Gopinath starts tariff war in air cargo sector

Nirbhay Kumar HYDERABAD

AIR DECCAN founder GR Gopinath is replicating his low-fare model in the air cargo venture. Taking rival Blue Dart head on, Mr Gopinath has kept tariffs lower than the leader. “We are selling our product on expansion network, besides distributing cargo at 10-15% cheaper compared with rivals,” Mr Gopinath, who has started his express logistics venture Deccan 360, told ET.

The cargo airline is planning to invest about Rs 400 crore in building infrastructure such as warehouses and in fleet expansion. The cost of carrying one kg of cargo from Delhi to Mumbai by air is estimated at about Rs 16 (inclusive of handling charges), compared with less than Rs 4 by road. So only highend products such as critical equipment, gold and medicine are carried by air now.

The Bangalore-based entrepreneur had launched the country’s first no-frills airline Air Deccan, but later sold it to liquor baron Vijay Mallya who merged the airline with Kingfisher.

Deccan 360 is currently operating with a fleet of seven cargo aircraft — five ATRs and two A310s — serving about 10 destinations. The express logistics company also operates a fleet of nearly 1,000 trucks.

“The mandate is to keep the cost structure as low as possible by introducing new technology and operating a larger network. In the next few years we would be serving 500 cities of the country,” Mr Gopinath said. Deccan 360 has decided to grow on franchisee model in most of the cities.

The competitors are, however, not happy with Deccan 360’s move to keep logistics distribution charges low. “Mr Gopinath should also say whether he is making profit or not. People should do either business or charity and not both the two at same time,” Aryan cargo and Express chairman and managing director Mukut Pathak said.

The domestic express cargo business is estimated at close to $500 million. The industry is currently growing at about 15% annually. The industry has, however, potential to grow at a much faster rate given the pace of economic growth in the country.