mangalore, Surat and Amristar also did very well in exports. But the domestic movement is still struggling due to the high freight rates,” Aggarwal informed.
In February 2020, India’s Finance Minister Nirmala Sitharaman introduced and Civil Aviation ministry launched Krishi Udan and Marine Krishi Udan schemes in her Budget 2020 to help move perishable commodities though air cargo in a subsidised manner on national and international routes.
Airports and Airlines take the lead
On an average, the Tiruchi International Airport, one of non metro airports in the country, has surpassed the target set for overseas cargo handling during the 2019-20.
The airport’s international air cargo terminal handled over 7,900 metric tonnes (MT) of overseas freight by February this year itself thereby exceeding the target of 7,500 MT set for 2019-20 financial year, according to Airports Authority of India (AAI) statistics.
On an average, the Tiruchi international air cargo terminal used to handle more than 550 MT overseas cargo every month during FY2019-20. There have been occasions when the figure exceeded 700 – 800 MT in certain months during the fiscal, AAI said.
Perishables such as vegetables, fruits and flowers continue to account for ninety-nine per cent of the consignments lifted from Tiruchi airport which is surrounded by agrarian districts.
In the absence of any freight service, cargo is being booked in international passenger flights that were being operated to select foreign destinations in South Asia, South East Asia and West Asia from here. Singapore is a big market for the exporters from Tamil Nadu and surrounding regions as bulk of vegetables is shipped to the country.
During May itself, 185 tonnes of cargo was exported from the airport. Maximum quantity of overseas freight to Singapore consisting of vegetables, fruits and curry leaves moved through the airport. A little over 160 MT of freight was uplifted by domestic airlines SpiceJet and IndiGo to Singapore on different dates over the last one month.
On May 08, for the first time, a dedicated cargo freighter was operated by the SpiceJet from Tiruchi to Singapore to lift vegetables and fruits. Around 11 MT of perishables such as vegetables, flowers were airlifted from Trichy.
Under the Krishi Udan scheme, the private airliner SpiceJet started a dedicated freight service in February connecting Visakhapatnam and Chennai to Surat and Kolkata for marine products and pharmaceuticals. During the lockdown, SpiceJet carried larger quantities of fresh farm and shrimp produce both within and outside the country to help Indian farmers.
Between March 25 and Septemeber 16, 2020, SpiceJet transported a record 9500 MT of shrimp and farm produce of shrimp on both domestic and international routes, powered by fully integrated transportation network including air cargo, ground transportation, and warehousing facilities across the country.
Until September, the airline has operated more than 7,000 cargo flights and transported over 50,000 tonnes of cargo since the nationwide lockdown began. Out of these flights, around 3000 were to international destinations.
SpiceJet, which for most part trailed IndiGo in terms of market share, is finally having its day under the sun, thanks to the success of its cargo arm SpiceXpress which has become the country’s biggest cargo operator by taking advantage of the lockdown and growing every day.
This, in turn, has pushed SpiceJet on the fast lane; the airline has grown faster than most of its peers this year. It overtook Blue Dart in August to become the second largest in the air cargo segment.
Today, SpiceJet operates a fleet of 13 cargo aircraft (Boeing 737, Bombardier Q-400s) including two wide-body (Airbus A340) planes and is the only Indian carrier to operate long-haul cargo flights to Europe. The induction of wide-body cargo planes has significantly enhanced the airline’s operational capability allowing it to operate non-stop cargo services across the globe to destinations in Europe, Africa and CIS countries.
Sanjiv Gupta, Chief Executive Officer, SpiceXpress said, “As SpiceJet, we are in a unique position where we can leverage our fleet strength, and our strong dominance in the Indian cargo market. We have grown by 72% for the period of March to June against the same period last year.”
As far as SpiceXpress is concerned, Gupta said, we are now poised to take off. We have the unique advantage of being a successful airline for the last 15 years. “We have the best combination of passenger and cargo fleet and well positioned to cater to the regional requirements including Asia Pacific, Central and Southeast Asia, and Arabian countries.”
“We have been able to demonstrate to our customers that we are the most flexible cargo carrier. Domestically, we have been able to place flights within a few hours of being notified. Internationally, we have been able to do this within 24 to 72 hours. This has turned a key differentiator for us,” said a beaming Gupta.
Gupta had said on a previous occasion that earlier they used to operate them between the domestic airports with scheduled routes. “But that went out of the window when lockdown started. Our freighters now go to the Middle East, Hong Kong, China, Southeast Asia and SAARC countries. The freighters are moving a lot of perishables from Kochi, Calicut, Chennai, Delhi and Mumbai to the Middle East. While Southeast Asia is mostly about inbound, the Middle East is mostly about outbound.”
“China is primarily for medical equipment, medical kits, and medicine raw materials and Singapore is mostly for electronic like ventilators. This traffic imbalance affects air freight prices. We run only full charters and charge for the full flight from retailers or forwarders as nothing comes back,” he added.
Just like in the passenger segment, IndiGo is building up a huge lead over its competitors in the domestic air cargo business.
Between April to September, IndiGo operated 1,700 cargo flights and transported over 14,300 MT of freight, clocking in the highest net monthly revenue in August 2020 from cargo operations, despite an operational capacity of only 32 per cent.
In May itself, IndiGo has exceeded its own record on the highest ever tonnage carried on a passenger freighter by uplifting 20,212 kgs on its Kochi-Abu Dhabi flight, by outpacing its last record of 19,193 kgs uplift on the same route. The cargo team of the airline transported a total of 70.27 cubic metres (in air freight, 1 cubic meter is equal to 167 kgs) of fruits and vegetables by following all safety measures in the flight.
“Cargo demand has been buoyant on many routes, owing to the lack of the normal passenger aircraft belly space. This has supported our cargo-in-cabin charters wherein with some minor equipment and procedural changes, we have been able to carry significant payloads on our Airbus A320/321 passenger aircraft,” said William Boulter, Chief Commercial Officer, IndiGo CarGo.
“Initially, there were challenges with the volume of cargo we could carry on these flights, but we reworked our strategy and were able to turn this into our advantage. Within the end of the first month of cargo charter operations, our team had broken the record of the highest tonnage carried on an A320 passenger aircraft. Thereon, we never looked back; we kept breaking our own record every time,” Boulter said.
“While we are the airline of choice for cargo to the Asian and Middle East destinations, our distinguished services have made our customers wanting us to partner with them for newer destinations like Tashkent, Almaty, Bishkek, Moscow and Cairo. These are new sectors which we have won because of the goodwill we generated by successfully building a reliable cargo charter product,” Boulter asserted.
“Our next focus is to continue supporting our farmers and manufactures in tier II and III cities to connect and sell their produce to international destinations, by giving them thorough connections and tailor-made solutions,” he added.
Meanwhile, the cargo handled at Kempegowda International Airport Bengaluru registered a year-on-year growth in September – the first time since the imposition of lockdown in March. The airport has been able to register positive growth during this period led by a 139 per cent increase in freighter movements in September.
From April to August 2020, Bengaluru Airport processed 180,745 kgs of pomegranates, emerging as the leading airport for the fruit’s exports from India.
According to data from the Agricultural and Processed Food Products Export Development Authority (APEDA) and the Directorate General of Commercial Intelligence and Statistics (DGCIS), Bengaluru has accounted for 99 per cent of the total pomegranate exports from Karnataka.
Global freight carriers such as Air France, British Airways, Cathay Pacific, Emirates Airlines, Etihad Airways, KLM Royal Dutch Airlines, Qatar Airways, Singapore Airlines and Turkish Airlines altogether accounted for most of the perishables uplift.
“September has been very positive for us as we processed 32,449 metric tonnes of cargo which is 85 metric tonnes or 0.26 per cent higher than September 2019 tonnage signalling an encouraging trend,” said Hari Marar, Managing Director of Bangalore International Airport Limited (BIAL) – that owns and operates Bengaluru Airport.
“At Bengaluru Airport, the exports are currently growing at around 8 per cent. As economic activities are expected to return to normal levels in the coming months with the easing of restrictions, we believe this will be sustained growth. In the next 18 months, we expect annual cargo volume to reach pre-COVID-19 levels, post which we expect to see further growth,” Marar added.
At Bengaluru Airport, the cargo infrastructure has been built to ensure the rapid distribution of perishable cargo.
The airport has two dedicated cold zones– AISATS Coolport with the capacity to handle 40,000 MT per annum and temperature zones ranging from -25 to +250 Celsius under the same roof, across 17 dedicated cold rooms, and Menzies Aviation Bobba Bangalore with the capacity to handle 20,000 MT per annum, across temperatures ranging from +15 to +250 Celsius for 20 ULD pallets and +2 to +80 Celsius for 2 ULD pallets.
Government’s prudent course of action
The Ministry of Food Processing Industries is striving to establish an integrated and seamless network of cold chain grid and infrastructure for the uninterrupted transfer of perishables from production to consumption areas/centers. This would maintain the safety, quality, and quantity and storage of perishable produce such as fruits and vegetables, dairy products, meat, fish marine, poultry, ready to eat food products.
It recently announced that 27 projects were approved in Inter-Ministerial Approval Committee (IMAC) meetings under the scheme for cold chain, value addition and preservation infrastructure of Pradhan Mantri Kisan SAMPADA Yojana (PMKSY).
The projects have been approved across the states of Andhra Pradesh (7), Bihar (1), Gujarat (2), Haryana (4), Karnataka (3), Kerala (1), MP (1), Punjab (1), Rajasthan (2), Tamil Nadu (4), and Uttar Pradesh (1). These 27 new integrated cold chain projects will leverage a total investment of 743 crores for the creation of modern, innovative infrastructure and effective cold chain facilities for the food processing sector across the nation. These projects with a grant-in-aid of Rs 208 crores will help increase efficiency and sustainability in India’s food supply chain.
Harsimrat Kaur Badal, Former Union Minister of Food Processing Industries said, “Saving perishable produce, by provisioning adequate infrastructure, will not only help in augmenting farmers’ incomes but will also act as a small step towards making India ‘atma nirbhar’ in the fruits and vegetable sector. They will not only provide a big boost to the growth of food processing infrastructure but also help in streamlining the agricultural supply chain, generate direct and indirect employment opportunities in rural areas, provide better prices to farmers and end-users, and benefit allied sectors.”
As many as 85 cold chain projects have been considered for financial assistance throughout the country to boost the government’s efforts towards bridging the gap in supply chain and building world-class cold chain infrastructure.
Recent findings by real estate consulting firm CBRE stated that the cold storage segment in India is expected to witness significant growth over the next few years on the back of a strong consumer and industrial base. Following the COVID-19 outbreak, the demand for cold storage is being further fueled by a wider omnichannel distribution of food & grocery (F&G) across tier I and tier II cities in the country.
The overall cold storage real-estate stock in India is estimated to reach 1,400 – 1,500 million sq ft by 2023, CBRE noted. The projected growth of F&G retail, dairy, food processing, and pharma industry over the next few years is likely to drive demand for cold storage and reduce product wastage. The emergence of the ‘cloud kitchen’ concept is also likely to boost demand for cold storage facilities.
Anshuman Magazine, Chairman and CEO (ISMEA), CBRE said, “Cold storage facilities play an integral role in improving the shelf life of products and are an important enabler for several industries working across fresh food production and delivery, along with healthcare and other products such as flowers and chemicals. Considering the potential of the cold storage segment in the country, we expect that consumer/industry-led factors in India would continue to attract the interest of leading players in the coming years.”
CBRE added that government initiatives to reduce post-harvest waste, encourage investment, and improve logistics efficiencies are also expected to boost the overall CS capacity, value and RE stock.
In 2019, the storage capacity in the country was 37-39 million tonnes. Andhra Pradesh, Telangana, Uttar Pradesh, West Bengal, Gujarat, Punjab, Bihar, Madhya Pradesh, Maharashtra, Haryana and Karnataka accounted for 91 per cent of the total cold storage capacity in India in 2019.