Reliant Logistics Institute


Air Cargo -an overview


The Air Transport industry is undoubtedly an important element of national and global economies. Air cargo industry in India has an important role in the nation’s trade and economy because of its significant contribution to the economic prosperity and well-being of the country. Transporting goods via air except perishable or sensitive products was once costly affair for the businesses to afford infrequent basis but due to the recent forces of globalization, liberalisation, privatisation and cut-throat competition among the companies have changed the face of global logistics and supply chain management throughout the world.

In today’s competitive environment, efficient logistics planning and managing supply chain in a most cost-efficient manner such as initiating JIT (just-in-time) production and distribution approach that enables companies to reduce inventory carrying cost, are among the key factors for company’s success and existence in local and international market and which in turn have made air cargo the most lucrative option than other mode of cargo transportation . India is the the largest submarket in Southwest Asia, comprising about 63% of international flows in the region, and it possesses a vibrant domestic market as well. India‘s air cargo business is having muchmore potential in revenue generation than passenger business butstill, the air cargo market is untapped. Statistics indicate thatairlines spend more than 75% on transporting passengers, while only25% is spent on cargo. According to the Airport Authority of India, the total cargo volume is expected to increase by 11.5% from 2007-08to 2011-12, international cargo traffic expected to increase 12.1% of car and domestic cargo by 10.1% during the same period.

However, the rising fuel cost is one of the major concerns which can dampen the growth as fuel accounts for 20-30% of the operating cost. To handle the variety and complexity of managerial forecasting problems multiple forecasting techniques have been developed. These econometric modelling, judgmental analysis, trend analysis and potential analysis are considered useful to provide a forecast. Econometric modelling helps to determine the overall importance of the economic factors like GDP, trade, fuel price etc. and enables forecasts to be linked to expectations for those factors. TheJudgmental modifications often account for expected changes in non-econometric growth factors like trade quotas, services agreement sets etc. A simple trend analysis is used to evaluate changesin economic factors. This is useful in evaluating general changes inthe marketplace that can be attributed to the combined effects of anumber of factors. The potential analysis is useful, particularly forforecasting markets in their early stages of development. Air cargofacilitates transporting goods much faster from one multiple linearregression analysis has shown GDP and trades are having a positiveimpact on the growth of air cargo whereas fuel price is havingsignificant negative relation. As per the calculations, the cargogrowth will be more than that of GDP growth. Several forecastingmethods are applied along with the proposed econometric model withmultiple variables and single variable with time to compare theirpredictive ability and fitting effect with respect to actual valuepart of the world to another and consequently initiates internationalbusiness to grow and expand quickly than another mode of transportation. The simple generalized forecasting methods help topredict air cargo demand of any country and eventually helps inmaking strategies to boost the predicted growth.


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