SpiceJet, which on Monday launched its dedicated freight service, SpiceXpress, is targeting cargo capacity of 1 lakh tone every month by 2022 on the back of the growth in the domestic e-commerce market, chairman and managing director Ajay Singh said. The airline, which has a current cargo capacity of 15,000 tone per month, will be adding four freighter aircraft under SpiceXpress. SpiceJet is the first scheduled domestic operator to start exclusive freight services. So far, airlines have been carrying payloads in the belly of the aircraft.
“We see a tremendous potential in the air logistics business. We will increase our monthly capacity to 27,000 tone by the end of 2018 and nearly 40,000 tone by the end of the next year. Our target is to take this capacity to 90,000-100,000 tone in 3-4 years,” Sings told reporters at the launch.
The company’s entry into the cargo-handling business has been fuelled by the growth of e-commerce in the country, with sellers like Amazon and Flipkart offering same or next-day options to their customers. Cities such as Bengaluru, Hyderabad and Gurugram have emerged as storage hubs for e-commerce companies.
As per consulting firm PwC India, domestic e-commerce is set to jump three times, from $35 billion to $100 billion by 2022. Two major players – Amazon and Flipkart – ship around 6.5 lakh units daily. There are just five freighter aircraft in the country, with Blue Dart Express being the notable player.
Cargo revenues for air carriers have witnessed a surge in the last few years. SpiceJet’s cargo business has grown 20-30% annually. The Gurugram-based carrier earned Rs 241 crore in FY17 from freight services. SpiceJet plans to ship apparel, consumer electronics, pharmaceutical products, live animals, among other items, inside the modified Boeing 737-700 aircraft starting next week. Its operations will initially cover Delhi, Bengaluru, Guwahati, Hong Kong, Kabul and Amritsar.
“We hope to ramp up our cargo servicing destinations from 54 to 150 destinations across India, Asia and Europe by 2022,” Sings added. According to rating agency Icra, the air cargo traffic is expected to grow at 60% in the next five years. Over 33 million tone of freight was carried by airlines in FY18, up nearly 13% year-on-year.
However, experts warned that a cargo venture could be highly risky for a scheduled commercial operator as it requires expertise. “Plans to launch freighter operations may be a strategic risk at this stage. The value in cargo is in door-to-door services, however, this requires massive investment in last-mile connectivity. The airline’s earlier non-core initiative in the retail space, SpiceStyle, proved to be an avoidable strategic mistake,” aviation advisory firm CAPA India said in its mid-year outlook for the sector. Revenue from cargo and ancillary activities has become a focus area for airlines due to a stiff competition in the passenger travel market.