How India’s Air Cargo Industry is Poised to Take Off

Cargo has become a critical revenue driver for Indian airlines amid the global pandemic. The stage is now set for air cargo to grow into a dominant industry in India’s globalized future.

Pre-COVID: A Passenger-Driven Market, Cargo Neglected

Before the COVID-19 pandemic, Indian aviation was primarily focused on passenger growth, which regularly saw double-digit increases. Between 2009 and 2019, passenger airlines in India achieved a 12% Compound Annual Growth Rate (CAGR), despite the bankruptcy of Jet Airways in 2019. Meanwhile, the cargo market grew at a slower, though still respectable, 8% CAGR over the same period.

However, with the pandemic disrupting passenger markets—where passenger volumes fell by 70% in 2020—airlines were forced to rethink their business models, and cargo finally took center stage.

Even before the pandemic, India’s dedicated freight market faced significant competition from other transport modes like ocean freight and rail. Low-cost carriers also utilized their bellyhold capacity for cargo, impacting margins. Until 2018, India only had one operator of dedicated freight aircraft, Blue Dart, which has been operational since 1996. By contrast, India’s passenger fleet grew by 60% over the past five years, adding substantial bellyhold cargo capacity to the market.

The Rise of Cargo Services

In 2018, India’s cargo market experienced a major shift when SpiceJet launched a dedicated cargo subsidiary, SpiceXpress, with a fleet of B737s. SpiceXpress later expanded its fleet with Q400s, B767s, and A330s, offering door-to-door services across India.

Today, India’s air cargo sector is supported by enhanced airport infrastructure, digital cargo handling systems, and partnerships across the logistics industry. However, challenges remain, and the key question is how Indian aviation will maintain sustainable growth in its air cargo sector.

During COVID: Air Cargo as a Lifeline

As the pandemic grounded passenger flights in March 2020, air cargo became a lifeline for cash-strapped airlines. From transporting medical supplies to facilitating e-commerce, the demand for air cargo surged.

While domestic air cargo demand has almost recovered to pre-pandemic levels, passenger demand has been slower to rebound. Passenger airlines in India have only regained about 60% of their pre-pandemic market share.

The Impact of E-Commerce and Pharma on Air Cargo

The pandemic has dramatically accelerated the shift toward e-commerce in India. With bans on in-person gatherings and increased online activity, e-commerce is expected to grow fivefold by 2026, reaching a $200 billion market. Demand for air cargo is driven by cities like Delhi, Mumbai, Bengaluru, and Hyderabad, which handle 70% of the country’s cargo volumes.

Additionally, India, known as the “Pharmacy to the World,” is the largest global supplier of generic drugs. Both pharma and e-commerce require quick, long-distance transport, driving demand for air cargo. The freight carried per domestic flight has doubled from an average of 0.6 tons pre-pandemic to 1.2 tons today.

Airlines Adapt to the Cargo Boom

To adapt to the growing demand for air cargo, airlines have retooled their operations. For example, SpiceJet reported a 450% increase in cargo operations revenue in the fourth quarter of 2020. Cargo operations contributed around 32% of total revenue in 2020, compared to just 2% in the previous quarter.

Airlines such as IndiGo have also announced plans to convert passenger aircraft to freighters, adding A321 freighters to their fleet. Some airlines even repurposed passenger aircraft by placing cargo on passenger seats to meet demand.

The Need for Infrastructure and Capacity Expansion

India currently has 25 dedicated freighter aircraft, operated primarily by SpiceJet and Blue Dart. However, this number is relatively low compared to other nations with similar market potential.

The demand for air cargo during the pandemic forced Indian airports to enhance their cargo infrastructure, particularly in handling temperature-sensitive pharmaceuticals and e-commerce shipments. New facilities and climate-controlled warehouses have been added to meet this demand.

Key Takeaways

While air cargo has become a substantial revenue source for Indian airlines, the sector faces several challenges, including high fuel costs and competition from other modes of transport. To secure long-term growth, airlines must invest in dedicated freight capacity, maintain competitive pricing, and offer consistent schedules.

The air cargo industry also needs to embrace digitization to improve operational efficiency. End-to-end paperless operations and real-time data tracking will unlock enormous potential and streamline communication across the supply chain.

Post-Pandemic: Poised for Growth

India’s air cargo sector is set for significant growth in the post-pandemic era. However, success will require sector reforms and infrastructure investments. As e-commerce continues to expand and consumers demand faster delivery, airlines will need to adapt quickly to meet rising expectations.

International airports in India must exapand their cargo capacity and create dedicated infrastructure for special cargo categories. For example, Delhi Airport has established India’s first Transshipment Excellence Centre (TEC), aaaaand Bengaluru Airport has developed additional infrastructure to position itself as the cargo hub of South India.India’s strategic location gives it the potential to become a global cargo hub, but realizing this potential will require a larger freighter fleet and continued investment in logistics and infrastructure.