Air Freight stations Cynosure of all eyes

The intervention of the new government to improve the air cargo infrastructure by bringing new policy guidelines to set up air freight stations (AFS) has brought a reason for air cargo stakeholders to smile. They are affirmative that once it is fully implemented, AFS will substantially improve  the air cargo infrastructure in India.

In December 2014, an announcement was made by Hyderabad Menzies Air Cargo, a joint venture company between GMR Hyderabad International Airport Limited and London-based Menzies Aviation Plc, to start an air freight station (AFS) in Chennai. The AFS for which the idea was conceptualised sometime seven years ago, came into effect when it was planned in association with Central Warehousing Corporation (CWC), which was one of the first companies to get an AFS licence. The Hyderabad airport will extend services to its airline customers by expanding their hinterland to Chennai, enabling local trade members to route their shipment through the Hyderabad airport. Chennai is second location after Nagpur for Hyderabad Menzies to start the AFS service. This partnership has set an example that this is the only way to go forward. ICDs/CFSs or off airport locations should be flexible with no restriction to bonded truckers.
By the time, this news in the industry showed a window of opportunity to strengthen the airport infrastructure; the new government led by Prime Minister Narendra Modi brought a New Year gift for air cargo fraternity, when in January 2015, Ministry of Civil Aviation came up with guidelines to set up AFS across the country. “The initiative of AFS will create an enabling environment for promoting international air cargo operations by reaching out to hinterland regions of the country besides de-congesting the congested air cargo terminals in some gateway international airports that face high dwell time,” according to MoCA.

ACAAI’s firm belief
S L Sharma, President, Air Cargo Agents Association of India, said, “With the emphasis on development of cargo infrastructure, air cargo stakeholders are optimistic. As a part of infrastructure development, the government has taken a decision to set up AFS in 10 cities. These AFSs, to be built by CWC will ease the supply of foodgrain.” Today, CWC is responsible for three air cargo complexes at international airports besides the management of the cargo warehouse at Indira Gandhi International Airport in New Delhi. “However, it remains to be seen whether these CWC AFSs are completed and commissioned in time,” he stated. Earlier attempts at starting AFSs have failed or at best remained half-hearted attempts. In fact, air cargo stakeholders have been demanding AFSs at international airports for quite some time.
ACAAI is confident that the air cargo and logistics industries will derive tremendous benefits when more number of AFSs become operational, Sharma added confidently. AFSs will enable exporters, importers and the logistics and air cargo industries to function in greater harmony with one another. The customs, security and other regulators’ formalities can be completed at the AFS, and the cleared goods can be speedily transported to the airport in the case of export goods, and to the consignee’s premises in the case of import goods. It is expected that the facility will be able to cope with the high degree of vehicular movements, thereby, facilitating the speedy offloading and loading of export and import goods.

Coordinated initiative – finally arrived
Venkata Reddy, CEO, Menzies Bobba Bangalore, said, “The air freight industry has largely been neglected vis-vis the focus on the new terminals and airport facilities on the passenger front. The most significant hurdle to growth and efficiency, however, remains our perennially inadequate and inefficient airport infrastructure as also the absence of any coordinated initiative to effect the required changes, improvements, streamlining, rationalisation and productivity enhancements so critically required. Working group with representation from the air freight industry has been set up by the Ministry of Civil Aviation to look into the various aspects of the industry. There is an urgent need to develop more air freight stations and cargo villages across India.”

Holistic approach key to world-class infra
Thinking about the future, one of the veteran freight forwarders Cyrus Katgara, Partner, Jeena & Company, said, “To create a world-class infrastructure, there is a need for holistic approach. Railways focus was on passenger movement while the National Highways Authority of India (NHAI is responsible for major highways in the country) and the ports do not enter into pre-planning consultations. Therefore, there is a need to create a new ministry. A dedicated ministry can ensure a world class infrastructure across all modes and this will also bring in a seamless supply chain.”

AFS – key to all problems
“Indian air cargo industry has not matured to world standards and cargo unitisation happens only at airports. Only loose cargo is shifted to airports. In fact, Indian airports stand out in the number of loose packages handled when compared to the major cargo hubs in Asia and other parts of the world. In such a situation, airports must remain only as throughput areas if they are to function efficiently,” averred Amber Dubey, Partner, KPMG. Suggesting AFS as a solution, he said, “the ideal solution for all this would be AFS where loose cargo is processed, unitised, and delivered to airports for uplift, and in the reverse flow unitised imports are shifted to AFS, devanned and delivered.”

ACAAI’s firm belief

At present, the infrastructure and approach roads at several major airports and sea ports are grossly inadequate, causing extensive delays. Consequently, the dwell time at these ports is very high, which causes delays in the prompt dispatch of export goods, and timely receipt of import goods by the end users. The transaction costs also increase due to such delays, thereby making exports from India uncompetitive vis-à-vis exports from other countries.
AFSs have the scope and a unique opportunity to contribute meaningfully towards enhancing and improving this situation. It would definitely decongest the saturated facilities and infrastructure at various airports. As per the new policy guidelines all export and import cargo clearance including customs related activities like assessment, examination, payment of duties etc. would be provided at the AFS, as is done in any other custom station. Besides the customs authorities, other cross-border regulatory agencies such as plant quarantine office, drug controller’s office, etc would also be accommodated by the respective AFS enterprise in the same premises. This may include for example, space for establishment of laboratory for immediate inspection and the area should be well lit.
“This is an urgent requirement, as the air cargo and logistics industries are currently undergoing unbearable stress and strain due to these factors. By virtue of their strategic location, AFS will become a median between the hinterland, where many manufacturing hubs are located, and the airports/seaports. Thus, the exporters and importers will be able to derive the dual benefits of speed and ease of access to such facilities,” added Sharma.
“To keep pace with the fast changing pattern of cargo handling in air cargo industry, the essence is speedy delivery. However, the importance of setting up of AFS throughout the country has long been felt intensely and we in Air Cargo Forum of India (ACFI) have suggested our views in this regard to the Government in formation of AFS,” said Katgara, who is also secretary at ACFI.
The prime object of setting up AFS is to de-congest the air cargo terminal at the gateway airports. This will facilitate expeditious handling of export and import cargo and will improve efficiency of cargo handling in decongesting the customs and forwarding activities. Thus the cargo will be brought to the air cargo terminal in a ‘Ready for Cargo’ condition. According to Dubey from KPMG, based on the faster clearance, the dispatch of cargo from AFS to air cargo terminal at the airport can be planned in advance and space can accordingly be booked with the airlines well in advance. “This will also help the airlines to plan their space allotment in time and cargo can be loaded promptly on arrival at the loading bays without any further loss of time. The most important thing for success of AFS would be seamless co-ordination among all its stakeholders such as airlines, consol agent, customs brokers, etc,” he suggested.
Moving on, Pradeep Panicker, President, Air Cargo Forum of India and Chief Commercial Officer, Delhi International Airport Ltd (DIAL) suggested few recommendations in the policy that are important to make AFS a business viable product:
Only airport operator should be allowed to operate an AFS as a first preference to ensure last mile connectivity and consistent service levels.
The security screening of cargo should happen at airport only and not at the AFS to secure freight at last port.
Existing ICD/CFS to accommodate AFS on request from airport operator
Area for AFS should be decided based on market forces and business requirement. 1000 sq m for export and import would add to the cost of setting up an AFS and ICD/CFS may not have readily this much area available initially.
Cargo handling equipment deployment should be based on operational requirements.
In the case of airport operator setting up AFS, approvals can be waived in view of their existing air cargo experience.
Echoing similar concerns and presenting airlines’ viewpoint, Vipan Jain, Regional Manager Logistics, South Asia & Middle East, Lufthansa Cargo considers AFS move as a welcome step and can be a turning point for the industry, if implemented in full. “In India, we have very strong regulatory requirements which may not encourage new AFS set-up. As number of manual processes and allied agencies are involved in the whole export and import process, I feel it will be quite difficult to manage the facility within limited area which will ultimately cost huge investment for instance land, building, equipment, security, electricity, running cost etc. As a first step, the existing ICD or CFS should be promoted to have AFS facility and later new independent facility of AFS should be considered.”

Success story has begun
India seemingly has all the ingredients to be one of the world’s great air cargo centers. Rapid growth of international trade, a huge manufacturing engine and a population of more than 1.2 billion all bode well for the industry. It was government support and a healthy communication between government and air cargo stakeholders was absent. With the interest shown by the new government towards development of air freight infrastructure and a smile on the face of air cargo fraternity, will set a bright future for air cargo industry in India in the way of air freight stations. Indeed!