Blue Dart revs up for growth with more planes, greater geographical reach

The company plans to add Boeing 737 aircraft to its fleet in order to access to multiple smaller Indian airports

Logistics major Blue Dart is looking to expand its fleet adding Boeing 737 aircraft to its fleet as it looks to increase its geographic presence and scale and gain more from the burgeoning e-commerce sector.

The company currently dominates the domestic air express market with around 50 per cent market share with a fleet of six Boeing 757-200 freighters.

“The company is looking to expand the fleet and the 737 is ideal as it can reach smaller airports. We have started acquiring skill sets like pilots and engineers for that. Expansion is also on the tech and infra side, and includes aircraft,” said Balfour Manuel, Managing Director, Blue Dart.

A person aware of the development said the company is planning to deploy two 737 aircraft this year and will expand further over the next 9-10 years.

“The company now operates a hub-and-spoke model. The addition of 737 aircraft will also open it up to serving more in a point-to-point model,” the person said.

Blue Dart's strategy to have a presence across segments--from express logistics to air, surface logistics to e-commerce--has helped it gain market leadership.

The company is South Asia’s largest integrated air express courier and logistics enterprise, and its stock gained 21 per cent over the past fortnight in BSE, extending its gains since its lows in March to over 43 per cent.

Global logistics giant DHL holds a 75 per cent stake in Blue Dart. It has an arrangement with Blue Dart under which the latter will primarily focus on the domestic logistics sector, and will not expand internationally. Manuel says that DHL directly connects Blue Dart to 220 countries. “The complimentary strength that DHL provides in the international sector for our customers is unmatched and, vice versa, we compliment them in the domestic sector. It’s a great strength and an association built over the years since 2004.

Simultaneously, Manuel says that Blue Dart’s network is integrated in a manner where it flies only at night so that shipments manufactured during the day can connect the night flights and be delivered to their destination the next morning.

“We would never play with this model because congestion at major airports is more during day time, and would have a cascading impact on the entire network. So, we don’t want our aircraft to be away for long distance international operations as it can impact the network,” Manuel said.

But during Covid, Blue Dart launched a few international charter flights such as Blue Dart Guangzhou and Shanghai, carrying medical supplies. It subsequently expanded its charters to Myanmar, Hong Kong, and Bangladesh. “So now we have a lot more day time flying. We make sure that the aircraft is back in the base well before our domestic operation. So we have started international but as charter services,” he said.

The high margin international charter services have bode well for the company with margins in the last quarter at an all-time high level of 18.7 per cent.

Competition is increasing with new-age players backed by private equity funds in the logistics sector. Softbank-backed Delhivery, which invests heavily in technology, got listed in the market in May.

Simultaneously, airlines are also looking to increase their freight business.

Manuel said cargo airlines are not competitors--he sees them more as complementary services. “They are necessary and complement our business, as we use their services ofen to reach locations we don’t fly to,” he said.

Analysts said Blue Dart is gaining from the growth in the express air-cargo business, as demand for faster transport is increasing with implementation of GST and growth in e-commerce. The company plans to raise its share of revenue from e-commerce from 25 per cent to 35-40 per cent.

“With a growth in manufacturing and ecommerce which are the two largest drivers of express services, this business is pegged to grow by 16-18 per cent CAGR over next few years. This would mean large organised players like Blue Dart Express with a wide network and strong brand image will be able to tackle competition and maintain market share,” Motilal Oswal said in a research report.