Dedicated freight services by Indian carriers can strengthen the air transport sector

In February 2024, India’s Directorate General of Civil Aviation (DGCA) breathed new life into the Open Skies Policy – a move that I believe is extremely promising for increasing efficiency and competitiveness in the air cargo sector. Earlier, due to COVID-19 protocols, foreign airlines were only allowed to operate freighter services at six major airports in India: Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad and Delhi. Now that the government has restored the Open Skies Policy, overseas and non-scheduled cargo charter services can be operated at all international airports for the next three years. This policy change is also likely to have a major impact on the Indian economy as it will help increase export volumes. Moreover, it also fits perfectly with the country’s ambitious goal of achieving 10 million metric tons of air cargo transportation by 2030.

India’s major exporters have strongly called for a return to the open skies policy since restrictions were introduced in 2020. Their main argument was that the ability to transport cargo had severely declined because Indian carriers had not deployed enough planes to keep up with rising air cargo demand. The government’s decision to restore the Open Skies Policy also seems to be an appropriate response to the growing demand for air cargo services around the world. According to the latest statistics from the International Air Transport Association (IATA), total air cargo demand increased by 11.9% in February 2024 compared to the same period last year.

The timing of the policy resumption is crucial as it will help ease concerns about Indian airlines grounding more planes this year. Recently, CAPA India warned that nearly 200 of the total fleet of nearly 800 aircraft would be grounded this financial year. She also indicated that the number is likely to increase in the coming months as more airlines plan to ground planes for various reasons.

According to statistics, among the cargo volumes handled by India in 2023, 1.84 million tonnes were international cargo, covering both exports and imports, and the remaining 1.30 million tonnes were used for domestic traffic. Almost 94 percent international cargo was handled by foreign air operators, the remaining 6 percent Indian airlines, mainly using the belly space of their wide-body aircraft.

Now, after the policy change, many foreign airlines are showing interest in resuming cargo operations in India. The entry of more players into the market and supply chain problems caused by grounded flights also raise questions about their collective impact on the flow of goods through Indian airlines.

Grounding of flights will reduce the cargo capacity of Indian carriers. Another problem is the lack of wide-body cargo aircraft operated by Indian cargo airlines that would help them fly to long-haul and ultra-long-haul destinations. This is an area where foreign players dominate the Indian air cargo space. Apart from the transportation capabilities and cargo services provided by leading airlines, there are also a number of specialized foreign cargo carriers flying to global destinations from India.

In this context, Indian airlines need to invest more in developing dedicated seating capacity. We have seen that some of the leading airlines are already placing orders for wide-body aircraft that will increase belly space. In addition, the government should also consider developing more specialized cargo terminals, as well as related infrastructure projects, including warehousing and better connectivity. This will help in streamlining the logistics sector by improving supply chain efficiency and ensuring uninterrupted cargo operations.

In summary, the multi-faceted challenges facing Indian airlines in the cargo sector require concerted efforts by various stakeholders. Key areas of focus include investment in increasing freight capacity, infrastructure development and improved regulatory frameworks.