Friday, May 15, 2009

The implications of Deccan 360

I am personally surprised at the reception of Deccan 360 by the industry. Considering its potential and implications one might have expected a lot of hulla ballo similar to the Nano project. But may be its implications haven't yet been realised by many. So why am I so excited about this venture?
Because within a couple of years an industry which is 90% unorganised becomes a highly organised one. Capt. Gopinath threatens to remove half the trucks that ply on today's national highways. From then on one doesn't need to pack his house a week before and wait for a week after if he is shifting his home from Agartala to Mumbai. Trucker's strike would have little impact on commodities movement.
Airports like Salem, Tuticorin which have been closed due to unviability can expect huge revenues from Cargo handling as they are strategically located near large industrial clusters. Since Deccan plans to have international entry points at Delhi, Nagpur, Mumbai, Hyderabad and Chennai, customs clearance could be finished at these airports and be sent to other places as domestic cargo. So little infrastructure needed at these small airports. Overall revenue of all domestic airports would increase thus making their modernisation profitable. The low-cost model will make average exporter shift to air transport from land and rail transport.
The current model followed is a 3rd party logistics manager manages warehouses at various points across the country and mostly outsources the transportation part from transport companies. This leads to production delay in the manufacturing industry. But within half a decade one can do away with such a system. As soon as a batch of components is manufactured, it can be air transported to the customer company in a day or two.
Now after all this, the ground situation is, MIHAN is only partly ready. Chennai the second busiest cargo port in India is facing capacity constraints. Chennai being a manufacturing hub for many auto components and electronics in industry is the customer end of many cargo routes. Airports like Salem and Tuticorin are ready to receive the ATRs of Deccan 360 but not their cargo. A cargo terminal at each of these airport is essential and also needs to be adequately staffed.

Deccan has cleverly chosen its initial sectors. Let it prove its mettle in the high density sectors and then expand. Maybe there will be a day when the number of Deccan's parcel coaches outnumber the yester year's postal department's van. That is something like privatisation of postal dept!!!!

Deccan 360 The Indian avtar of Fed-Ex

Capt. G.R. Gopinath may first seem to be a man who takes heavy gambles in a volatile industry. But his past records speak volume about what he has in him. When Deccan first flew out of Bangalore only 1% of India's population was flying. Later when he sold it to Mallya it was 5%. Now his new brain child 'Deccan 360' dares to change supply chain and logistics scene in the country.
Within an year he plans to have a fleet of 9 planes and over 400 trucks criss crossing the country and abroad. A corporate logistics solution provider, end to end supply chain management and a swift and low cost courier and parcel service, all combined into one. This is what he has envisioned. Think of a parcel being sent from Jalandhar to Tuticorin within a day. This is what Gopinath is planning to achieve. With a hub at the geographically and therefore the govt favoured Nagpur MIHAN, that will serve as the hub for domestic network and a feeder point for international cargo, one can expect a reformed and competitive service from the logistics sector in the near future.

Thursday, May 14, 2009

Jet Airways Konnect - following a once successful model

On May 7th 2009, the Indian aviation industry, which has witnessed everything from boom to crashes in the past, saw the emergence of another successful business model that is still followed in the U.S and Europe. The feeder and hub model. Under this model low density routes from major cities are served by a subsidiary which acts as a feeder for the mother airline. The mother airline operates on the high density routes. These subsidiaries act as a feeder service for the high density routes. For eg, if a passenger wants to travel from Coimbatore to Kolkata, he will take a Jet Konnect to Chennai from where a Kolkata bound Jet Airways flight would leave in twenty or thirty min. At the same time similar flights from other tier 2 cities like Trichy and Madurai will also arrive to connect with the Kolkata flight. Since only ATRs or other regional jets would be operated on these routes, the load factor would be high as well as the load factor on the mother Chennai - Kolkata flight would be high.
Similar model is already being followed by Paramount keeping Chennai as a hub, with the only difference being it operates all business class flights in all its routes. Though the time of introduction of such a service by Jet Airways is debatable, considering the position of Jet lite and the current economic scenario, this age old model has been highly successful in boom times. Seems like Naresh Goyal wants to consolidate his position further in the domestic sector, considering the current international scenario.