Preetham Philip: Quikjet’s need for speed
19 / 06 / 2017
India-based all-cargo carrier Quikjet Cargo Airlines certainly seems to be a big believer in the theory that slow and steady wins the race.
Plans to launch the airline were first revealed in 2007 and although some flights were flown using an ATR-72F in the intermittent period, it took nine years before the airline fully launched operations.
The Bengaluru-based airline’s launch finally came in February of this year when it announced the start of services connecting Delhi, Chennai, Bengaluru and Hyder-abad utilising a Boeing 737-400SF aircraft.
The network is being run by Quikjet on behalf of logistics firm Sovika under a block-space air service agreement. But what took so long?.
Quikjet chief executive Preetham Philip, who has previously worked for Thailand’s K-Mile Air, Deccan Charters and the defunct Deccan Cargo & Express Logistics, says that the airline’s lengthy launch period was all a matter of timing.
“Quikjet in its first avatar was intended to be a pure cargo operator,” he says. “They would run the network and sell the space themselves.
“In 2008, they did get two B737-300s; however, at that time there was also a serious downturn in the domestic cargo business so then they made a call and decided not to operate the aircraft and wait for a better opportunity.
“Subsequently there was a change in the Quikjet management team and they then made a call that maybe the 737-300 was not the right type of aircraft and then they were in discussion with the management about a possible 767 type operation.”
This took Quikjet up to 2012 and the point when Switzerland-based Farnair, which later also became a part owner of K-Mile, bought into the company, purchasing a 36% share that later became 51%.
In 2014, Farnair was purchased by ASL Aviation and the Irish group later upped its shareholding in Quikjet to almost 74%, the maximum allowed under Indian foreign direct investment regulations.
Cyrus Guzder-led AFL, which launched the airline, owns another 20% and the remainder is owned by various minority shareholders.
“When Farnair bought into Quikjet we changed the business approach to the whole thing and revamped how we wanted to run the business.”
The change in approach mentioned by Philip is in reference to the decision to become a dedicated aircraft operator and leave someone else to sell the space.
But it has not been easy to convince the air cargo industry in India that the all-cargo concept will work.
Several airlines, such as Air India Cargo and Deccan, have tried to launch Indian freighter services in the past but only Deutsche Post DHL’s Blue Dart, which has a fleet of five B757-200Fs, has endured.
Some of the reasons given for the failure of freighter operations include infrastructure issues, bureaucracy, non-conducive market conditions, lack of demand, availability of lower deck capacity and low rates.
However, times are changing in India as the government’s ‘Make in India’ campaign hopes to encourage foreign companies to set up production lines in the country.
Prime Minister Narendra Modi’s government hopes that in the medium term manufacturing output will increase by as much as 14% and by 2022 will represent 25% of the country’s GDP compared with around 15% today.
However, as well as introducing measures to improve foreign investment in manufacturing, the government also knows it will need to improve supply chain proc-esses and infrastructure if it is to encourage companies to create production lines in the country.
The government has been working on a new civil aviation policy for the last six months that includes several incentives for the air cargo sector.
The country also has a growing middle class, its GDP is now the fastest growing in the world and increases in e-commerce are also driving change.
However, the country is still in transition and the cargo industry is still more inclined to use road, rail and bellyhold capacity than freighters for domestic moves.
“This is a country that is not used to this type of [all-cargo] set up and it was challenging to sell the idea because everybody is used to bellyspace prices on passenger aircraft and that’s what you are competing for.
“The dedicated freighter is not going to cost you the same as the bellyhold,” Philip says.
However, he adds that using bellyspace does create its own challenges that have been holding back the growth of domestic air cargo.
“I think the biggest challenge in using bellyspace is the uncertainty of capacity that can be offered on any given day,” he says.
“It could be two tonnes, then in the summer it could be nothing. This uncertainty is not conducive for the logistics team to move their freight.
“They take measures to ensure things are moving [by road and rail] and only at the last minute freight needs to go on an aircraft.”
Philip says that by offering guaranteed set space, Quikjet will be able to provide the reliability needed to transfer more freight over to air transport.
He says another reason freighter operations haven’t proved successful in India is that there hasn’t been a demand for time-definite services like there is in other parts of the world.
However, the rise of e-commerce in India could drive that to change.
Philip says: “In India, courier companies don’t give you a guaranteed service level − it’s not a unique selling proposition that they have been offering.
“So what happens is they look for the cheapest possible means to move shipments from A to B and that is detrimental to the growth of airfreight.
“That’s why, actually, Blue Dart has been successful because they give the commitment and they have the tools to make the commitment work.
“So we needed to find partners that say ‘this is something for us, it is important to make a difference, and get into the market’.
“E-commerce, being as it is, views time-definite as important and we are creating the tools to give that time-definite service.”
Philip explains that at the moment, because of a lack of freighter services, e-com-merce companies are forced to set up warehouses in towns across the country to ensure timely shipment.
This goes against the whole asset and inventory-light ethos of e-commerce and will need to change if the industry is to succeed in India.
“The whole ethos of not having retail space, not having stock on shelves, keeping costs down by cutting all of this is being lost by doing what you’re not supposed to do,” he says.
“I hope we have started this service just at the moment people say air cargo is an option.”
Pricing is also an issue: “In my personal opinion, the market is still driven by price. We have challenges with infrastructure, we have challenges in various other issues.
“But it is still a market driven by price and you have cheaper options by rail, you have cheaper options by road, and unless the service level commitments become a driver, airfreight is not going to move.”
Again, he hopes that the growth of e-commerce could help to drive this change.
Since launch, Philip says the service has been going well and loads have been gradually increasing.
Looking ahead, the airline hopes to add three freighters – probably 737-400s, although this could change depending on customer requirements – per year for the next three years.
This year, through its partnership with Sovika, it hopes to add another freighter in April or May that will extend the network to Mumbai and then later this year it will add a turboprop service to Kolkata in the north-east region.
“Sovika are holding off on Mumbai until they get the right commitment from the airport,” Philip says.
It seems that the success of Indian domestic freighter operations could come down to the need for speed.