Mumbai: Jet Airways (India) Ltd, which runs India’s largest airline, is in initial discussions with FedEx Corp. for a dedicated cargo airline that it wishes to set up either as a joint venture or in alliance with the multinational logistics firm, according to an independent consultant as well as two executives of the airline familiar with the development.
One of these, a senior executive at Jet Airways who didn’t want to be identified because he is not one of the airline’s authorized spokespersons, confirmed that the two companies were in talks but added that it was premature to speak of details.
Spreading wings: Jet Airways chairman Naresh Goyal. Originally, Jet had planned to launch a cargo airline with Deutsche Lufthansa AG, but the global economic slowdown put paid to these plans. Manoj Patil/Hindustan Times
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Spokespersons for Jet Airways and FedEx Corp. said they were unaware of their companies being in talks for a cargo venture.
Jet Airways, promoted by non-resident Indian Naresh Goyal, had originally planned to launch a cargo airline in partnership with Deutsche Lufthansa AG, but the global economic slowdown put paid to these plans.
The revival of Jet Airway’s cargo plans comes a few days after Kingfisher Airlines Ltd launched a new door-to-door express cargo delivery service, Kingfisher Xpress, on 2 February. Another Jet rival and low-fare carrier Go Airlines (India) Pvt. Ltd, that runs GoAir, is also planning to relaunch its cargo services shortly under the brand name GoCargo. GoAir had discontinued its cargo services last year.
Neither GoCargo nor Kingfisher Xpress are pure cargo offerings; their business model is built around delivering cargo that is carried on the same planes on which they ferry passengers.
Another Delhi-based low-fare carrier SpiceJet Ltd has similar cargo operations and carries 120 tonnes of cargo a day.
“Globally, revenue from cargo is 2-3% for a passenger airlines. Managing belly cargo and starting dedicated cargo services are two different things. Though it (news of the talks between Jet and FedEx) shows Jet Airways is upbeat about translating ancilliary revenues into a permanent stream of income, I doubt whether Indian market is ripe for just pure play,” said an airline consultant, who did not want to be identified as he is advising many domestic carriers on their strategies.
Still, there is a market in India, said another airline executive.
“India is largely untapped (as a cargo market). There is strong business for more players. Though the air cargo business had an adverse impact due to economic slowdown, now the market is cleaning up. The air cargo business will return to 2007-08 levels by the end of next year,” said Ram C. Menen, divisional senior vice-president (cargo) of Emirates SkyCargo, the cargo airline division of Emirates.
Several airlines and entrepreneurs think so too.
G.R. Gopinath, founder of India’s first low-fare carrier Air Deccan, has launched Deccan Cargo and Express Logistics Pvt. Ltd, that flies cargo airlines in India and international destinations under the brand name Deccan 360.
State-owned National Aviation Co. of India Ltd (Nacil), that runs Air India, is also running dedicated freighters.
The second Jet Airways executive, who too did not want to be identified, said FedEx was a logical choice as a partner.
“Jet Airways is looking at serving domestic and international destinations. So it would be ideal to have a partner with a global reach,” he said.
In November, FedEx Corp. announced the launch of FedEx India, a next-business-day domestic express service (for small parcels) for the Indian market. The launch followed similar ones by the company in China, Mexico and the UK.
In an?unrelated development on Monday, Jet Airways said in a media statement that it saw a 30% surge in international traffic and 26% increase in domestic passenger traffic for January compared with the same period last year. JetLite (India) Ltd, Jet Airways’ low-fare unit, saw a 12.8% growth in passenger traffic in the same month.
Photo by Ramesh Pathania; graphic by Ahmed Raza Khan/Mint