Flying high or facing headwinds: Future of Indian air cargo

The Indian air cargo market is at a pivotal moment, balancing growth potential with challenges. Projections estimate annual growth of 6-9 percent for the next five years, driven by a booming economy, expanding manufacturing base, and growing trade. Yet, the sector faces infrastructure bottlenecks, regulatory hurdles, and global economic uncertainties that could hinder its trajectory.

India’s air cargo sector is emerging as a global leader propelled by economic expansion and strategic policy initiatives. Indian air cargo outperformed overall world air cargo growth in 2024, with international traffic growing at 19 percent compared to a global average of 13 percent, according to the India Air Cargo Outlook 2025-2029 report by Trade Data Service of Trade and Transport group published in January 2025.

The report also projects Indian air cargo to grow annually by 6 to 9 percent for the next five years and handle between 5 and 5.8 million tonnes of annual cargo by the end of 2029 compared to 3.7 million tonnes today.

"Strong expected economic and trade growth is likely to drive additional air cargo volumes over the next five years. We expect the Indian air cargo market to outperform the overall global air cargo market," it reads.

Glyn Hughes, Director General of The International Air Cargo Association (TIACA), attributes this growth to a combination of factors including strong expansion of the manufacturing sector and continued success in high-tech, pharmaceuticals, aerospace, automotive and perishable exports. “India is also expected to be a significant beneficiary of an accelerated China plus One production strategy that could result following the promised introduction of further tariffs on Chinese imports by incoming US President Donald Trump,” Hughes explained.

“Manufacturing prowess that India has developed is gaining significant strides and we can witness the growth in the electronics industry.”
Ruby Abidi, cargo-partner

India’s electronics sector exemplifies this trajectory. Electronic exports jumped 27 percent to $22 billion in April-November of 2024-25, from $17 billion during the same period in 2023-24. Ruby Abidi, Director of Air Cargo at cargo-partner, credits government initiatives like Make in India and the Production Linked Incentive (PLI) scheme for these advancements. “The manufacturing prowess that India has developed is gaining strides,” she said.

On the same line, Anupama Kachhap, Head of Commercial, Worldwide Flight Services (WFS), confirmed that India has seen a rise in electronics manufacturing, “with companies like Samsung, Apple, and Xiaomi setting up factories.” “These types of exports need to be shipped globally within tight deadlines and securely, making air cargo a preferred mode of transportation,” she said.

Adding to these, Jagannarayan Padmanabhan, Senior Director & Global Head – Consulting at CRISIL, emphasised the role of geopolitical shifts. “The Red Sea crisis and other maritime disruptions have shifted some cargo from sea to air, further boosting India’s air cargo volumes,” he observed.

"International cargo volumes have increased by 18 and 19 percent YoY during H2 FY2024 and 8M FY2025 respectively and are expected to increase by a further 11 to 13 percent YoY to touch new highs in FY2025."
Vinay Kumar G, ICRA

Vinay Kumar G, Vice President & Sector Head - Corporate Ratings at ICRA, explained this impact of the Red Sea crisis and pointed out that the international cargo volumes have increased by 18 and 19 percent YoY during H2 FY2024 and eight months of FY2025 respectively and are expected to increase by a further 11 to 13 percent YoY to touch new highs in FY2025.

“The international cargo volumes have seen a muted YoY rise of 1 percent in H1 FY2024 on the back of the slowdown in the global economy and geo-political conflicts. However, the international cargo volumes have seen a healthy expansion of 18 percent in H2 FY2024, amid the Red Sea crisis, which started in October 2023,” he said.

For instance, Kempegowda International Airport Bengaluru (BLR Airport) reported its highest-ever annual cargo tonnage of 496,227 tonnes, during the calendar year 2024 (CY 2024), a 17 percent increase compared to CY 2023. International cargo saw a 23 percent growth at the airport driven by increased demand for perishables, spare parts, engineering goods, and e-commerce shipments while domestic cargo volumes increased by 9 percent.

“Logistics hubs, airports, and warehouses were stretched to their limits, and many processes had to shift offline, ushering a surge of manual intervention and lack of transparency."
Joyce Tai, Freightos

The Indian air cargo sector has been through a lot recently, but it's emerging stronger than ever. According to Joyce Tai, EVP Worldwide Partnerships, Freightos, what India saw in 2024 was “a perfect storm of challenges: geopolitical tensions, Red Sea diversions, supply chain disruptions, and a massive spike in demand that caught everyone off guard.”

“For example,” she said, “airfreight rates jumped 180 percent from January to February last year. That kind of volatility can be tough to manage, especially when there's an inconsistency of rates, and track and trace information.”

“Logistics hubs, airports, and warehouses were stretched to their limits, and many processes had to shift offline, ushering a surge of manual intervention and lack of transparency that led to delays and uncertainties regarding the total cost of ownership for overseas importers,” Tai added.

“Our unrivalled network from India to overseas destinations, often from Tier 2 cities, means we have a unique network, frequency and product offering.”
Mark Sutch, IndiGo

Following these trends, IndiGo, the biggest airline in India by market share, has reported the intention to grow cargo volumes on both domestic as well as international routes.

IndiGo has an extensive domestic network of 88 stations, accepts cargo in 66 destinations and serves many Tier 2 and Tier 3 cities. Mark Sutch, Chief Commercial Officer - Cargo of IndiGo informed that most of their cargo flows are between Tier 1 cities and then Tier 1 to Tier 2 cities.

“We are always looking to grow our volumes and capacities in Tier 2 to Tier 3 cities. We do target this and intend to put more focus on this area to grow incremental volumes in 2025,” he also added.

International operations are a key growth strategy for IndiGo – both point of sales (POS) ex India and POS into India, informs Sutch.

IndiGo operates a majority narrow body passenger fleet which means they are very sensitive to passenger load when it comes to available cargo capacity. Also, Sutch notes that they are not currently in the palletised cargo space even though they compete head-to-head on all routes. “Therefore there are certain commodities and shippers that will not use IndiGo for cargo operations,” he said.

“Our unrivalled network from India to overseas destinations, often from Tier 2 cities, means we have a unique network, frequency and product offering,” he added.

“90% of India’s air cargo is handled through 6 airports. That is a far greater degree of concentration than in markets like the US or China which creates bottlenecks and limits scalability.”
Frederic Horst, Trade and Transport Group

Overreliance on key airports, belly capacity
However, this growth is not without its challenges. International traffic constitutes two-thirds of the total volumes handled at Indian airports, underscoring the need for balanced development of both domestic and international cargo handling capabilities. The Indian air cargo sector faces structural challenges that could constrain its potential. Even while IndiGo intends to focus on Tier 2 cities, a key concern is the over-reliance on a few major airports. Currently, 90 percent of Indian air cargo is handled at six airports, a level of concentration that risks creating bottlenecks as volumes rise.

Frederic Horst, Managing Director of Trade and Transport Group, points out the scalability risks. “This creates bottlenecks and limits scalability,” Horst warned, adding that diversifying cargo handling capabilities across more locations would mitigate this risk.

The sector’s dependence on belly capacity over dedicated freighters is another critical issue. The Trade Data Service report highlights this as a unique feature of the Indian air cargo market, noting that while narrowbody aircraft generally carry little freight in other markets, Indian operations average 2-3 tonnes per flight.

“India’s reliance on foreign-registered freighters could pose a risk if these assets are redeployed elsewhere for higher returns.”
Glyn Hughes, TIACA

Hughes elaborated on the risks tied to this dependency. “India’s reliance on foreign-registered freighters could pose a risk if these assets are redeployed elsewhere for higher returns,” he cautioned.

He also stressed the need for Indian carriers to expand their widebody freighter fleets. “The lack of Indian registered wide-bodied freighters means that over the next five years, the Indian exporters will be relying on mostly foreign registered freighters,” said Hughes.

"The belly freight cargo has traditionally been cheaper and hence helped the airlines to compete with pure freighters, if the competitive intensity increases, this could prompt freighters to drop their prices."
Jagannarayan Padmanabhan, CRISIL

Padmanabhan of CRISIL highlighted a different dimension of increased capacity and his concern about the competition, freight prices and yields in the market. “The belly freight cargo has traditionally been cheaper and hence helped the airlines to compete with pure freighters, if the competitive intensity increases, this could prompt freighters to drop their prices,” he said.

Meanwhile, Abidi emphasised financial sustainability, warning of overcapacity risks. “Heavy investment in expanding infrastructure without aligning with demand projections could lead to lower profitability,” she explained, adding that strategic partnerships between airports and logistics operators could offset these risks.

“To succeed, stakeholders must manage these risks carefully, invest in technology and infrastructure, and align their strategies with global trends in trade, sustainability, and logistics innovation.”
Anupama Kachhap, WFS

On the same line, Kachhap noted that investing in cargo operations presents substantial opportunities for Indian airlines and airports, especially in terms of revenue diversification, tapping into growing e-commerce demand, and expanding export potential. “However,” she said, “These opportunities come with risks such as high operational costs, market volatility, and regulatory challenges.

“To succeed, stakeholders must manage these risks carefully, invest in technology and infrastructure, and align their strategies with global trends in trade, sustainability, and logistics innovation,” she added.

Geopolitical conflicts and economic slowdowns can also cause fluctuations in demand for air transport services, impacting overall growth rates.

“The growing demand for fast, reliable deliveries has opened opportunities for value-added services and optimised supply chain solutions.”
Arun Chandra, Bangalore International Airport

While short-term disruptions may arise, analysts remain optimistic about the long-term outlook, pointed out Arun Chandra, Vice President - Aviation Business, Bangalore International Airport (BIAL), provided that key demand drivers—such as e-commerce—continue to gain strength despite global uncertainties.

“India’s diversified trade base and growing domestic demand further cushion the impact of these challenges,” he said.

Chandra also informed that at BLR Airport, they have consistently observed a surge in e-commerce-driven cargo.

“The growing demand for fast, reliable deliveries has opened opportunities for value-added services and optimised supply chain solutions,” he added.

Padmanabhan also supported this notion. “Air cargo’s role in the e-commerce ecosystem has created opportunities for revenue growth." He pointed out BLR Airport’s dedicated express cargo terminal to exemplify this shift, supporting next-day deliveries to Tier 2 and Tier 3 cities.

Adding to this, he noted that many airports in the country have realised the revenue potential of air cargo and have adopted region-specific and sector/product-specific strategies. "Hyderabad Airport Pharma Zone has increased its focus on pharma exports by establishing a temp-controlled infrastructure. Similarly, Ahmedabad Airport has focused on textile and jewellery export by creating a special zone for handling fragile goods while Mumbai Airport has focused on high-density cargo and hub operations with initiatives like automated storage and retrieval system."

Indian air cargo by 2029
The Indian air cargo sector stands at a crossroads. Its potential is undeniable, with projections indicating annual growth of 6-9 percent driven by expanding trade, e-commerce, and manufacturing. However, the journey ahead is fraught with challenges. By addressing structural gaps and embracing forward-looking strategies, the sector can reinforce its position as a cornerstone of global logistics, ensuring sustained growth and global competitiveness for years to come.

As Glyn Hughes aptly summarised, “We must continue to be agile so that we may respond successfully to whatever prevailing conditions present.”

The article was originally published in the January 2025 issue of The STAT Trade Times.