Airlines Bet Big On Cargo Ops

According to data from the Airports Authority of India, all operational airports handled 3.14 million tonnes of freight in 2021-22, or 94% of freight handled in 2017-18, while air passenger traffic at 85.1 million was 69% of the traffic recorded in FY18.

The dedicated freighter fleet is set to increase with IndiGo, SpiceJet, Air India Express and Bluedart looking to induct more aircraft. New cargo-only airlines, such as QuikJet and Pradhan Express, are also set to enter the fray.

“The pandemic accentuated the potential of the CarGo business for us as it provided revenues in the absence of normal scheduled commercial flight operations within India and internationally," an IndiGo spokesperson said. The airline has now initiated a proper freighter programme after using its passenger aircraft for cargo operations during covid. The carrier is in the process of converting 4 A321CEO to freighters with a capacity of 25-27 tonnes. The first of this lot is expected to be delivered this month, he added. IndiGo will cater to cargo markets between China and the Gulf, and the Commonwealth of Independent States (CIS) countries.

Low-cost carrier SpiceJet has been one step ahead in the cargo space. While SpiceJet reported a net loss of ₹1,725 crore in FY22, its cargo and logistics arm SpiceXpress reported a net profit of ₹46 crore. The airline’s freighter fleet has four aircraft comprising 737-700 and 737-800 freighters. It plans to induct eight more 737-800 freighters within one year.

“We feel that the cargo business is in a continuous growth phase. We are in talks to induct a wide-body freighter during the next one year," a SpiceJet spokesperson said.

Dedicated cargo airline Pradhaan Air Express, which received its first converted A320 freighter aircraft, is seeking to increase the fleet size to four by next year. QuikJet is expected to reenter the air cargo market by October and has already taken its first aircraft, a Boeing 737, for commencing operations.

The trend also coincides with air cargo operations in the Asia-Pacific region. Data from International Air Transport Association (IATA) showed the capacity for cargo operations in Asia-Pacific grew 2.7% from a year ago. In fact, despite external headwinds, the cargo load factor was globally the highest, at 56.3%, for airlines operating in the Asia Pacific for July.

In the near term, the air cargo segment in India could face some concerns over the conflict in Ukraine, low levels of trade and manufacturing due to covid-related restrictions in China, and inflation, an analyst said, seeking anonymity. But, the long-term challenge for India’s air cargo sector will be the lack of wide-body aircraft operations, said Murali Ramachandran, chief executive of Celebi Aviation.

Until airlines in India have a large fleet of wide-body aircraft with big belly space to build hub-and-spoke capability, it will be slow and steady growth as the airlines here primarily operate via narrow-body aircraft that can operate on short routes, Ramachandran said. “If Air India invests in a large fleet of wide-body aircraft, it may change the ecosystem substantially," he added.

In FY20, around 25% of the trade in India by value terms, or $155 billion of goods, was ferried by air. This compares with the global average of 35%. Indian carriers only captured around 16.5% of international cargo volumes to and from India, according to CAPA India. “Although there may not be structural shifts in the near-medium term, there are significant opportunities for Indian carriers, especially on long-haul international routes as well as on domestic routes, if they invest in understanding the market," CAPA India said at a cargo webinar. In an attempt to boost the air cargo industry, the Centre plans to establish 33 new domestic cargo terminals by 2024-25, besides increasing air transportation of agricultural products via Krishi UDAN. Now, India has 21 international and 35 domestic cargo terminals.