Chapter II Review of Literature

Transcription

1 Chapter II Review of Literature

2 13 CHAPTER II REVIEW OF LITERATURE 2.1 INTRODUCTION The researcher has undertaken intensive literature review for the study. For this purpose Acts and Rules, regulations, books, journals, abstracts, websites, published and unpublished reports were referred. Though writings about cargo industry in India are limited, the trends in the industry are analyzed with internal circulations like Cargo Connect, Cargo Talk, Pay Load Asia, AKAAI News, Air Cargo Week and Journals where the industry participants echoed their views and pangs that helped to form the external and internal environment of the concept. The views of luminaries, the experiences of field workers are taken into account. The external environment under which the cargo industry operates should get its due attention and that environment comprises social, technological, economical, legal, political, and administrative facts, which have enormous bearing on the function, operation, and services of Air Cargo handling industry. Apart from those studies, other fields provided valuable information connected to the methodology schema, analysis and organization of the research. Hence, the researcher has done referral studies at various fields, whether related or unrelated. Further, studies done at both Chennai and Bengaluru airport handling levels are also referred. Reviews of such things are needed for the following reasons: i) To provide the conceptual framework of the research problem with its interdependencies. ii) iii) To gain a clear understanding of the research To provide guidelines for smooth flow of cargo handling.

3 AIR CARGO History of Air Cargo Even before the advent of aircraft, mail was moved by balloons, dirigibles and carrier pigeons. The first cargo moved by aircraft occurred on 7 November 1910 when a few bolts of silk were transported by air from Dayton to Columbus, Ohio. The following year in 1911 experimentation with the movement of post was started, and by 1914 regular air service began in the United States. In Germany, the first official air mail flight occurred in On October 7, 1925, the first five Contract Airmail (CAM) routes were issued by the U.S. Postal Service to fly airmail between designated points. For example, CAM 1 flew the New York to Boston route and was managed by Juan Trippe, who later started Pan American Airways. By 1931, 85% of airline revenue was from domestic airmail contracts, with 14.8% from passenger service and only 0.2% from freight. World War II caused a rapid expansion of the aviation industry and for the first time, large scale movements of freight were carried out to support the war efforts. For example, in support of the Nationalist Chinese over 650,000 tons of cargo was transported over the Hump between India and southern China between 1942 and Later, in the 1948 and 1949 timeframe, the largest airlift in history occurred to support the blockaded city of Berlin. In the early 1970 s the door-to-door express package services came into action. Dalsey, Hillblom and Lynn started DHL in 1969, and Fred Smith started Federal Express in The era of the wide-bodied jets started in 1970 when the first Boeing 747 entered service. This was the first time in history that the aviation industry chose size over speed to increase performance. Soon afterwards, Douglas and Lockheed started production of three engine wide-bodied aircraft, the Douglas DC-10 and Lockheed L In the beginning, only the passenger market was serviced by these new wide-bodied aircraft until Lufthansa flew the first Boeing 747 freighter in April 1972 between Frankfurt and New York. The much larger widebody increased the volumes carried by narrow body aircraft by a factor of 2.7.

4 15 By 2012, there were 1738 freighters in operation worldwide. Thirtyseven percent of these were large wide-body (>80 tons) aircraft, 36% were medium wide-bodied aircraft (40 to 80 tons) and 27% were standard bodies with carrying capacities of less than 45 tons 1. Importance of Air Shipment and Significance Air cargo plays a crucial role in today's world. Whether it's through express shipments providing expedited service, cargo carried in the passenger aircrafts linking together businesses across the globe, freighters delivering cargo on high volume trade lanes, or chartered flights providing needed supplies on special service schedules, the air cargo industry serves as a key engine of economic growth and development. It supports trade and investment, promotes connectivity, and improves efficiency and competitiveness. Air cargo represents a relatively small percentage by volume of world trade (less than 10%) - but its significance leaps by value, where it accounts for more than 30% of international trade. In other words, air cargo is oriented towards high value or time sensitive products. i) With time-definite international transactions, production flexibility and speed characterizing much of the new economy, it is nearly certain that air cargo will play an increasingly vital role in the global economy. No other means of transportation is better equipped to meet the economic realities of the new era where global sourcing and selling, and just-in-time logistics, require that producers receive and ship smaller quantities more frequently, quickly and reliably over long distances. ii) Air services help improve the competitiveness of almost all aspects of companies' operations, including sales, logistics and inventory management, production and customer support. By expanding the 1 Camille Allaz, 2004, History of Air Cargo and Airmail from the 18th Century, Christopher Foyle Publishing, France, pp.1-20

5 16 size of the market that can be served, aviation acts as a spur to innovation, increases sales, and profit, allows more scope for economies of scale and enhances competition. iii) Business sectors such as technology, financial services, pharmaceuticals or business services increasingly require highspeed delivery services to ensure that they can respond to customers needs. iv) Around 60 per cent of air freight travels in the hold of passenger planes, so it travels at the same time as passenger flights do. The remainder is carried on specialist freight services, which includes express carriers. These often need to leave at specific times of day to make international connections. v) High quality transport infrastructure is a prerequisite for sustained economic growth and for maintaining competitiveness in a developed economy. International competitiveness is driven by productivity growth which is underpinned by trade, foreign investment and innovative activity, all of which are facilitated by connectivity. The most innovative and productive firms tend to be those that are competing at a global level. vi) Air connectivity increases with the number of destinations served and the frequency of flights along these routes. This in turn will make a location more attractive to foreign investment and increase the potential for business efficiency, and ultimately generates a virtuous cycle of connectivity and economic growth. vii) Air cargo service has been a tremendous enabler for economic development. This is because air freight and integrated air express are critical to time-based competition - the frontier challenge for the world's most-advanced firms. Airfreight has also facilitated specialization and allowed the most well developed countries, their

6 17 producers and consumers to reap the benefits of ever-closer matches between demand and supply. viii) One area where airfreight is particularly vital is in facilitating trade with the developing world - especially Africa. Air freight allows these developing countries to trade in fresh products, such as food or flowers with Europe - a key area of the economy for many African nations. ix) At the same time, airfreight allows large pools of especially Asian labor to connect with the product needs of wealthy Western European, North American, and Northeast Asian markets. x) Whether producing cut flowers, fresh vegetables, milk, or fish, air cargo has also allowed otherwise remote agricultural and maritime regions to access world markets. The accessible labor force of the world has expanded as air transport has come together with reformed institutions, rethought supply and distribution processes, and human resources 2. World air cargo traffic growth detail: International air freight will drive overall world air cargo growth through Over the next 20 years, world air cargo traffic will grow 4.7% per year. Air freight, including express traffic, will average 4.8% annual growth, measured in RTKs. Airmail traffic will grow much more slowly, averaging 1.0% annual growth through Overall, world air cargo traffic will increase from billion RTKs in 2013 to billion in Asia will continue to lead the world in average annual air cargo growth, with domestic China and intra-asia markets expanding 6.7% and 6.5% per year, respectively. The Asia North America and Europe-Asia markets will grow slightly faster than the world average growth rate. 2 Global air cargo advisory group report, Role of the air cargo industry, retrieved on , <

7 18 Figure 2.1 Trade volume index and air cargo traffic percentage Freighter fleet development The number of airplanes in the worldwide freighter fleet will increase by more than half during the next 20 years as demand for air cargo services more than doubles. Cargo capacity on passenger flights has been expanding as airlines deploy new aircrafts. The demand for freighter capacity in long-haul markets is not confined to the Asia North America market. Freighters are essential to all the eastwest markets. Freighters carry about 72% of all air cargo carried between Europe and Asia, as well as 43% of all cargo carried between Europe and North America 3. Figure 2.2 Diagram showing total air cargo traffic carried by freighters Source: Boeing 3 Boeing, World Air Cargo Forecast , < commercial/about-our-market/cargo-market-detail-wacf/download-report/assets/pdfs/wacf.pdf>

8 CIVIL AVIATION IN INDIA The history of civil aviation in India began in December 1912, with the opening of the first domestic air route between Karachi and Delhi. This was by the Indian State Air Services in collaboration with the Imperial Airways, UK. Three years later, the first Indian airline, Tata Sons Ltd., started a regular airmail service between Karachi and Madras without any patronage from the government. At the time of independence, the number of air transport companies, which were operating within and beyond the frontiers of the land, carrying both air cargo and passengers, was nine. It was reduced to eight, with Orient Airways shifting to Pakistan. These airlines were Tata Airlines, Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways. In early 1948, a joint sector company, Air India International Ltd., was established by the Government of India and Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of three Lockheed Constellation aircraft. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)-London air route. At the time of its nationalization in 1953, it was operating four weekly services between Mumbai-London and two weekly services between Mumbai and Nairobi. The joint venture was headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932 and he himself piloted its inaugural flight. Air transport is the most modern, the quickest and the latest addition to the modes of transport. Because of speed with which aeroplanes can fly, travel by air is becoming increasingly popular and hence the growth of air cargo in India has also been manifold though it might not have kept pace with the progress made all over the world. Director General of Civil Aviation collects data pertaining to Civil Aviation from various sources viz. Air India, Air India Express, Alliance Air, Indian Airlines, Private Operators (Scheduled and Nonscheduled), Foreign Airlines and the airports HISTORY OF AIR CARGO IN INDIA India is strategically located peninsular country, connecting both the West and the East. It is not only an easy place for ships to stop and dock but also a place for aircraft to fuel and transfer goods. India is one of the populous countries 4 Ministry of Statistics and Programme Implementation, History of Civil Aviation report, retrieved on

9 20 (126.8 crore population) with a galloping economy. The economy of India is the tenth largest in the world by nominal GDP and the third largest by Purchasing Power Parity (PPP). India is one of the G2 major economies. India exports approximately million USD worth of goods to foreign countries, of which airborne export is 20%. India is the second fastest growing air cargo market after Middle East. India would be among the ten largest international freight markets by 2018, led by the USA and followed by China. It is expected that India s International cargo will grow 5% every year. The demand for air cargo transportation has been increasing over the last few years. The Overall trade from and to India was US dollar 607 Million in , which has grown 14 times in the last two decades. India s International trade to CGDT increased from 3.8 percent in to 8 percent in Realizing the importance of the International Cargo Revenue, the government has opened up a plethora of schemes and policies to develop and promote air cargo sector. The Open Sky Policy of the Government aims at creating more airports under PPP mode as international air cargo hubs, developing regional connectivity etc. Background The International airports are located at strategically and geographically significant areas to serve their hinder lands and their products and produces. They are developed on the basis of increasing economic developments, changing the role of cargo movements, trade requirements, and resources availability and also of global scenario. It is aimed at avoiding unnecessary shunting of cargoes to far off airports, at avoiding cost escalation and also aimed to decongest airports. The government s aim of developing more airports is almost achieved, but at the expense of public money and land. The governmental body AAI, which is controlling the airports, expects strong revenue from airports by way of Air Cargo 5 Press Trust of India agency report, , (IATA), retrieved on

10 21 Operations. But major hurdles like inadequate infrastructure in airports, slot issues, airport congestion, inability to handle out sized cargo holes, lack of professionals to manage the ever competitive airports etc., are often spoken of but always neglected. One of the very important issues seen but unseen is that major chunk of revenue from India s cargo are seized by foreign airlines. We develop airports with our money but the benefit is reaped by foreign airlines. This is due to lack of will, insight and professionalism and due to inefficiency and callous attitude. The policies are out dated, untested and cruel to operators. Unable to control the dwindling government controlled airports, the PPP mode is taken up and all the important international airports are privatized. More and higher density traffic airports are going into the hands of private players. AAI is focusing on the cargo segments to boost its revenue. It plans to use its own passenger terminals by converting them into cargo facilities. If it is so, the benefit will be reaped by foreign airlines. Performance of Air Cargo throughput in Indian Airports India s impressive growth in international and domestic trade over past few years has augured well for the air-cargo industry in India. Air Cargo in India received its initial impetus from the 1986 permission, wherein air taxi operators were allowed to provide on-demand services primarily to boost tourism on major routes. Subsequently, the Air Cargo Open Sky Policy was adopted in 1990 initially for 3 years and further extended in 1992 on a permanent basis, where any airline whether Domestic or Foreign carriers which met specified operational and safety requirements, were allowed to operate scheduled and non-scheduled cargo services to/from any airports in India wherever customs facilities are available. In addition, regulatory regime over cargo rates for major export commodities was abolished so that carriers are free to set their own rates 6. 6 International civil aviation organization report on cargo, <

11 22 Figure 2.3 Trends in growth of air freight traffic throughput at Indian airports Source : AAI, analysis: Moca Total Cargo handled at Indian Airports Total Air cargo has grown 3.5 times in the last 15 years from 0.68 Million Metric Tons (MMT) in to 2.39 MMT in i.e. a CAGR of 8.7%. Domestic Cargo Handled has grown 4 times from 0.22 MMT in to 0.89 MMT in i.e. at a CAGR of 9.7%. Similarly, International Cargo Handled at Indian Airports has grown 3.2 times in the same period from 0.46 MMT to 1.5 MMT i.e. at a CAGR of 8.2%. However, in the last 3 years, Domestic Cargo throughput is the fastest growing segment (CAGR of 13.6%) as compared to International Cargo throughput at a CAGR of 9.2% 7. 7 Ministry of Civil Aviation analysis report on total cargo throughput, 2012,retrieved on , <

12 23 Figure 2.4 Freight throughput across six metro airports of India ( ) Source: AAI, MoCA Analysis Note: Th MT refers to Thousand Metric Tonnes Cargo Forecast: A Comparative Analysis Domestic cargo volume projected by different agencies including MOCA range from growth of 8 to 10 and in respect of international cargo it is 4 to 7.5 times by Figure 2.5 Cargo forecast for the 20-year period, to Source Airbus, Moca and AAI 8 Ministry of Civil Aviation analysis report on cargo forecast, 2012,retrieved on , <

13 Air cargo handling airports in India Air cargo is handled at forty seven domestic and international airports in India. The table below shows the rank of the airports with number of passengers, the quantum of cargo handled during the year with the percentage of change over compared to the previous year. Table 2.1 List of airports with passenger traffic, aircraft movements and cargo handled Rank Name City IATA Code Total passengers % Change Rank Change Aircraft movement Cargo handled (tonnes) 1 Indira Gandhi International Airport Delhi DEL 40,895, , ,539 2 Chhatrapati Shivaji International Airport 3 Kempegowda International Airport Mumbai BOM 37,694, , ,260 Bengaluru BLR 15,401, , ,475 4 Chennai International Airport Chennai MAA 14,299, , ,904 5 Netaji Subhash Chandra Bose International Airport Kolkata CCU 10,916, , ,699 6 Rajiv Gandhi International Airport Hyderabad HYD 10,404, ,057 98,899 7 Cochin International Airport Kochi COK 6,414, ,750 75,787 24

14 Rank Name City IATA Code Total passengers % Change Rank Change Aircraft movement 8 Sardar Patel International Airport Ahmedabad AMD 5,050, ,797 59,313 9 Goa International Airport Dabolim GOI 4,513, ,422 4, Pune International Airport Pune PNQ 4,190, ,760 27, Thiruvananthapuram International Airport Cargo handled (tonnes) Thiruvananthapuram TRV 3,174, ,719 29, Kozhikode International Airport Kozhikode CCJ 2,583, ,481 22, Chaudhary Charan Singh International Airport Lucknow LKO 2,541, ,749 4, Lokpriya Gopinath Bordoloi Airport Guwahati GAU 2,233, ,871 10, Jaipur International Airport Jaipur JAI 2,197, ,852 3, Srinagar Airport Srinagar SXR 2,040, ,828 5, Biju Patnaik International Airport Bhubaneswar BBI 1,493, ,512 5, Coimbatore International Airport Coimbatore CJB 1,429, ,691 8, Dr. Babasaheb Ambedkar International Airport Nagpur NAG 1,401, ,042 6, Devi Ahilvabai Holkar Airport Indore IDR 1,353, ,371 6, Mangalore Airport Mangalore IXE 1,307, ,

15 Rank Name City IATA Code Total passengers % Change Rank Change Aircraft movement 22 Chandigarh Airport Chandigarh IXC 1,206, ,551 5, Lok Nayak Jayaprakash Airport Patna PAT 1,196, ,304 5, Tiruchirappali International Airport Tiruchirappalli TRZ 1,189, ,834 4, Visakhapatnam Airport Visakapatnam VTZ 1,099, ,900 2, Sri Guru Ram Dass Jee International Airport Amritsar ATQ 1,083, , Bagdogra Airport Bagdogra IXB 1,035, ,395 2, Varanasi Airport Varanasi VNS 1,019, ,901 2, Jammu Airport Jammu IXJ 952, ,063 1, Swami Vivekananda Airport Rajpur RPR 925, ,628 3, Agartala Airport Agartala IXA 879, ,845 5, Veer Savarkar International Airport Port Blair IXZ 815, ,350 3,046 Cargo handled (tonnes) 33 Vadodara Airport Vadodara BDQ 712, ,136 2, Madurai Airport Madurai IXM 687, ,162 1, Birsa Minda Airport Ranchi IXR 653, ,612 3,496 26

16 Rank Name City IATA Code Total passengers % Change Rank Change Aircraft movement 36 Imphal Airport Imphal IMF 612, ,991 4,467 Cargo handled (tonnes) 37 Maharana Pratap Airport Udaipur UDR 457, , Aurangabad Airport Aurangabad IXU 426, ,369 1, Raja Bhoj International Airport Bhopal BHO ,206 4, Kushok Bakula Rimpochee Airport Leh IXL 403, ,376 1, Jolly Grant Airport Dehradun DED 378, , Rajkot Airport Rajkot RAJ 351, , Dibrugarh Airport Dibrugarh DIB 319, , Jodhpur Airport Jodhpur JDH 295, , Tirupati Airport Tirupati TIR 245, , Gaya Airport Gaya GAY 127, , Vijayawada Airport Vijayawada VGA 109, ,404 0 Source: published by Airports Authority of India ( ) 27

17 REVIEWS Customs Act 1962 An Act relating to Customs of India. It is the provisions relating to appointments / licenses to customs airports, warehousing etc. It prohibits imports and exports of certain goods into and outside India. It prevents illegal exports of goods. The Act levy customs duties on goods imported/ exported. It regulates Customs House Agents under Customs House Agents Licensing Regulation goods 9. Customs Tariff Act 1975 It prescribes export import duties for the Directorate General of Foreign Trade (DGFT) is an attached office of the Ministry of Commerce and Industry and is headed by Directorate General of Foreign Trade. Right from its inception until 1991, when liberalization in the economic policies of the Government took place, this organization has been essentially involved in the regulation and promotion of foreign trade through regulation. Keeping in line with liberalization, globalization, and the overall objective of increasing of exports, DGFT has since been assigned the role of facilitator. The shift was from prohibition and control of imports/exports to promotion and facilitation of exports/imports, keeping in view the interests of the country 10. The Foreign Trade Development and Regulation (1992) the Act facilitates exports and imports giving priority and cutting down the transactions cost and time, there by rendering Indian exports more competitive 11. i) Power to make provision relating to imports and exports. ii) Continuance of existing orders. iii) Export and import policy Central Board of Excise and Customs, < Director General of Foreign Trade, < Director General of Foreign Trade, <

18 29 iv) Importer-exporter Code Number. v) Issue, suspension and cancellation of license. vi) Power relating to search, seizure, penalty and confiscation. Airport Authority of India Act (1994) Act to provide for the constitution of the airports Authority of India and for the transfer and vesting of the undertakings of the International Airports Authority of India and the National Airports Authority so constituted for the better administration and cohesive management of airports and civil enclaves whereat air transport services are operated or are intended to be operated and of all aeronautical communication stations for the purposes of establishing or assisting in the establishment of airports and for matters connected therewith or incidental thereto 12. The Airport Authority of India, under this Act plan, constructs and controls all the airports in India. Airport Authority of India (Management of Airport) Regulation 2003 regulates vehicular traffic inside airports. Airports Economic Regulatory Authority of India Act (2008) An Act to provide for the establishment of an Airports Economic Regulatory Authority to regulate tariff and other charges for the aeronautical services rendered at airports and to monitor performance standards of airports and also to establish Appellate Tribunal to adjudicate disputes and dispose o f appeals and for matters connected therewith or incidental thereto 13. Warsaw Convention as amended at The Hague, (1955), and by Protocol No. 4 Montreal, (1975) This Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward. This convention contains Article 1 to Article 40 A. It provides for baggage check, documentation relating to cargo, compliances, the rights of the consignor and the consignee, the liability of carrier, liability for delay in the transportation of passengers, baggage or cargo, limitations, vicarious liability etc Airport Authority of India Act < Airports Economic Regulatory Authority of India, <

19 30 Article 12 says subject to his liability to carry out all his obligations under the contract of carriage, the consigner has the right to dispose of the cargo by withdrawing it at the airport of departure of destination, or by stopping it in the course of departure or destination, or by stopping it in the course of the journey on any landing, or by calling for it to be delivered at the place of destination or in the course of the journey to a person other than the consignee originally designated, or by requiring it to be returned to the airport of departure. He must not exercise this right of disposition in such a way as to prejudice the carrier or other consignors and he must repay any expenses occasioned by the exercise of this right. Article 19 says the carrier is liable for damage occasioned by delay in the transportation by air passengers, baggage, or cargo. Article 28 says that an action for damages must be brought, at the option of the plaintiff, in the territory on of the High Contracting Parties, either before the court having jurisdiction where the carrier is ordinarily resident or has his principal place of business, or has an establishment by which the contract has been mad, or before the court having jurisdiction at the place of destination. Montreal Convention (1999) this convention consolidates and modernizes the Warsaw Convention. This convention has Article 1 to Article 57. This convention applies to all international carriages of, persons, baggage, or cargo performed by aircraft for reward. This convention clarifies the documentations and duties of the parties relating to the carriage of passengers, baggage and cargo, which includes contents of airway bill, its description responsibility for particulars of documentations, evidentiary value of documentation, delivery of cargo, enforcement of the right of consignor and consignee. Article 20 explains if the carrier proves that damage was caused or contributed to by negligence or other wrongful act, or omission of the person. If the carrier shall be wholly or partly exonerated from its liability to the claimant to the extent, that such negligence or wrongful act or omission caused or contributed to the damage. Article 22 limits the liability in relation to delay, baggage and cargo.

20 31 Article 28 explains advance payments. Article describes the jurisdiction of the concerned parties. Article 34 provides for Arbitration. Article 47 provides for invalidity of contractual provisions.article 50 provides for insurance covering each party s liabilities 14. PS Senguttuvan (2007) principles of Airport Economics examines the airport operation, financial aspects of airport, slot mechanism, optimization of space usage, pricing, revenue from airports, planning of airports for future needs, congestion and delays. Finally, the author gives the means to enhance the revenue of airports by adopting modern methods in management 15. P Hooper (2002) privatization of Airports in Asia, the author claims that Asia lacks behind in the privatization of airports and at the same time, the air transport sector has been growing quickly and this has exerted enormous pressure on airport infrastructure although models employed in privatization is similar to the West. It is mobilized to form new source of finance. Airports are given more priority in Asia but lacks institutional strength to regulate effectively. The author suggests for more privatization of airports in Asian countries 16. Barry Tarnef (2008) the author estimates that billion dollar worth of goods are pilfered in the cargo handling world. Mostly consumer goods, food and clothing are the top targets. Weekends are targeted for easy theft. Warehousing and unsecured places are where thefts are common. The author suggests for more monitoring and advanced equipments in vehicles, warehouses, and Airports 17. Louis a Tyska (2006) the author studies security guidelines needed to assist transportation industry in combating serious increase in cargo theft. The losses are steadily increasing every year. This book provides comprehensive reference to transportation security. This book deals with airlines, rail, road and satellite tracking Warsaw Convention as amended at The Hague, 1955,and by Protocol No. 4 Montreal, retrieved on < P S Senguttuvan, 2012, Principles of Airport Economics, 3 rd edition, Published by Anurag Jain, New Delhi, chs.1-2 Paul Hooper, 2002, Journal of Air Transport Management, vol. 8, issue 5, pp Tarnef, Barry, 2008, Into Thin Air: The Growing Risk of Cargo Theft, Published by Trade, Vol.21, Issue 9, pp

21 32 for theft prevention. It also details cargo security planning and conducting cargo facility audits 18. John Wensveen (2009) explains several business models used in the air cargo industry; the predominant ones include the all- cargo carriers, the integrators (operators that deliver cargo from point to point rather than airport to airport), belly only cargo carriers, or mixed carriers that operate a fleet of both passenger and freighter aircrafts. The author discusses the profitability of each models based on market demands and certain models can be used accordingly. The Author concludes that different types of aircrafts can be operated based on the market size 19. Martin Jonasson and Matthew Hailey A Case Study - (2013) the author evaluates the effect of risk management in Air cargo handling. The authors critically examine the risk causing factors involved in cargo handling. Their study is based on a local Airfreight terminal and the handling process in operation there. The authors tried to study the process, management, control and the risk involved. The authors identify the risk, estimate it, evaluate it, and classify the risk as physical, financial, and organizational. The authors conclude that to override the risks involved in cargo handling, a contingency as well as permanent plan should be followed to alleviate the impact posted by risk in air cargo handling 20. Robert Walton, (2011) the author describes the history of air cargo from 1910 in various countries. World of commerce caused a rapid expansion of aviation industry and from 1970 air package services were introduced. The author gives a plethora of information regarding problems about security, cargo screening, and volatility. The author also deals with air cargo market in near future and the factors, Louis A. Tyska, 2001,Cargo Theft Prevention: A Handbook for Logistics Security, Published by American Society for Industrial Security, pp.1-25 John Wensveen 2009, Air Transportation, 7 th edition, Published by Ashgate Limited, USA, pp Hailey Matthew, Jonasson Martin, 2013, Case Study on Risk Management in Air Freight Handling Processes, pp.25-30

22 33 which may affect the further growth of air cargo market in certain area of the world 21. Bart Elias (2010) the author describes various cargo screening procedures and screening technologies. He says that the imaging systems, which use a variety of gamma- ray, X-ray, Millimeter Wave Imaging technology, are generally not considered suitable in air cargo screening because they require intensive human observation to deduct potential threats. The MWI technology generally do not offer adequate image resolution or automated or assisted threat detection capabilities for identifying relatively small explosive devices capable of destroying an airline. High cost and large machines have been significant deterrents to their use in air cargo industry. The author insists on tamper resistant packing in cargo handling. The author advices to use standard security programs throughout the country. The components of air cargo networks such as shippers, third party logistics companies, screeners etc should follow the standard program prescribed. He also advices the use of blast resistant cargo containers 22. The Boeing Company issues, the biennial World Air Cargo Forecast (WACF ) to provide a comprehensive up-to-date overview of the air cargo industry. The forecast summarizes the world's major air trade markets, identifies major trends, and presents forecasts for the future performance and development of markets as well as for the world freighter airplane fleet. After rebounding more than 19% in 2010 over the depressed levels of 2009, world air cargo traffic stagnated from mid-2011 to early This prolonged period of weak growth can be attributed to two factors: a weak world economy and slack trade growth. Since the onset of the global economic crisis in 2008, world air cargo traffic has averaged only 1.7% growth per year through On a positive note, world air cargo traffic began to grow again in second quarter By July Robert Walton, 2011, Air Cargo Operations, Journal of Transportation Management, pp Bart Elias, 2011, Specialist in Aviation Policy, CRS Report for Congress, Prepared for Members and Committees of Congress, pp.1-13

23 , traffic had grown 4.4% compared with the first seven months of Forecasts for even better economic and trade growth should lead to sustained air cargo traffic growth in 2015 and Details of world Air cargo traffic growth Over the next 20 years, world air cargo traffic will grow 4.7% per year. Air freight, including express traffic, will average 4.8% annual growth, measured in RTKs. Airmail traffic will grow much more slowly, averaging 1.0% annual growth through Overall, world Air cargo traffic will increase from billion RTKs in 2013 to billion in Asia will continue to lead the world in average annual air cargo growth, with domestic China and intra-asia markets expanding 6.7% and 6.5% per year, respectively. The Asia-North America and Europe-Asia markets will grow slightly faster than the world average growth rate. Latin America markets with North America and with Europe will grow at approximately the world average growth rate, as will Middle East markets with Europe. Established markets grow more slowly than developing markets, so North America and Europe air cargo growth rates are below the world average rate 23. Sumangal Narendra, (2013) this journal explores the status of the Air Transport in General Agreement on Trade in Services (GATS) vis-à-vis opening of the Aviation Ground Handling market. The study is focused on the developments in terms of open market access to aviation ground handling services and developments in the GATS Air Transport Review. India shows a steady growth prospects for the aviation sector. Recently, it has opened up the sector to Foreign Direct Investment of up to 49% in the airlines. The study reveals that India, though having a steady growth in aviation sector, has been cautious in opening of the sector, especially the ground handling services market to foreign participation. It had followed the gradual change policy in this service market since Another fact that emerged is that the Member States (of WTO) may file the commitments under GATS, in case 23 Boeing, 2014, World Air Cargo Forecast retrieved on , <

24 35 of air transport, but it does not directly lead to open market access and face the overall constraints of the national policy and domestic regulations and primarily the airport infrastructure capacity constraints limiting the entry and consequent competition of open market access. Compliance of national and international obligations of safety and security in aviation operations also pose certain constraints in free or open market access. Conclusions and limitations of the study are included. The research and studies so far have concluded that Plurilateral and multi-lateral agreements, concepts of Common and Open aviation areas are certainly the way forward. Discussions and resolution of questions of legal jurisdiction, safety and security issues are pre-requisite to liberalization objectives. Potential path to further liberalization in case of the air transport services under GATS, through evolution of the bi-lateral, to plurilateral, multi-lateral and regional agreements in the light of regulatory developments under GATS and ICAO, could also be explored 24. The International Air Transport Association (IATA 2014) Airline Industry Forecast ( ) shows that international freight volumes are expected to increase at a compound annual growth rate (CAGR) of 4.1% over the next five years. Emerging economies, particularly in the Middle East and Africa, will be the fastest-growing markets. Air cargo remains as vital to the global economic system as ever. This year, more than $6.8 trillion worth of goods, equivalent to 35% of total world trade by value, will be transported around the world by air. So it is welcomed to see a forecast for a return to growth for the air cargo sector after several years in the doldrums. An average of more than 4% growth for the next five years would be a marked improvement on the performance of recent years. Since 2011, for example, growth in freight tones has averaged just 0.63% per year, said Tony Tyler, IATA s Director General, and CEO. 24 Sumangal Narendra, 2014, General Agreement on Trade in Services and Aviation Ground Handling Services - A Theoretical Perspective, IOSR Journal of Business and Management (IOSR-JBM), Vol.16, Issue 4, pp.36-46

25 36 Nevertheless, despite the positive picture, the overall risks to the economic outlook, and therefore to air freight, remain towards the downside. Trade protectionism is a constant danger. According to the World Trade Organization (WTO), between November 2013 and May 2014 alone, 112 new trade-restrictive measures were enacted by G20 governments. Geopolitical concerns, volatility of oil prices, and competition from rail and sea could also affect this forecast. The air cargo industry certainly cannot afford to be complacent, said Tyler. The second fastest-growing market, India, will experience a CAGR of 6.8% to add 622,000 extra tones. Bangladesh (339,000 total freight tonnes), Ethiopia (319,000) and Nigeria (276,000) make up the remainder of the top five 25. The Times of India (2014) press report on March 2014, analysis that an indication of decline in economic activity in Tamil Nadu propelled Chennai Airport to lose its tag of being the third busiest airport in the Country. Bengaluru has taken over the number three slot after Delhi and Mumbai. Bengaluru has been ahead of Chennai in terms of domestic passenger traffic for the past two years. Now, it has overtaken Chennai in total number of passengers (domestic and international). Between April 2014 and January 2015, Bengaluru recorded a 17.7% increase in passenger traffic as against Chennai's growth of 10.5%. In cargo, Bengaluru grew by 15.8% during the period, while Chennai's growth was a tardy 3.8%. An airport official said Bengaluru was poised to overtake Chennai in cargo movement in a few months. In April-January period, Chennai was ahead of Bengaluru by 19,000 tonnes, a narrow gap considering the pace of growth Bengaluru has registered 26. Epaper Times of India (2014) according to the Editor some manufacturers in Sriperumbudur, including Nokia, are moving their export goods 300km to Bengaluru airport when Chennai airport is only 32km away IATA Five year Forecast, Press Release No. 58, Report on An indication of decline in economic activity in Chennai, Times of India, Chennai, March 2014, retrieved on , <

26 37 Until the mid 2000s, Chennai air cargo was considered the best in the South for export and import consignments. However, poor road connectivity, traffic congestion, bureaucratic delays, and lack of good infrastructure at the cargo terminal mar smooth movement of shipping cargo through the airport. Bengaluru has started to reap from Chennai s loss. Often import cargo is not cleared on time while trucks with export containers are held up because traffic restrictions allow them to enter GST Road, where the airport is located, only at night. The cargo handled by Chennai airport has plummeted in the last three years while the volume handled by Bengaluru airport has been growing. The private airport is offering incentives for industry to move their cargo from Chennai to Bengaluru. Many find it easier to move a container truck to Bengaluru than drive into Chennai. DHL initially wanted to operate its jumbo aircraft in Chennai, but chose Bengaluru instead. Lufthansa Cargo has told AAI that constant increase in airport tariff was not commensurate with the facilities and the quality of service. The airport has registered negative growth in the first quarter of this year and in the last two years. The volume of cargo handled decreased by 11.9% in and 8.1% in The airport recorded an increase of 21.2% in but Bengaluru grew by 27.6% the same year. Chennai airport used to generate more than Rs 200 crore from cargo annually. This has dipped to Rs 140 crores in recent years. If the cargo complex was modernized on time, we would have overtaken Mumbai. But, delays in planning and execution of work have cost the airport, said an airport official. Representatives of international cargo airlines have also told AAI they would have to reconsider landing their transit flights in Chennai if cost of operations increased Report on Air cargo takes road to Bengaluru, Times of India, June 2014, e-paper, retrieved on , <

27 38 Table 2.2 Rising losses cargo handled at Chennai airport (in tonnes) (April, May, June) Chennai 73, % Bengaluru 59, % Chennai 3,15, % Bengaluru 2,26, % Chennai 3,57, % Bengaluru 2,24,949 1% Chennai 3,88, % Bengaluru 2,22, % Chennai 3,20,768 Bengaluru 1,74,644 % change when compares to the same period in the previous year Hindu Business Line (June 2008) Article on Chennai Cargo Handling Chennai airport risks losing its cargo business to Bengaluru if the infrastructure at the air cargo complex does not improve, feel members of the cargo trade. Chennai airport s monthly cargo import is touching around 12,000 tonnes, compared with the average 4,000 tonnes per month five years ago. Except for adding two sheds, there has been no improvement in infrastructure in the air cargo complex in the last five years, says Mr J. Krishnan, Vice-President, Air Cargo Agents Association of India, and Chairman, Logistics Committee, Madras Chamber of Commerce and Industry. The Chennai air cargo complex is handling cargo beyond its capacity. It handled 2.34 lakh tonnes in , against the capacity of 2.22 lakh tonnes. For the Airport Authority of India (AAI), Chennai, out of the total revenues

28 39 of Rs. 430 crore in , cargo contributed the maximum of Rs. 140 crore. This does not include the aircraft parking and handling charges, he says. According to Mr Krishnan, the Chennai air cargo complex is not geared to handle large-sized parcels. Five years ago, cargo used to arrive in small pallets and in low-weight cartons. Today, however, Nokia s pallet weighs 800 kg, and most parcel sizes are over 100 kg. Last year, the free period to keep cargo at the air cargo complex was reduced to three days from five. The scene today is such that Chennai needs almost three days for the AAI to make cargo ready for clearance. The free days are all used by the AAI for its own internal working. The shortage of manpower and machinery adds to the problem, says Mr Vijaya Kumar, Vice-President, Chennai Custom House Agents Association. The AAI consumes five times the transit time of air-lifted cargo from origin to destination. Consequently, the very purpose of routing imports by air to meet critical requirements is defeated due to the mishandling of cargo by AAI, he says. The Minister of State for Finance, Mr. S.S.Palanimanickam, in his inaugural address at the Golden Jubilee Celebrations of the CCHAA recently, said: If you look out of the aircraft s window you see cargo everywhere in the airport. He was referring to the way cargo is scattered around the air-cargo complex. Cargo should be readily made available to customers and the only time cargo is not available should be when it is carried by an aircraft. Agents handling consignments for some of the multinational companies say that companies in Sriperumbudur, a hub for electronic manufacturing two hours away from Chennai, working on just-in-time, will divert cargo to Bengaluru if infrastructure does not improve at Chennai. If there are delays in Chennai, we will explore the option of moving to Bengaluru in future, Mr Sachin Saxena, Director, Operations and Logistics, Nokia India, told Business Line during a recent visit to the company s plant in

29 40 Sriperumbudur. We need to work out the overall savings in the logistics cost by such a diversion. It takes hours to move the cargo from the aircraft belly to the ground, compared to three-four hours in developed countries. Another six-eight hours is added for binning which is data entry in the airport authority system for storage of cargo in the earmarked location, according to Mr N. Siva Subramaniam, Chairman, Air Cargo Agents Association of India-Southern Region (ACAAI-SR). Multinationals may be willing to spend more on road transport if their cargo is available on time. It takes nearly 50 hours in Chennai for clearance of import cargo. By moving to Bengaluru, if the cargo is cleared in 12 hours and another four hours is lost in road transport, companies can still save more than half the time, says Mr Asad Caasim, Committee Member, ACAAI-SR. There is no concerted effort from AAI to overcome the problems at the air cargo complex, he says. The proposal to move cargo to an off-location Air Freight Station has also been scuttled by AAI. The AFS will ease the pressure on AAI and create space at the air cargo complex, he says. Mr Dinesh Kumar, Chennai Airport Director, says the infrastructure-related problem was there two years ago. But the new sheds provide a lot more coverage now. The situation looks better now than two years ago. We will keep expanding the facilities, he says 28. Michael Sales (2013) according to the author the future freight forwarding will be production of pharmaceuticals,flowers, fruits and vegetable will remain global and this sector will grown in its share of total air cargo business. The automotive and manufacturing industry, currently major use of air cargo, will continue to thrive as more fuel- efficient vehicles are introduced. In years time we will start seeing more personal, flying machines in use, which will create a new segment of business related to the automotive industry. 28 Article on Chennai Cargo Handling, Hindu Business line, June 2008, e-paper, retrieved on , <

30 41 The Author also describes a number of factors that have been hindering the growth in air cargo traffic in recent years. For example, the eruption of the Icelandic Volcano and its destructive ash clouds, which shut down European and subsequently global aviation activity for many days in April In addition various acts of international terrorism have resulted in the heightening of security related aspects, which in turn disrupt efficient supply chain operation, especially since the 9/11 terrorist attack on the US in He also specifies the increase in oil prices that increase the transport cost and also sudden economic downtrend which affects the overall air freight industry. The author concludes that overall, the global movement of air cargo will remain a growing industry. As the world goes through the current renewal process, where all past definitions of trend analysis have to be redefined, the anticipated growth, which was forecasted by Boeing at 5.4percent per year over the next 20 years, might actually track slightly lower. This is driven by more technology and global regionalization of production. The author also specifies that past is past: it is firmly consigned to history, and the trends of the past cannot be used to manage the industry today and forecast its prospects tomorrow 29. John G, Wevensveen (2011) the author defines four stages of development impacting the airline industry. He discusses the main trends impacting the global airline industry including regional challenges. The author describes and discusses the main critical financial issues and challenges associated with air transportation. According to the author the airline industry is perhaps the most high profile industry in the world, but it is also considered one of the most neglected industry in terms of investment which faces numerous frustrations. The Author highlights top five frustrations impacting aviation today. The frustrations includes fuel and oil; pollution; global economies, safety lapses, accidents, etc. The author explains the fundamentals of Air transportation management, the method of forecasting, future challenge, and opportunities to the industry, innovative technologies to be used for the benefit of the future aviation.according 29 Michael Sales 2013, Air freight and the global supply chain, first published by Routledge, U.S.A, chs.1-2