Dedicated freighter services from Indian carriers can strengthen air cargo sector

In February 2024, India's Directorate General of Civil Aviation (DGCA) breathed new life into the Open Sky Policy — a move I believe holds immense promise for boosting efficiency and competitiveness in the air cargo sector. Previously, due to COVID-19 protocols, foreign airlines were restricted to operating freighter services at only six major airports in India: Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, and Delhi. Now, with the Government reinstating the Open Sky Policy, foreign and non-scheduled cargo charter services are free to operate at all international airports for the next three years. This policy shift is also likely to have a major impact on the Indian economy as it helps in increasing export volumes. Moreover, it also aligns perfectly well with the country's ambitious target of achieving 10 million metric tonnes of air cargo movement by 2030.

Major exporters from India had been pushing hard for the return of the Open Sky Policy ever since restrictions were put in place in 2020. Their main argument was that the capacity for transporting goods has taken a major hit because Indian carriers haven't deployed enough aircraft to keep up with the increase in demand for air cargo. The government's decision to bring back the Open Sky Policy also seems to be an apt response to the growing need for air cargo services globally. According to the International Air Transport Association’s (IATA) latest statistics, the total demand for air cargo has witnessed an 11.9 per cent increase in February 2024 compared to the same period last year.

The timing of the revival of the policy is crucial as it will help alleviate apprehensions regarding the grounding of a larger number of airplanes by Indian airlines this year. Recently, CAPA India warned that nearly 200 out of a total fleet of nearly 800 aircraft will be grounded in this financial year. It also indicated that the number is likely to increase in the coming months as more airlines plan to ground aircraft due to various issues.

As per the statistics, among the cargo volumes handled by India in 2023, 1.84 million tonnes consisted of international cargo, including both exports and imports, with the remaining 1.30 million tonnes used for domestic traffic. Nearly 94 per cent of the international cargo was handled by foreign air operators, the remaining six per cent by the Indian airlines, mainly utilising the belly space of their wide-body planes.

Now, with the revision of the Policy, many foreign airlines are showing interest in resuming cargo operations in India. The entry of more players into the market and the supply chain issues due to the grounded flights also raise questions about their collective impact on cargo movement by Indian airlines.

The grounding of flights will restrict the cargo movement potential of Indian carriers. Another issue is the lack of wide-body freighter aircraft managed by Indian cargo airlines, which would have helped them to fly to long and ultra-long-haul destinations. This is one area where foreign players are dominating India’s air cargo space. Apart from belly capacity and cargo services from leading airlines, there are also many dedicated foreign freight carriers flying across global destinations from India.

In this context, Indian airlines need to invest more in developing dedicated freight capacity. We have seen some of the leading airlines already placing orders for more wide-body aircraft, which will add to the belly space.  Further, the Government should also look into the development of more dedicated cargo terminals as well as related infrastructure projects, including warehouses and better connectivity. This will help in the enhancement of the logistics sector by improving supply chain efficiency and ensuring uninterrupted cargo operations.

In summary, the multifaceted challenges faced by India’s airline in the cargo sector necessitate a collaborative effort from various stakeholders. The key areas of focus include investment in freight capacity augmentation, infrastructure development and a refined regulatory framework.

Jaideep Mirchandani

Guest Author