New cargo terminal at Mumbai to meet e-commerce growth

Air cargo volumes at Mumbai International Airport Ltd. (MIAL) are on the rise, and a new domestic air cargo terminal that opened earlier this week is expected to allow the airport to capture a larger portion of India’s booming e-commerce market. The new, 60,000-square-foot facility will contribute an additional 300,000 metric tonnes of capacity and will be used by all carriers, except for Air India and Blue Dart, which use their own cargo-handling facilities.

MIAL projects medium-term growth in the air cargo business at 7 to 8 percent, annually, with e-commerce currently making up about 75 to 80 percent of the airport’s total domestic cargo business. In 2015, according to an airport official, MIAL handled 200,000 tonnes of domestic cargo and an additional 500,000 tonnes of international cargo.

Earlier this year, India’s aviation minister, Ashok Gajapathi Raju, told The Hindu that “cargo has a tremendous potential,” in spite of the fact that “very little cargo is going into the belly of aircraft and being exported.” Mr. Raju cited high tunaround times and inefficient airports as causes.

These developments come in the wake of an announcement by Amazon that it will invest US$5 billion into India’s e-commerce sector, worrying domestic players like Flipkart, Snapdeal and Paytm. A recent study by The Associated Chambers of Commerce & Industry of India (ASSOCHAM) estimated that the e-commerce industry in India will be worth more than $38 billion by the end of this year, a 67 percent increase over 2015. ASSOCHAM also predicted that, although air cargo currently comprises only 1 percent of the total freight market in India, a brisk 12.5 percent compound annual growth rate (CAGR) over the next five years would increase its role in the national economy.

But with the online sale of retail goods in the B2C category expected to account for 3 percent of total retail by 2020, up from 0.4 percent in 2014, the market is still nascent, according to PwC. Further, the professional services firm anticipates orders-per-million to more than double from five million in 2013 to 12 million by 2016.