Trade with Commodities: Cargo business looks good, express segment set to take off

Sunday, March 23, 2008

Cargo business looks good, express segment set to take off

The airlines may have other loses to manage and plans to formulate, but for Jacques Creeten, vice-president, India, FedEx, his daily schedule has become more hectic. After 10-years of operations in the Indian market, he feels that this is the time to capitalise on the ground work that they’ve done for a decade. “During this period we have grown almost five times, which speaks volumes about our commitment to the Indian market,” he says.

There is a similar story in the boardroom of Craig Grossgart, country manager, DHL Express India. The company holds a market share of 60% in terms of shipments and handles over 7.2 million shipments in 2007. As per industry estimates, the Indian express industry is valued at Rs 7,000 crore and is growing at approximately 25% annually.

“Asia will witness the highest growth rates and India will account for almost 9% of this annually, as compared to the world growth rate of 4%. And in this whole number maze, India emerges as a priority market for us,” says Grossgart.

Today, the domestic express makes up about 58% of the total market, of which a little less than half is in the organised sector. The unorganised and semi-organised segments, comprising largely of regional and intra-city service providers, and EMS Speedpost, account for the rest.

Blue Dart, one of the pioneers in the industry clocked a profit of Rs 69.93 crore after taxation for the year ended December 31, 2007, up by 39% from the corresponding period of the previous year. “We manage to carry 72.4 million shipments (Jan-Dec, 2007) and yet maintain our reliability levels at 99.96%,” says Anil Khanna, MD, Blue Dart Express.

He says in the organised air express industry in India, the company holds a market share of 41.7%. Though Blue Dart has no plans to partner with a foreign airline, the company feels that all major companies will be looking out for opportunities to acquire small domestic companies and enter into the sector. “This is a phase of consolidation in the logistics industry and I believe there is space for everyone in this space,” says Khanna.

According to a recent CARE report, in India there are nearly 2,500 companies in this segment— the huge potential and demand looks tempting. According to analysts, the opening up of the Indian economy to foreign investments is expected to attract more companies into the country, thereby adding momentum to market growth.

R K Saboo, chairman, Express Industry Council of India (EICI) is hopeful that the current growth trend should continue for at least another five years. “Since express and cargo together have huge potential, it is good for the sector to have dedicated cargo carriers and from the user prospective it is good for express industry to have many carriers offering services. The increase in the FDI cap will also see a boost in the activity of the air cargo space,” he says.

With such projected growth charts, it looks like the weather is sunny and perfect for a smooth flight. But for an exponential growth, the industry needs a solid runway to take-off. But for the express industry, the challenges are no different with speed of distribution, value adds and a better turn-around time being the prominent issues.