Avicore plans cargo airline by mid-2008, to invest Rs400 crore

Avicore plans cargo airline by mid-2008, to invest Rs400 crore

Logistics start-up Avicore Aviation Pvt. Ltd plans to invest $100 million, or about Rs400 crore, to launch a new cargo airline before mid-2008 from the country’s first dedicated cargo airport at Nagpur.

The start-up is backed by Indian and some US-based non-resident Indian businessmen through Avicore Llc.

The main Indian promoter is Abhay Lodha, managing director of Mumbai-based Topworth Group, which has interests in steel and power plants, along with Avicore Aviation chief executive Shankar Devarajan. Avicore is the third firm that has applied to the government for a licence to launch a cargo airline. Interest in the country’s air cargo business comes after a three-year boom in passenger services among airlines in India.

Leading businesses in the sector, including Jet Airways (India) Ltd, for instance, are planning dedicated cargo airlines. Of the 250 planes flying domestic routes, just a dozen are freighter planes, the rest being passenger jets.

The demand for air cargo services is expected to grow in India as investment increasingly flows into manufacturing businesses in the country.

The Union government has approved setting up of dozens of so-called special economic zones (SEZs) in the past year, several of which are expected to be manufacturing hubs. Units in SEZs are eligible for tax and other fiscal breaks.

Nagpur was chosen for its location in central India, Avicore said. “What we intend to do is set up a hub in Nagpur and serve the other major cities which will all be under two-hour flying distance. All other airlines can bring in cargo from all over the world and distribute them through us to the respective locations," said Devarajan.

The firm is looking to lease or buy five Boeing Co.-made B737 aircraft. A B737 can carry about 15-17 tonnes of freight compared with long-haul B747’s 100-tonne capacity; the latter is widely used by international cargo carriers. The first of the aircraft will be converted to freighters from passenger jets.

Devarajan said Avicore aimed to serve domestic demand initially. “People think perishables only as food items. But a phone or laptop is equally perishable," he said. “For example, Dell which recently started a manufacturing unit at Chennai customizes every booked PC. That delivery takes days to ship today which can change if they could have a better connectivity."

Avicore, which has appointed consultant Frost & Sullivan for help on starting the business, expects to start as soon as government permissionsare awarded.

A senior civil aviation ministry official familiar with process said Avicore’s proposal is still pending approval. The official did not want to be named. The government got three applications for scheduled cargo airlines, including from Flyington Freighters Ltd, which plans to start international as well as domestic cargo operations using Airbus SAS-made A330-200F. Aryan Cargo Express Pvt. Ltd, which already has a non-scheduled operators cargo licence, will refile its application laterthis month, said director Mukut Pathak.