KPMG Air Freight

8/3/2019 KPMG Air Freight

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KBuzzSector Insights

April 2011

kpmg.com/in



As the summer months come to an end, both farmers and policy makers in the country

are hoping for a good monsoon this year, given that the monsoon is crucial as a source

of irrigation for 60 percent of the farms in India and approximately two thirds of India’s

population depend upon agriculture for their livelihood. With India being the world’s

second biggest producer of rice, sugar and cotton; inflation rising—food inflation rose by

8.55 percent in the week ending May 14—and the direct correlation between disposable

income and ample rainfall, a timely and evenly-distributed monsoon also augurs well for

the economy as a whole.

On a silver lining, PM Manmohan Singh signed a slew of trading and investment

agreements with countries across the African continent and offered them three-year

credit lines of USD 5 billion to achieve their development goals, while attending the India

Africa Forum Summit in Ethiopia. India-Africa trade stood at USD 46 billion in 2010 with

India setting an ambitious target of reaching USD 70 billion by 2015.

I hope you find this edition of KBuzz insightful and interesting.

Regards,

Vikram

Head – Markets and Private Equity Advisory

KPMG in India

Sources

http://online.wsj.com/article/SB10001424052702304520804576346741093655236.html

http://www.hindustantimes.com/Despite-delay-monsoon-on-track/Article1-702403.aspx

http://www.thenational.ae/thenationalconversation/industry-insights/economics/indias-big-push-into-africa

http://www.monstersandcritics.com/news/business/news/article_1641360.php/India-promises-Africa-5-billion-dollar-credit-line

http://www.mydigitalfc.com/news/india-14-african-nations-strengthen-mutual-trade-889

1© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with

KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.



TRANSPORTATION &

LOGISTICS





-

7,000

14,000

21,000

28,000

35,000

42,000

FY06 FY07 FY08 FY09 FY10

T o n n e s h a n d l e d

Cochin

Trivandrum

Ahmedabad

Pune

Calicut

Agartala

Jaipur

Indore

Guwahati

Imphal

Amritsar

“Against the national

benchmark of air freight

growing at 8.5 percent

(FY06-FY10), the tier 2

hubs have been

growing at CAGR of

11.8 percent shifting

focus to emerging air

hubs like Cochin,Jaipur, Pune,

Ahmedabad and

Coimbatore”

- Manish Saigal

Head

Transportation &

Logistics

KPMG in India

Transportation & Logistics

KPMG view – Air freight hot spots

Manish Saigal

Head


[email protected]

Overview

The airfreight sector in India has been witnessing a steep and consistent growth

over the last few years. Driven by India’s strong GDP growth, rising domestic

consumption and EXIM trade as well as supply side improvements, the air freight

market has grown at a CAGR of 8.5 percent (FY06-FY10) to reach 1.95 million

tonnes in FY10. It is expected to grow at a higher CAGR 10.5 percent over the next

few years to reach 3.2 million tonnes by FY15. This growth will, in turn, be

supported by planned investments of over INR 80,000 crores1 in the airport sectorin the XIIth Five Year Plan, more than double of the INR 36,000 crores2 in the XIth

Plan, leading to the development of world class airport infrastructure at Delhi,

Mumbai, Chennai, Hyderabad, Bengaluru and several other locations and

corresponding strong traffic growth in these key hubs. However, these trends

stretch well beyond the metropolitan cities into Tier 2 locations creating novel

opportunities – the subject of this paper.

Aggressive emergence of Tier 2 air cargo hubs3

Against the overall growth of CAGR 8.5 percent between FY06 and FY10, the air

freight market at metro/tier 1 hubs has grown at a CAGR of 8.3 percent from 1.27

million tonnes to 1.75 million tonnes. In contrast, the tier 2 hubs have grown at a

CAGR of 11.8 percent from 132,000 tonnes to 207,000 tonnes in the same period.

• Amongst the larger micro-markets, Cochin has experienced the steepest growthdoubling volume to 42,000 tons in four years. Trivandrum and Ahmedabad are

other large markets that have demonstrated good growth.

• Pune and Calicut are other locations that have broken into 10,000 tons+

category in the same period and are growing at a CAGR ~20 percent

Note: 1. Estimated assuming share of investment in airports in XII Plan remains approximately same as that in XI Plan;

2. Revised projections from Planning Commission of India, January 2011;

* . Analysed airports include those with either >15,000 tonnes freight or >20 percent growth rate (except Guwahati – included for North-eastern comparison)

Source: 1. Planning Commission, KPMG Analysis;

2. Planning Commission, KPMG Analysis;

3. All quantitative figures (volumes, growth rates, etc.) in this section are based on information from Crisil’s Airport Industry Statistics July 2010 and KPMG Analysis

• Jaipur, given the growth rate of CAGR 27.3 percent, seems to be the next crucial

destination catering to the increasing freight demand in North-Western India.

• Among other tier 2 cities handling sub-10,000 tonnes volume, a firm trend

appears with respect to North-Eastern India. Guwahati (CAGR~2.3 percent), the

traditional leader, is being overtaken by Agartala (22.9 percent) and Imphal (31.1

percent). Though these high growth rates can be attributed to low base volumes,

the actual volume handled by these twin cities have risen drastically to compete

with Guwahati’s benchmark of ~ 5,000 tonnes.

Air freight at major Tier 2 hubs*

Source: Crisil’s Airport Industry Statistics July 2010 and KPMG Analysis





The key drivers behind increased freight handling at airports such as Cochin,

Trivandrum and Ahmedabad include rising local demand, improved international

connectivity and the resultant hubbing activity and expanding cargo-handling

infrastructure. Other emerging hubs such as Pune, Jaipur, etc.5 are witnessing high

growth rates primarily driven by increasing domestic volumes, freight handling

services by low cost airlines and better connectivity.

Segregated by attractiveness for 3PL players and freight forwarders

Further analysis suggests that these upcoming hubs can be broadly classified into

two categories - 1) attractive-for-3PL players, and 2) attractive-for-freight forwarders -

based on the hub’s domestic versus EXIM focus.


Note: # – Airports have been analyzed based on FY10 volumes handled as reported by the respective airports; aassumption: 3PL players and

freight forwarders are respectively domestic and EXIM cargo-focussed

Source: 5 – Crisil’sAirport Industry Statistics July 2010 and KPMG Analysis

Location attractiveness for 3PL players and freight forwarders #

KPMG’s perspectiveThere are ample opportunities for players across the logistics value chain to enter

and/or expand their presence within India’s air freight sector, driven by strong

demand as well as improved carrier services. While metro or Tier 1 cities will

continue to dominate the overall market, we believe that it is the new set of Tier

2 cities that represent new and uncluttered opportunities. Service provider firms

will do well to evaluate their presence, focus and service orientation in thesenew locations in the context of this unprecedented growth being experienced in

these locations.

Nagpur

Low

(<1,000 tonnes)Medium

(~ 10,000 tonnes)

High

(>30,000 tonnes)

Medium

(~10,000

tonnes)

High

(>30,000

tonnes)

Attractive-for-freightforwarders

Attractive-for-3PL

CalicutTrivandrum

Goa

Cochin

Ahmedabad

Coimbatore

Jaipur

LucknowLow

(<1,000

tonnes)

Pune

Agartala

Indore

Guwahati

Imphal

Source:Crisil’s Airport Industry Statistics July 2010 and KPMG Analysis

Legend:

CAGR (FY06 -FY10)

20% or more

>10-20%

<10%

<0%






TargetTarget

country

Acquirer/

investor

Acquirer/

investor

country

Deal typeDeal value

(USD Mn)

Stake

acquired

Continental

WarehousingNhava Sheva

India WarburgPincus US PEinvestment 100 NA

GMR Airports

HoldingIndia StanChart PE India

PE

investment150 NA

Transpole

LogisticsIndia Fidelity US

PE

investment13 NA

Atlas Logistics India SBS Holdings Japan Acquisition 33 80

Nikkos Logistics IndiaAqua

LogisticsIndia Acquisition 33 70


Source.Venture intelligence database

Key recent deals






The information contained herein is of a general nature and is not intended to address the circumstances

of any particular individual or entity. Although we endeavor to provide accurate and timely information,

there can be no guarantee that such information is accurate as of the date it is received or that it will

continue to be accurate in the future. No one should act on such information without appropriate

professional advice after a thorough examination of the particular situation.

© 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member

firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights

reserved.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of

KPMG International.

kpmg.com/in

This document has been compiled by the Research, Analytics, and

Knowledge (RAK) team at KPMG in India.

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KPMG Air Freight