Overcapacity clouds air cargo boomlet

Is the air cargo market going the passenger aviation way? Many industry observers believe so, what with capacity addition surging at a much faster pace than demand. This is likely to pressure yields, and as that happens, players will be goaded to push up volumes to salvage operating margins. And this vicious cycle could continue till consolidation takes place.

This being the reality, civil aviation minister Praful Patel’s recent announcement that overseas investors may soon be allowed to own as much as 74% in Indian cargo airlines compared with 49% now has failed to excite the industry as much as it should have.

Take the case of US-based UTi Worldwide Inc’s Indian subsidiary, UTi India, which is operating as a forwarding agent here and growing at much above the industry growth rate. It is not jumping at Patel’s announcement to start a cargo airline immediately.

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