Today, there is a growing understanding amongst governments worldwide that air connectivity is an asset improving the global competitiveness of cities, regions and countries. Similarly, the importance of air connectivity to India’s economic prosperity is emerging as a subject of paramount importance to the country’s government and stakeholders who are working together towards ensuring that efficient policies are implemented and right steps taken, which are critical factors to create a wide potential and place the country as a cargo hotspot within the air trade galaxy.
Upamanyu Borah
Drive Insight
In January 2019, India and Asean countries decided to deepen cooperation in the area of aviation and enhance air-links for better connectivity within the region. The tie-up will work towards convening of air services consultations by the Asean-India Working Group on Regional Air Services Arrangements and the establishment of air transport cooperation on technical, economic, and regulatory matters between Asean and India. Well, this is not the start.
Budget carriers – IndiGo and SpiceJet, whose international operations are confined to the Gulf and Southeast Asia, started direct flights to China starting September 2019. Air China, China Southern, China Eastern, China Airlines and Shangdong Airlines currently flies to India with the China Southern operating the maximum 14 flights per week of the total 42 seats a-week allocated to them. Apart from the state-owned Air India, Jet Airways, which is now grounded, was the other carrier flying to China from India through its code-share partner, China Eastern Airlines.
Besides, as part of expansion plans, AirAsia India launched international services between September-October 2019 with flights to destinations in South East Asia, including Malaysia and Thailand. Air India has also announced that will begin services on Mumbai-Nairobi, Amritsar-Delhi-Toronto, and Delhi-Chennai-Bali routes starting September 2019.
Meanwhile, GoAir also expanded its operations with five new international services to the Gulf region, two to Bangkok and eight new domestic services. All of these developments will strive to establish and promote tourism, trade, and enhance greater connectivity.
However, in the wake of the COVID-19 pandemic, SpiceJet’s dedicated cargo arm, SpiceXpress expanded its international cargo network to over 41 international destinations that include Almaty, Abu Dhabi, Baghdad, Bahrain, Bangkok, Bishkek, Cambodia, Cairo, Cebu, Chad, Colombo, Dhaka, Doha, Dubai, Guangzhou, Ho Chi Minh, Hong Kong, Huangzhou, Incheon, Jakarta, Kabul, Kathmandu, Khartoum, Kyrgyzstan, Kuala Lumpur, Kuwait, Male, Myanmar, Shanghai, Singapore, Sharjah, Sulaymaniyah, Tashkent, Ukraine, among others.
According to global airlines’ body IATA, India’s air connectivity has grown the fastest in the last five years and there is ‘strong growth’ ahead though there are infrastructure challenges. An analysis by IATA showed that air connectivity grew the fastest at 114 per cent in India during the five-year period from 2013-2018.
Airlines/Freighters attitude towards India
Lured by the fast-growing cargo operations, leading freighter companies have joined the race to enter India in a big way. Existing cargo airlines are also busy augmenting their capacities seeing the growth in international air cargo over the last few years. The domestic air freight demand which is expected to touch 1.1 million tonne by the fiscal 2025 at a compounded annual growth rate (CAGR) of 7-9 per cent propelled by rapidly growing e-commerce activity, increasing capacity and improving airline connectivity to smaller cities, is also a major attraction for them.
Freighter majors such as Lufthansa, Emirates SkyCargo, Cathay Pacific, Gulf Air Cargo and SriLankan Cargo are scaling up capacity in India.
Peter Gerber, CEO of Lufthansa Group describes the Indian freight market demand by saying, “We have had a strong revenue market share in India since 2016 with a total of 10 per cent. We believe that with this growth Lufthansa Cargo would be the first choice in India when it comes to air freight. We have even contributed to the automobile industry of India which is the fastest growing and we have and will provide flexible services in freight and cargo.”
In August, 2019, Turkish Cargo initiated cargo flights to Bangalore, the capital of the state of Karnataka and the third largest and crowded city in India. Besides, Saudi Airlines Cargo Company (SACC) has been offering additional cargo capacity of 60 tonnes a week in belly hold on the daily operation of Saudi Arabian Airlines passenger Airbus A330 flights to Calicut International Airport (CCJ) in the Indian state of Kerala, starting December 2018. The company also resumed its freighter flights to Mumbai with a weekly freighter flight effective first week of April 2019, aiming to meet the growing demand for cargo operations and stimulate trade movement to/from India. British Airways World Cargo (BAWC) has increased its belly capacity to India in its direct B777 flights between London Heathrow and Hyderabad. Ethiopian Airlines has added cargo and passenger service to Ahmedabad and Chennai and increased its capacity to Delhi as a part of its expansion in India.
Most recently, Italian flag carrier Alitalia Airlines announced it will operate a weekly flight every Sunday on the Mumbai-Rome-New York route. Besides, Ethiopian Airlines said it will be operating a Boeing 777-300 aircraft with a capacity of 50 MT per week. Etihad Cargo also announced the addition of two new routes- Chennai and Kerela which it will service using Etihad Airways’ passenger aircraft to increase the flow of essential supplies into the UAE and further provide east-west connectivity between major markets.
The largest airline of the Russian Federation, Aeroflot is also planning to have a regular weekly frequency to Hyderabad International Airport, enabling a direct connectivity of Hyderabad to Russia and other Commonwealth of Independent States (CIS) countries.
Qatar Airways Cargo, the freight division of Qatar Airways has already added more air freight capacity to and from India with the utilisation of belly-hold operations of freight-only passenger aircraft from April 2020. The airline now operates 19 weekly Boeing 777-300ER and Boeing 787 Dreamliner cargo-only passenger aircraft to– Delhi (3 weekly flights), Hyderabad (2 weekly flights), Bengaluru (3 weekly flights), Chennai (4 weekly flights), Mumbai (5 weekly flights), and Kolkata (2 weekly flights).
India’s domestic airlines are quite behind in the air cargo space space. Although, GoAir and IndiGo have announced plans to launch dedicated cargo operations, SpiceJet’s cargo division, SpiceXpress became the first airline to operate freighter services between Guwahati and Hong Kong on January 19, 2019. Ironically, the domestic dedicated freighters fleet currently stands at just seven planes compared with about 680 passenger aircraft. In the domestic air cargo space, besides Blue Dart Aviation which flies to seven Indian cities, Quikjet Airlines operates with flights to Bangalore, Hyderabad Chennai and Kolkata.
Market Forecast
The estimated Rs 600-700 crore domestic dedicated air freighter market stood at 0.8 million in 2019, logging a CAGR of eight per cent in the last five fiscals. Majority of the cargo during this period was transported in ‘aircraft belly’. A 14 per cent CAGR spurt in domestic airline capacity provided adequate room to support this growth.
However, the quantum of cargo moved by dedicated freighters hardly increased, bringing down their share of the pie from 23 per cent in fiscal 2014 to 16 per cent in fiscal 2019. Shorter lead distances compared with global freighters, lack of significant niche cargo, and intense competition from airlines which also carry cargo in aircraft belly are expected to continue restricting growth of domestic dedicated freighters.
In terms of revenue per tonne kilometre, dedicated freighters have just about 15 per cent share of the domestic air freight market, compared with 50-55 per cent globally. This is because while their global peers move cargo across countries/ continents, those in India operate on shorter distances and lead times, leading to competition from other modes of transport.
However, cargo capacity of airlines which is expected to grow at a higher CAGR of 13-15 per cent, given the impending fleet expansions, will further shift the market towards airlines.
Talking about their expansion of operations in India, Fitsum Abadi, Managing Director, Ethiopian Cargo & Logistics Services says, “India is still the major source of export products to Africa, and the volume is expected to grow in the years ahead. Ethiopian Airlines is offering its dedicated freighter flights and belly capacity of its passenger aircrafts for accommodating adequate air cargo shipments from India.” Ethiopian Cargo’s current annual uplift is around 23K tonnes, and the products vary from a wide range of temperature sensitive such as pharmaceuticals and perishables to general cargo such as chemicals, textiles, garments, engineering goods, auto spare parts, etc. “In 2019, with keeping India in the overall scheme of things, we have planned to commence new freighter destinations to Bandaranaike International Airport (CMB) in Sri Lanka, Incheon International Airport (ICN) in South Korea, and Hazrat Shahjalal International Airport (DAC) in Bangladesh,” says Abadi.
As one of the fastest growing economies, India is definitely a market we have focussed on, says Alaina Shum, General Manager- Aviation Logistics, Airport Authority Hong Kong. According toShum, “Currently, there are over 170 flights operating weekly between HKIA and various destinations in India. HKIA will continue to enhance its capacity and capability in handling high-value added, temperature controlled cargo as a key business development strategy and support China-India route development.”
“India is Changi’s fifth largest cargo market, and was our fastest growing market with an 8 percent growth year-on-year,” says Lim Ching Kiat, Managing Director for Air Hub Development, Changi Airport Group. Singapore is currently connected to 18 cities across India, including three new links – Pune, Vijayawada, and Guwahati – that were established in 2018. Looking ahead, Kiat says, there is high growth potential for India due to its expansion of production activities. “With the boom in e-commerce and the rise of pharmaceuticals, India is regarded to be an emerging logistics hub. Due to our strategic geographical location and extensive air connectivity, Singapore is well positioned to be a conduit of South Asia-Southwest Pacific and South Asia-Southeast Asia cargo flows,” further says Kiat.
Liege Airport of Belgium has made a lot of efforts to establish itself as a gateway airport to India, says Steven Verhasselt, VP- Commercial, Liege Airport. “We believe in the Indian market; and the ‘Make in India’ policy, combined with the e-commerce boom, will definitely require more freighter capacity into this belly-hold dominated airfreight market. We are looking forward to direct connections between India and Liege. Until then, we know a lot of Indian cargo is already arriving and departing from Liege through our partners such as Qatar Cargo,” expresses Verhasselt.
How can India facilitate connectivity growth?
With the exception of external factors such as geography that are beyond control, stakeholders have the ability to influence many of the factors that enable achievement of greater air connectivity.
India can achieve greater air connectivity by focussing on the development of aviation infrastructure (such as airports) – attracting new investors and ensuring that enough capacity is created to accommodate the demand. Airlines need to continue establishing and building up their network to support linkages with the rest of the world. Besides, stakeholders should develop regulatory and economic frameworks which reflect the characteristics and needs of India, whilst at the same time, fosters air transport growth.
In January 2019, the centre unveiled its much-awaited draft National Air Cargo Policy, which seeks to make India among the top five air freight markets by 2025, besides creating air transport shipment hubs at all major airports over the next six years. The policy will encourage code sharing/inter-line agreements between foreign and Indian carriers. As per the document, the potential in the new markets needs to be explored with long-term infrastructure creation in order to sustain cargo growth in the next 10-15 years at least. The cargo policy also seeks to establish agreements between national carriers/ freighters and integrators to improve domestic connectivity as well as encourage the establishment of agreements between national and international carriers/freighters and other airline operators to provide access to key global cargo hubs.
Tulsi Nowlakha Mirchandaney, Managing Director, Blue Dart Aviation says that the vision of making air cargo transportation available to the masses at an affordable cost, and connecting every village to the national and global supply chain will provide an opportunity to all stakeholders to collaborate and innovate and to make a quantum leap to propel India’s air cargo sector to the next level and beyond. “There would be opportunities in infrastructure, inter-modal transportation across various modes, service innovation, and development of human resources and systems required for cutting-edge service delivery. The policies need to be fleshed out and executed by a steering body within given timelines,” further says Mirchandaney.
The underlying message, Mirchandaney observes, is that, air cargo must be available at an affordable cost with a high standard of service quality, and to make this possible, all stakeholders need to be committed to the larger vision beyond their individual interests, as it would benefit us all. While there are lessons to be learned from successful low-cost passenger airlines, air cargo need to innovate its own model in India, given our advantage of size, geography and demographics.
Future Forward
India became the world’s fastest growing domestic travel market for the 22nd time in a row recording a 26.6 per cent year-on-year growth in January 2017, according to IATA. India is witnessing a high-growth trajectory and set to become the third-largest aviation market in the world in terms of passengers by 2026. IATA also expects air passengers to double from 3.8 billion in 2016 to 7.2 billion by 2035.
All this augurs well for India and its growing domestic passengers. In fact, India replaced Japan to become the largest domestic aviation market globally. India recorded a total of 100 million domestic flyers in 2016 as compared to 97 million people who travelled by air in Japan during the same period.
Recognising the growing importance of the aviation sector, the Government has taken all possible measures to improve infrastructure and regional air connectivity in the country. The UDAN scheme seeks to promote regional connectivity by serving the un-served and under-served airports. Connecting Tier-II cities, pilgrim towns and historic places with the wider air routes is important for boosting tourism and business travel. While developing no frills and Greenfield airports, augmenting existing capacities, creating synergy between scheduled and non-scheduled airlines for better penetration and connectivity through collaborative efforts of the State and Central Governments is needed.
India’s air cargo industry has been growing steadily over the past few decades. The domestic cargo traffic registered a compound annual growth rate (CAGR) of 6.6 per cent over the period from 2007 to 2018 while international cargo traffic grew at 5.4 per cent during the same period. IATA expects the country’s air cargo to grow at 9 per cent over the next few years. Huned Gandhi, Managing Director, Air & Sea Logistics- Indian subcontinent, Dachser says, “The country’s air freight growth has been the fastest in the intra-Asian lanes. Today, there are many freighter operators serving the Indian market without being swayed by temporary headwinds, rather focussed on the long term growth potential of India.”
Globally, the air transport industry is highly dynamic and the story is no different in India. As markets evolve and customer demand changes, air cargo operators across the industry need to constantly review and update their operations and product offering to ensure that they continue to meet the market needs. Mirchandaney says, “Simplification, affordability and automation of the end-to-end supply chain processes will drive the undercurrents of the air cargo market in India.”
In the next five years, Gandhi believes, India will achieve top rank for global air freight growth, driven by higher efficiency resulting from improved processes backed by IT, greater reforms to promote exports and improved infrastructure providing the much needed tail wind for growth.
With above, a clear economic vision and a great system in place to tap into the huge potential that the Indian market offers, the country will emerge as an aviation hub not only in terms of increased air connectivity but also in terms of Maintenance, Repair and Overhaul (MRO) facilities and setting up of ancillary units.
