It’s not just passenger numbers but cargo traffic, too, that is growing at a brisk pace for Indian air carriers. Data from aviation regulator DGCA show that domestic air cargo volumes in 2017-18 (about 7 lakh tonnes) grew about 9 per cent y-o-y, much faster than in the previous two years.

Also, Indian carriers have been increasing their share of the pie in the fast-growing international air cargo market. In 2017-18, total international air cargo volumes to and from India (about 17 lakh tonnes) grew about 15 per cent, the fastest in many years. And in this business, the share of Indian carriers grew to 20.5 per cent in 2017-18, up from 16.9 per cent in 2015-16.

The healthy growth has continued in the current fiscal year too. In the period from April to August 2018, domestic air cargo volumes have grown about 13 per cent, while international air cargo volumes ferried by Indian carriers have increased about 6 per cent y-o-y.

Growth potential

The trend seems set to continue. One, the air cargo market in the country has high potential fuelled by factors such as the e-commerce boom and sectors such as pharma that have quick transportation requirements. Rating agency ICRA says that with expected growth in the economy, the air cargo traffic in India is expected to grow by around 60 per cent to 4.7 million tonnes in the next five years, translating into a compounded annual growth rate (CAGR) of 9.7 per cent.

Next, airlines in India are gearing up to seize the opportunity. Recently, IndiGo Airlines, the country’s largest carrier, partnered with SmartKargo, a cloud-based platform to drive growth in its air cargo business unit. IndiGo already has the largest share – about 22 per cent – in the domestic air cargo market. The competition is also going full throttle. Last month, SpiceJet inducted its first freighter aircraft and launched its dedicated air cargo service SpiceXpress on domestic and international routes. Its first four freighters are scheduled to be inducted in FY2019; this is an extension of its ‘belly cargo’ service, in which airlines carry cargo in passenger aircraft.

Belly cargo currently makes up the chunk – about 80 per cent — of domestic air cargo volumes in the country while dedicated cargo aircraft solely for freight carriage make up the rest; these are mostly operated by players such as Blue Dart. SpiceJet’s ambitious plans in the cargo business could mean an increasing share of dedicated cargo carriage in the coming years.

The increasing attention that Indian carriers are paying to ferrying cargo also makes business sense. Carrying cargo gives higher yields (price realisations) than ferrying passengers. This can provide a good hedge in the current turbulent times when the financials of the aviation sector are under stress due to high fuel costs and low passenger ticket fares.

Foreign opportunity

Also, in the international cargo business to and from India, the share of Indian carriers will likely increase further. The country’s airlines that are already flying international such as Jet Airways, IndiGo and SpiceJet are adding capacity on foreign routes while other carriers such as Vistara are waiting in the wings. This could translate into higher foreign cargo traffic for Indian carriers.

A large portion of the international traffic capacity of Indian carriers is being deployed on short-haul routes to West Asia – a geography that also accounts for much of the cargo traffic to and from India.

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Data from IATA show that in 2017, the UAE and Qatar were the top freight country pairs from India, accounting for 28 per cent and 11 per cent of the cargo traffic. Saudi Arabia and Kuwait are also in the Top 10 list.

While the opportunities beckon, there are challenges, too, especially on the infrastructure front.

ICRA notes that the air cargo infrastructure in India is increasingly getting constrained by the strong growth in traffic in the last few years, and that the cargo handling capacity at airports needs to be upgraded by around 2 million tonnes over the next five years.

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