SpiceJet Launches Air Cargo Services For India And Overseas

Cash-strapped Spicejet Ltd., which inaugurated its first cargo aircraft in Delhi today, seeks to increase its cargo capacity to 40,000-50,000 tonnes per month to offset losses.

The private airline said it will launch its air-cargo services on Sept. 18 and inducted its first freighter aircraft—a Boeing 737-700. It plans to have a fleet of four aircraft by March 2019. The operations will initially cover Delhi, Bengaluru, Guwahati, Hong Kong, Kabul and Amritsar.

High aviation turbine fuel prices and intense competition have taken a toll on the profit books of most Indian airlines. SpiceJet suffered a net loss of Rs 38.1 crore in the quarter ended June on higher fuel costs, weak rupee and a one-time provisioning of Rs 63.5 crore.

“We believe that we still have the margins in a dedicated freighter market and as an airline, it's important to increase ancillary revenue,” said Ajay Singh, chairman and managing director of the private airline, at a press conference. “With the increase in cost pressures, it's important to introduce ancillary revenues.”

The airline plans to tap into an increasing air-cargo market in India. “Currently, there are only five freighters in India, and we felt the need for dedicated air-cargo freighters,” Singh said. “The cargo for overnight delivery in sectors such as e-commerce, fruit and vegetables, high-value and electronic goods and pharmaceuticals is significant.”

“We'll keep looking at new routes depending on demand,” Singh said, adding that a huge demand exists for the movement of goods within India and abroad.

The airline will start at a low capacity level, as Singh said. “Our current cargo capacity is about 15,000 tonnes per month, which we expect to take to 27,000 tonnes per month with the addition of these four freighters.”

Singh said that, in terms of belly space and additional dedicated aircraft, the airline's cargo capacity will rise to 40,000-50,000 tonnes per month in 2019. We're targeting a capacity of 100,000 tonnes per month, he said, adding: “We think that's a good place to be.”

Singh said that the air-cargo business has a lot of potential and that the government will soon come up with a cargo policy. “A player like SpiceJet, with its low-cost structure, is best suited to address this need.”

“The freight aircraft will be acquired on pure operating leases and haven't incurred any major capital expenditure,” Singh said. He said that while the ground operations will be handled either by SpiceJet's existing ground infrastructure or shall be outsourced “till we develop a certain scale of operations”.