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SpiceJet’s cargo business is not only generating cash and keeping the airline afloat but is also by far the biggest in the country today By Ashish Sinha
Photo Credit :
Every underdog has its day. Yes, low-cost carrier SpiceJet, which for most part trailed IndiGo in terms of markershare, is finally having its day under the sun, thanks to the success of its cargo arm SpiceXpress.
The cargo business is not just generating cash and keeping the engines running at a time when the aviation sector the world over is facing its worst existential crisis in decades, SpiceXpress has also become the country’s biggest cargo operator by taking advantage of the lockdown and growing every day. It has also helped SpiceJet to pay salaries for April to most of its employees.
“SpiceJet is India’s biggest air cargo operator today and the only domestic airline having a dedicated fleet of freighters,” says a beaming Ajay Singh, Chairman and Managing Director of SpiceJet.
While all modes of passenger travel including air travel remain in ‘pause’ mode, SpiceJet’s air cargo business, which it launched in September 2018, is paying off today. “During the lockdown between March 25 and May 6, we have operated around 825 cargo flights carrying 6,000 tonne of cargo—this is more than double of all domestic airlines combined together,” says Singh.
SpiceJet operated 100-odd cargo flights in the last week of March. “Now we do that number in about three days,” says Singh. Of the 825 cargo flights that SpiceJet operated, 294 were international cargo flights, informs Singh.
At the time of filing this report, SpiceJet had operated 916 cargo flights (March 24 to May 8) covering a distance of 15,46,809 km and carrying 6,587 tonne of cargo. Out of these, 337 were international cargo flights. Blue Dart had operated 311 cargo flights followed by IndiGo (121 cargo flights between April 3 and May 8), Vistara (23 cargo flights between April 19 and May 8). All these were commercial cargo flights, as per data made available by the Ministry of Civil Aviation. These private carriers have also undertaken operations in national service on a pro bono basis, say executives of some of the airlines.
SpiceJet has been regularly transporting medical supplies including sanitisers, face masks, coronavirus rapid test kits, IR thermometers, etc. and providing doorstep deliveries of essential supplies, medicines, medical equipment, and cold chain medical supplies to various pharma and healthcare companies, international retailers in this global war against the Covid-19 pandemic.
“We have also helped Indian farmers maintain continuity of their supply chains by operating special cargo flights to take farm produce, fresh fruits and vegetables to various domestic and international destinations,” says Singh.
As to the revenue generated by the cargo business so far, Singh avoids a direct answer and instead says that SpiceJet has been maintaining ‘adequate cash flows’ to cover reduced cost of operations. “While our primary revenue source from our passenger operations has completely dried up much like most airlines worldwide, our cargo business has ensured that SpiceJet paid significant salaries to about 92 per cent of our people for the month of April when some of the biggest airlines around the world have announced job cuts,” Singh points out. “It’s extremely tough but we are trying to do our best...we are not laying off people at this time. So, yes, our cargo business is doing very well and is growing with each passing day,” he adds.
While the Indian aviation sector has until now been left to fend for itself, in the US, for instance, the Congress has announced a $50-billion package to bail out its aviation sector. Of this $50 billion, half (a mix of grants and loans) will be used to pay 750,000 workers employed in the aviation sector. This money comes with a caveat though -- that airlines will not furlough or cut pay till 30 September. However, reports suggest that 90,000 employees of Delta Airlines have already volunteered for unpaid leave while thousands of employees at other airlines have also signed up for unpaid/partially paid leave.
Cargo Rates Go North
A study of destinations reveals that SpiceJet has been flying special cargo flights to and from some top international destinations including Abu Dhabi, Kuwait, Singapore, Ho Chi Minh, Cambodia, Hong Kong, Shanghai, Bangkok, Colombo, Dubai, Dhaka, Kabul, Myanmar, Sharjah, Male, Kuala Lumpur, Guangzhou, Bahrain, Ukraine and several other places. This has been a smart move on the part of SpiceJet to cash in on the rising airfreight rates.
As per reports based on World ACD, the world’s largest air cargo market database, airfreight rates are at an all-time high in the wake of the coronavirus outbreak. The rates on Shanghai-Dallas/Fort Worth route, for instance, rose to $8.72 (Rs 658) per kg on April 13 compared to $4.91 (Rs 370) on March 9. On average, air cargo from Shanghai to the US is said to be available at $6.92 (Rs 522) per kg in April compared to $3.36 (Rs 253) on March 9, an increase of 105 per cent in one month. Data shows that on April 13 the airlines reportedly charged a record price of $9.64 (Rs 724) per kg to move cargo from Shanghai to Frankfurt compared to $2.46 (Rs 185) on March 9, a jump of 291 per cent in just one month.
Things are no different in India too. In the pre-lockdown months, air cargo cost under $1 per kg (a rough average for understanding). Today, the going rate, according to one airline executive, is somewhere around $2.65 and $3.31 (Rs 200-250). “It could be more. These are confidential information and the rates can change depending upon the consignment, the destination, the distance, the bookings back from the destination to the home location, among others,” he says.
The success of air cargo operations has prompted the SpiceJet management as well as of others to seriously consider transforming their existing fleets of passenger aircraft into freighters. “Yes, we are considering this at the moment,” says Singh. And why not? If cargo business is fetching more money, it is logical to look at re-modeling the passenger airliners into freighters. After all, only the seats need to be removed and with some minor modifications, the passenger cabin can accommodate perishables like fruits, vegetables, medicines, among a host of possibilities.
Speaking at a webinar a few weeks ago, Sanjiv Gupta, CEO, SpiceXpress said: “We have five freighters with four of them flying only in domestic routes. The Covid-19 changed the whole scenario. We have most of our freighters flying to China, South-east Asia and the Middle East because we have seen demand for perishables to the Middle East, and medicines and equipment from South-east and China grow.”
SpiceXpress, according to Gupta, is already transporting perishables within the country with the help of Krishi Udan and Marine Krishi Udan schemes. “For example, we are still operating the freighters from Chennai to Surat and Kolkata to help shrimp cultivation.”
“We use freighters for bigger consignments. For perishables we mostly use main cabin passenger seats, and to transport smaller cargoes to tier III cities we use our bombardiers. We can also expect SpiceJet bombardiers, with seats removed, flying only cargo in a few months,” Gupta said.
With air turbine fuel rates as low as they are today (less than Rs 25 per litre), the air cargo route may be the way for all domestic carriers, at least for the next 6-12 months.