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At a recent conclave of air cargo CEOs in Chennai, a pharma exporter observed that Indian freight forwarders were nothing more than booking agents since they couldn’t offer guaranteed rates for a given period, unlike their counterparts in other exporting markets.
His words took the audience by surprise, but he had a valid point since fluctuating air freights put Indian exporters at a disadvantage vis-a-vis the competition.
The freight forwarders’ defence was that they have no option since the rates are quoted by foreign airlines, who decide on the available capacity.
A speaker representing a foreign airline confirmed that they are forced to juggle capacity between one country and another in pursuit of the highest yield, leading to rate volatility.
The geopolitical crisis that has hit maritime carriage through the Red Sea has pushed up India’s demand for air cargo capacity, where almost 90 per cent is controlled by foreign airlines.
Unrealistic goal
At yet another meet in Bengaluru, experts pitched for converting India’s major gateways into transshipment cargo hubs. There were references to the airports in West Asia and the Far East that flourished as major transshipment hubs for air cargo.
While the aspirations of the industry are laudable, the reality is vastly different. A country can host transshipment hubs only if it has at least one ‘anchor’ airline that operates across the globe.
Foreign airlines such as Emirates, Qatar, Turkish and Cathay Pacific that operate in India do not have a sizeable home market but boast a large fleet and capacity that far exceeds their country’s needs. They effectively use the sixth freedom traffic right (commercial aviation right of an airline to carry load from one foreign country to another with a stopover in its home country) and gain the most.
India, on the other hand, does not have even a single airline that’s comparable to these foreign carriers in size.
Lost time
Foreign airlines benefit from the fact that India has failed to build its air cargo capacity. In the early 1990s, India adopted an open sky policy for cargo to support exports and develop its own capacity. Though foreign airlines tapped the opportunity, the country failed to build its capacity simultaneously.
To counter the exploitation of market conditions during the Covid-19 pandemic, a government circular restricted the open sky policy to six gateway airports. However, this has since been relaxed to deal with the ensuing capacity crunch.
Two Indian operators are reported to have placed big orders for aircraft. The belly capacity of passenger airlines is no match for the freighter capacities of foreign airlines.
Building capacity
The Tamil saying ‘Yanaipasikku cholapori’ — offering popcorn to a hungry elephant — comes to mind when one considers the prospect of relying on the belly capacity of passenger airlines to ferry the estimated 10-million-tonne air cargo generated by the country’s anticipated $5-trillion economy by 2030.
Globally there is a growing demand for freighter aircraft and P2F (passenger-to-freight) operations. There is no better time than now for the country to augment its freighter cargo capacity to reach at least 50-60 per cent of the required capacity. Self-reliance is the way forward to end the excessive dependence on foreign airlines for air cargo capacity.
(The writer is founder and COO of Tirwin Management Services, Chennai)
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