In an interview with Payload Asia, just prior to the awards, Anil Khanna, Blue Dart managing director noted that the current global slowdown has hit India worse than the major economic upheaval of 2008/09. “Even in 2008/09 when global GDP growth fell to almost 4.5 per cent, India still had over six per cent GDP growth, down from the 2007 figure of about seven per cent.” With India’s GDP growth now hovering at around five per cent “it’s the worst in a decade,” he says.
“Therefore we are also impacted, but we are growing, just not growing at a 25-30 per cent pace, more about 12-13 per cent.” Clearly not figures to be distraught over considering the drubbing many air cargo companies are taking in the current environment, but none-the-less it is an environment which impacts the bottom line. The company 75 per cent owned by Deutsche Post DHL generated a revenue of INR 4.71 billion (US$76.1 million) in the three months to the end of September 2013. However, net profit dropped 6.6 per cent year-on-year in the second quarter, to INR 300.6 million (US$4.86 million) and a full 26 per cent down on profits seen in the first quarter.
Overall in the year-to-date, the company has seen its revenue grow by nine per cent compared to the first half of 2012, to INR 9.24bn ($149 million), but the second quarter’s result has taken net profit for the first half down by nearly three per cent to INR 707 million (US$11.43 million).
With a fleet comprised of seven B757 freighters and one B737 freighter and a total capacity of nearly 400 tonnes per night, Blue Dart is flying 85 per cent capacity utilisation overall, according to Khanna. “And if we knock off the so-called weak sectors like Chennai-Bangalore for instance which is only about five hours by road, so we get hardly any load on that sector, the utilisation hits about 92- 93 per cent.
Key to this, according to Yogesh Dhingra, Blue Dart’s finance director & COO, is the carrier’s unique network configuration. “We don’t fly a hub and spoke system – we have seven stations and five types of route, so that we serve all stations and increase productivity on the entire network. India, he says, “cannot really support hub and spoke – it would require more aircraft and that would lead to high fuel costs. The model which we have put in is very efficient and with this network we are able to offer overnight delivery across the country.”
Currently Blue Dart estimates it has an air express market share of nearly 52 per cent and is the only domestic express company having its own aircraft fleet. While other major players are in the market Khanna notes it is a highly fragmented market with nearly 3,500 players. On the ground side it has an express market share of about 14 per cent with the entire vehicle fleet operated by long-time, third party vendors whose vehicles all ply under Blue Dart branding.
Expansion plans
While fleet expansion is definitely in the cards, timing is crucial. “Right now we are managing with whatever fleet we have and the commercial uplift for the remainder, but whenever we see it’s the right time, we will add. So it’s not that we aren’t going to add, just a matter of when – if not in 2014, definitely in 2015 we will need more aircraft.” This includes he adds, the possibility of moving up to B767 freighters, but this is still under evaluation.
As for geographic scope, Sri Lanka is a market Blue Dart has looked at a number of times, but the problem is the imbalance, with little in the way of return loads back to India, creating a 30-40 per cent load imbalance. The company has and will continue to do charters out of the Bangladesh market when peak demand for textiles requires it. “Going forward we would probably look at doing international operations – Hong Kong into India, or India into Dubai – something that complements the DHL network,” Khanna said.
Currently domestic express is handled by Blue Dart which also has a bit of international business, contributing 8-9 per cent of revenue, which is handed over to DHL at the gateway. “We also do pickup and delivery for DHL in smaller cities, meaning about 16-odd cities are directly served by DHL and the rest of India, almost 600 cities, we do the pick-up and delivery – it’s a very strong combination.”
Domestic developments
As for the long discussed infrastructure issues in the country, Khanna says that while there have been improvements to India’s road infrastructure, “it is not progressing at the pace it was supposed to.” “Airports are modernising, but unfortunately we are not getting the type of facilities that we should be getting, like what international players like DHL or FedEx would get in places like Singapore.
We are constantly in touch with the airport operators to get the type of facilities we need,” but the problem he says is that they tend to group express carriers in with mainstream air cargo carriers. “But gradually they are understanding the difference and the civil aviation authority is more aware that express operators are different from general air cargo.”
On the issue of the recent liberalisation of foreign investment rules for the aviation sector, Khanna notes that “the aviation potential is huge in India, but there will definitely be some shakeout and some mergers. Right now it is difficult to be an air operator in India. Another key problem is the Indian rupee’s depreciation against the US dollar. “With the rupee depreciating and all the leases and engines and spares and everything in dollars, that immediately impacts your bottom line.”
