Knowledge report on Air Cargo industry in India and identifying solutions to transform the industry published by Auctus alongwith PHD Chambers

1. th
5 Air Cargo Summit
November
2019
Air Cargo
Industry Transformation
-Future Outlook

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TITLE Air Cargo Industry Transformation – Future Outlook
YEAR 2019
AUTHOR AUCTUS ADVISORS
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Table of Contents
1. Global Overview ........................................................................................................................8
1.1. Global Macroeconomic Context..........................................................................................8
1.2. Global Trade Scenario......................................................................................................13
1.3. Global Aviation Industry....................................................................................................18
2. Indian Macroeconomic Environment........................................................................................21
3. Indian Aviation Industry............................................................................................................23
3.1. Passenger Traffic .............................................................................................................23
3.2. Indian Air Cargo Market....................................................................................................26
4. Challenges in Air Cargo Industry .............................................................................................31
4.1. Capacity and Infrastructure Constraints............................................................................31
4.2. Capability..........................................................................................................................32
4.3. Connectivity for cargo.......................................................................................................32
4.4. Cost of air transport ..........................................................................................................33
5. Measures to ensure growth in air cargo...................................................................................34
5.1. Capacity Transformation...................................................................................................34
5.2. Process Transformation....................................................................................................35
5.3. Policy Transformation.......................................................................................................37

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1. Global Overview
1.1. Global Macroeconomic Context
The global economy is experiencing a synchronized slowdown which started in 2018. Global agencies
such as Moody, IMF and World Bank have downgraded their growth expectations for 2019 from the
3.5 per cent around 6 months back to 3 per cent. Figure 1.1 indicates that the growth slow-down
though seen in developed as well as developing countries, recently has been primarily due to the
emerging markets and developing countries. Within the developing countries, the slowdown is largely
due to minor recessions in stressed economies of Turkey, Argentina & Iran; and low GDP growth in
economies such as India and China
The slowdown is a consequence of a global slow-down in manufacturing and global trade due to
muted demand, higher trade barriers and rising global uncertainties; and idiosyncratic developments
in Asia and Euro area. The slump began with a slow-down in demand which then spread to supply-
side due to lower future growth expectations.
2.5
3.0
3.5
4.0
4.5
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Fig 1.1 World GDP growth
Source: IMF 2019
World G4
Forecast

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Spending on Machinery and Equipment witnessed minor de-growth in Q2 2019, the lowest level after
near zero growth rates in 2016. The slow-down in spending on capital goods coincides with the slow-
down in GDP growth indicating a supply-side slump.
A portion of the growth slump can be attributed to idiosyncratic developments in Asia and Euro area.
The automobile industry is contracting owing also to idiosyncratic shocks, such as disruptions from
new emission standards in the Euro area and Asia that have had durable effects. Consequently, trade
volume growth in the first half of 2019 is at 1 percent, the weakest level since 2012.
-2
-1
0
1
2
3
4
5
6
7
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
2015 2016 2017 2018 2019
Fig 1.2 Global Industrial Production & Trade
Source: IMF 2019
Industrial Production World trade volumes Manufacturing PMI: new orders
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Q1
FY15
Q2
FY15
Q3
FY15
Q4
FY15
Q1
FY16
Q2
FY16
Q3
FY16
Q4
FY16
Q1
FY17
Q2
FY17
Q3
FY17
Q4
FY17
Q1
FY18
Q2
FY18
Q3
FY18
Q4
FY18
Q1
FY19
Q2
FY19
Fig 1.3 Growth in spending on Machinery and Equipment
Source: IMF 2019

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As opposed to manufacturing, services have shown comparatively higher growth. The divergence in
the growth trend of manufacturing and services has continued for substantial period which creates a
risk of slow-down in manufacturing to extend to the services sector. US – China trade-war has been
a major contributor to the global trade uncertainties. In addition to the export pressure, China faces
an internal rationalization in the public debt which, combined, has led to a substantial growth slow-
down in China. For the United States, trade related uncertainty has had negative effects on
investment, but employment and consumption continue to be robust, buoyed also by policy stimulus.
In the euro area, growth has been downgraded due to weak exports, while Brexit-related uncertainty
continues to weaken growth in the United Kingdom. Some of the biggest downward revisions for
growth are for advanced economies in Asia, including Hong Kong Special Administrative Region,
Korea, and Singapore, a common factor being their exposure to slowing growth in China and spill-
over from US–China trade tensions.
A recovery in growth is expected in 2020, as forecasts expect the growth to be around 3.2 – 3.4 per
cent. But the reversal in growth trend would not be broad-based. Developed economies are expected
to continue the slump for an extended period and the revival would broadly be in the developing world
due to demand pick-up. Advanced economies are expected to deliver a muted growth of around 1.5
per cent in 2019 and 2020. On the contrary, emerging markets and developing economies are
expected to witness a revival in growth from the current levels of 3 – 3.2 per cent to around 4.2 – 4.6
per cent in 2020. The growth revival is expected to be driven by internal demand in the emerging
markets and developing countries. Countries such as Brazil, Mexico, India, Russia and Saudi Arabia
witnessed a marked drop in growth in 2019 relative to 2018 and are expected to perform better due
to strong internal demand playing out over the next year.
4.1%
7.2%
5.2%
1.7%
2.7%
1.6%
4.8%
3.6%
0.00%
2.00%
4.00%
6.00%
8.00%
Africa South Asia Southeast Asia North America South America Advanced
Economies
Developing
Economies
Total
Fig 1.4 Global GDP Growth Trend
Source: IMF 2019
2017 2018 2019 E 2022 E

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Downside risks to the outlook are elevated. Trade barriers and heightened geopolitical tensions,
including Brexit-related risks, could further disrupt supply chains and hamper confidence, investment,
and growth. Such tensions, as well as other domestic policy uncertainties, could negatively affect the
projected growth pickup in emerging market economies and the euro area. A realization of these risks
could lead to an abrupt shift in risk sentiment and expose financial vulnerabilities built up over years
of low interest rates. Low inflation in advanced economies could become entrenched and constrain
monetary policy space further into the future, limiting its effectiveness. The risks from climate change
are playing out now and will dramatically escalate in the future, if not urgently addressed. As policy
priorities go, undoing the trade barriers put in place with durable agreements and reining in
geopolitical tensions top the list. Such actions can significantly boost confidence, rejuvenate
investment, halt the slide in trade and manufacturing, and raise world growth.
US monetary policy, until 2018, indicated a revival of demand in the US which was expected to have
a positive impact on the global demand scenario. US Fed rate was consistently increased from 0.25
per cent in 2016 to 2.5 per cent in 2018 on the back on encouraging inflation. But positive demand
cycle in US has not had the expected impact on the global demand. Rather recent period has
witnessed a stabilization of inflation in US below the Fed target of 2 per cent. In the context of global
uncertainties, the Fed reduced the Fed rate in order to provide an impetus to the demand which hasn’t
seen the expected response. Inflation levels are still lower than the target 2 per cent level.
Some of this momentum, underpinned by a spectacular, pro-cyclical fiscal expansion, has shadowed
the weaker growth in other developed economies, especially in the Euro area. However, disruption
caused by factors including fiscal fade, restrictive trade policies and tighter financial conditions, can
lead to a classic cyclical growth slowdown to 2.2 – 2.3 per cent in 2020.
South East and South Asian regions remain on a relatively strong growth trajectory, amid robust
domestic demand conditions. Even though the South East Asian region showed strong growth, the
growth was dichotomous. India, Bangladesh and Bhutan delivered above average growth while the
economic outlook in Pakistan visibly deteriorated. Indian government has reduced corporate tax rate
for new companies in a move to revive the manufacturing SME sector which is already under immense
pressure due to low credit availability.
Chinese economy is losing its momentum as the trade war with US continues against market
expectations. Industrial Production growth hit the 17-year low in May 2019 and the investments
remain muted in spite of significant credit growth indicating economic issues. China is expected to
post growth of 6.3 per cent in 2019 due to escalating trade war with US and weak global demand and
is expected to decrease to 6 per cent in 2020.
European economy slowed down more than expected as consumer and business confidence
weakened; car production in Germany was disrupted by the introduction of new emission standards;

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investment dropped in Italy as sovereign spreads widened; and external demand, from emerging
Asia, softened. Additionally, muted global demand, domestic uncertainty due to Brexit and possible
intensification of US – EU trade disputes pose significant downside risks.
Economic activity in MENA is expected to pick up slightly in 2019. The pick-up would be fuelled by
Iran contracting yet again and Iraq rebounding strongly. However, the pick-up doesn’t come due to
structural improvements in the macro economy and hence the growth in 2020 is expected to be weak.
Growth in oil demand has been weak due weaker global output, majorly due to low production levels
in China. Overall, oil-exporting economies will be affected by an uncertain global oil market, while
weak global demand and political unrest are broader downside risks to the outlook. For Africa, the
slower-than-expected overall growth reflects ongoing global uncertainty, but increasingly comes from
domestic macroeconomic instability including poorly managed debt, inflation, and deficits; political
and regulatory uncertainty; and fragility that are having visible negative impacts on some African
economies.
Trade barriers and heightened geopolitical tensions, including Brexit-related risks, could further
disrupt supply chains and hamper confidence, investment, and growth. Such tensions, as well as
other domestic policy uncertainties, could negatively affect the projected growth pickup in emerging
market economies and the euro area. A realization of these risks could lead to an abrupt shift in risk
sentiment and expose financial vulnerabilities built up over years of low interest rates. Low inflation in
advanced economies could become entrenched and constrain monetary policy space further into the
future, limiting its effectiveness. The risks from climate change are playing out now and will
dramatically escalate in the future, if not urgently addressed. As policy priorities go, undoing the trade
barriers put in place with durable agreements and reining in geopolitical tensions top the list. Such
actions can significantly boost confidence, rejuvenate investment, halt the slide in trade and
manufacturing, and raise world growth. In its absence, and to fend off other risks to growth and raise
potential output, economic activity should be supported in a more balanced manner. Monetary policy
cannot be the only game in town and should be coupled with fiscal support where fiscal space is
available and where policy is not already too expansionary.
US Federal reserve and European bank have adopted an accommodative stance considering the
global economic weakness. Markets are optimistic regarding the US – China and US – EU trade
tensions which could be a good sign for the global economy, however, this optimism has been around
for long time now without any resolution of the impasse.

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1.2. Global Trade Scenario
Global trade has grown in-line with the world GDP since 2008 irrespective of the 15 per cent correction
in trade during the recent financial crisis which witnessed a much lesser correction in GDP. Historically
trade is known to grow a higher rate of around 1.25 – 1.5 times the GDP growth. But in the recent
years we see subdued growth primarily due to uncertainty in the global markets. Market uncertainty
is increasing due to the US – China trade war continuing without any signs of resolution, disruption in
supply chains in European region due to ongoing impasse of Brexit and lower global demand. US-
China trade war has resulted in China showing a current account deficit (CAD) after a long time due
to a steep drop in manufacturing in China.
World trade is in deceleration mode. After having recovered smartly from 1.3 per cent growth in 2016
to 4.5 per cent in 2017, the average growth in the volume of world exports and imports slowed to 2.8
per cent in 2018. The trade growth expectation for 2019 have been slashed by WTO in expectation
of continued global downturn. This is because the deceleration in trade growth has been sharp in
recent quarters. Data from the Netherlands Bureau for Economic Policy Analysis (CPB, 2019) show
quarterly growth rates (relative to the corresponding quarter of the previous year) fell from 1 per cent
in the third quarter of 2018 to -0.5 per cent in the fourth quarter and -0.2 per cent in the first quarter
of 2019. Though the sharp decline in trade points towards the developing trade tensions, the overall
deceleration of trade reflects a more generalized moderation of global demand, resulting in a loss of
growth momentum. The signs of a medium-term loss in the momentum of trade growth signals
persistent fragility in the post-GFC global economy.
80
90
100
110
120
130
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Fig 1.5 World GDP & Trade
Source: WTO
World merchandise trade volume
World real GDP at market exchange rates

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China has been the main loser from the heightened trade tensions. Imports by the United States of
Chinese goods fell from $52.2 billion in October 2018 to $31.2 billion in March 2019 (compared to
$38.3 billion a year earlier). The effect on the United States was much smaller in absolute terms, with
exports of the United States to China falling from $12.4 billion in March 2018 to $10.4 billion in March
2019. This is partly because China has been circumspect in responding to the measures adopted by
the United States Administration, given its own persisting dependence on external demand, even as
it seeks to rebalance growth away from exports and in favour of the domestic market and from
investment in favour of domestic consumption.
Though the trade tensions have been bilateral, the implications have been much wider since the
linkage of global value chains. China is a major exporter but also is a major importer of semi-finished
goods and raw materials. Thus, the decrease in exports has a corresponding impact on the countries
exporting such semi-finished goods and raw materials to China. Having said that, this has had a
positive impact on the economies which were competitors to China in the global market who have
gained market shares.
The growth trend of global trend shows higher volatility than GDP growth rate. The world witnessed
a partial recovery in 2017 but since then the synchronized downturn around the globe has forced
economies to look inwards while erecting barriers to trade to protect themselves from global negative
factors.
-1%
0%
1%
2%
2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2019 Q1
Fig 1.6 World Trade QoQ Change
Source: CPB World Trade Monitor

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“Escalating trade tensions and a slowing global economy have led WTO economists to sharply
downgrade their forecasts for trade growth in 2019 and 2020,” WTO said in a statement. Thus, the
trade growth projections have been cut to 1.2 per cent in FY19 from the earlier projection of 2.6 per
cent.
Due to rising trade barriers, the global trade situation has worsened over the last 2 years. An uptick
is expected in the global scenario in 2020 as the trade war concludes and there is clarity on the Brexit
situation. WTO has also cut the trade growth projection for FY20 but reduction in growth projection is
only 0.3 percentage points.
1%
2%
3%
4%
5%
6%
2011 2012 2013 2014 2015 2016 2017 2018 2019P 2020P
Fig 1.7 Growth Comparison between Trade & GDP
Source: IMF 2019, UNCTAD
Trade GDP
0
50
100
150
200
250
300
350
400
2005 2007 2009 2011 2013 2015 2017 2019
Fig 1.8 Index of global economic policy uncertainty
Source: IMF 2019
WTO recently
downgraded its trade
growth projection for
FY19 to 1.2% from
2.6% and for FY20 to
2.7% from 3%

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The global economy remains at a delicate juncture. Even if the threats discussed in the previous
section are thwarted, as assumed in the baseline, per capita growth is projected to stay below past
norms across most groups, except in sub-Saharan Africa, over the medium term. Moreover,
conditions are very challenging for a number of emerging market economies that need to adjust their
macroeconomic policies sharply. As discussed in the section on the Global Growth Outlook, the world
economy is confronting a diverse set of headwinds. These headwinds affect countries differently,
adding to idiosyncratic factors and varied cyclical positions, meaning that policy objectives and
priorities vary widely across countries. A common thread and the foremost priority, in many cases, is
to remove policy-induced uncertainty or threats to growth. Policy missteps at this juncture, such as a
no-deal Brexit or a further deepening of trade disputes, could severely undermine sentiment, growth,
and job creation and may exhaust policy space for avoidable reasons.
International trade contributes towards 87% of the international freight market. Since the dominant
driver of the international freight market has under-performed, the FTK has seen a steady drop in its
growth rate. The cargo growth has significantly reduced in the last 2 years impacting the weight load
factor of the airlines.
The trends of weakness in freight volumes is variable across regions. The most affected region was
Asia Pacific and Middle East. International FTKs flown by airlines based in APAC plunged by 7% YoY.
Middle Eastern carriers experienced a decrease in international FTKs to the extent of 2.7%. Airlines
in these regions have responded to the decline in freight demand partly through reducing capacity in
the market, measured in available freight tonne kilometres (AFTKs). AFTK was a meagre 0.3% in
APAC and 2% in Middle East. Globally, the AFTK slowed to just 2.4%% in May 2019 compared to
May 2018.
FTKs for the North American carrier are currently unchanged from their year-ago level due to the
increased domestic freight demand which in-turn was driven by the significant economic growth.
However, the international FTK declined by 3.3% YoY.
Fig 1.9 Contribution (YoY growth in FTK)
s

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Contrary to the global trend of decreasing cargo volume in the air cargo market, Africa and South
America posted 3% growth. However, both these regions, combined, only contribute to 4.2% of the
total FTK in the world.
The rate of decline in the world trade driven by global uncertainty and trade tensions and subsequent
slowdown in global GDP and hence air cargo, which is expected to intensify if the status quo persists,
indicates that the FTK might seek an early revival. From the recent G20 talks, US-China trade
negotiations are touted to head in a positive direction. This was also showcased by the end-June
announcement of President Trump cancelling the planned 25% tariff on an additional $300bn worth
of Chinese goods.
The Purchasing Manager’s Index, which has statistically shown a close relationship with FTK in past,
continued to be neutral on the trade growth expected in the future which could be indicate
maintenance of status quo and further deterioration of the situation.
-3.3%
3.1%
-7.8%
-1.5%
3.0%
-2.7%
0.3%
2.4%
11.2%
0.3%
3.7%
10.8%
2.0% 2.2%
-10%
-5%
0%
5%
10%
15%
Total Africa APAC Europe South America Middle East North America
Fig 1.10 FTK v ATK Growth Regionwise
Source: IATA
FTK ATK
Fig 1.11 Purchasing Manager’s Index
Source: ISM, SIPMM
Note: Purchasing Manager’s Index (PMI) is an index of prevailing direction of
economic trend as per surveys of purchasing managers in major private sector
companies

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1.3. Global Aviation Industry
Passenger Traffic
Over the past decade, global economy has improved substantially and airlines world over have
witnessed excellent demand growth. The passenger traffic growth has been muted in 2019 due to a
global synchronized slowdown. Historically, passenger traffic demand is dependent on the GDP
growth and a muted global GDP growth has resulted in lower passenger traffic demand. This
slowdown in demand is expected to be temporary and the demand is expected to revive with
economic revival. Air carriers too expect a revival of demand which can be deduced from the ever-
increasing order books for the airlines and reported record deliveries. Even banks and other financial
institutions have supported the growth by facilitating delivery of aircrafts.
As discussed earlier the global geo-political scenario is hurting the economic growth. US – China
trade war and departure of Britain from the European Union have led to increasing uncertainties in
the global economy leading to lower growth which is expected to have a negative impact on the
passenger traffic demand. IATA is predicting a 4 per cent traffic growth in 2019 against a 10 – year
average of 5.5 per cent in the last decade. The latest Economic Performance of the Airline Industry
report from the International Air Transport Association (IATA) has shown a slight cooling in passenger
demand. In 2018, demand measured in revenue per kilometre (RPK) grew by 6.5%, down from 8.0%
growth in 2017
US Fed was in a rising interest rate regime from 2016 to 2018. Higher interest rates result in higher
lease payments for air carriers and thus, airlines have been facing negative pressures on profitability.
These pressures have been balanced by increasing load factors for airlines across the globe. As the
aircraft deliveries continue while the passenger traffic demand slows down, the load factors have
remained constant leading to profitability pressure. In the context of global slow-down the market
expects the policy rates to reduce which would be positive from the airline perspective.
The IATA report mentions that the net post-tax profits of airlines are $32.3 bn for 2018 against $37.7
bn in 2017. Net margins too have dropped from 5 per cent in 2017 to 3.9 per cent in 2018. The drop-
in profitability is partly due to increase in crude oil prices compared to 2017 levels. Oil prices increased
significantly in 2018 peaking at US$86/bbl. (Brent Crude) in October but fell to US$55.63/ bbl. in late
December 2018. While the drop in the oil price during the fourth quarter of 2018 gave airlines a slight
reprieve Future expectation of crude prices is flat due decreasing demand of crude oil in developing
world; majorly China and India.
As the aviation market grows exponentially, airlines are beginning to witness scarcity of pilots and
skilled technicians. Labour costs are now considered a major risk for airline growth and profitability.

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The competitive scenario in the aviation market continues to intensify and difficult macroeconomic
environment has led to a slew of bankruptcies in Europe: Primera Air, VLM, Small Planet Airlines’
German and Polish units, Azur Airlines, SkyWork and Cobalt. UK regional carrier, Flybe has been put
up for sale. Icelandair has broken covenants and failed in a bid to acquire troubled Wow Air, which
may be acquired by Frontier parent, Indigo Partners. Norwegian too is continuing to struggle in the
competitive marketplace. Further consolidation is expected in the European market as a result. North
American airlines are doing well. Airlines in North America collectively reported profits of $16.6 bn
which amounts to $16.77 per passenger; highest among all regions. Competitive tensions are the
highest in the Middle east where airlines are competing for the same narrow market with low internal
demand to allow preferential access. In Asia, the traffic growth has been relatively higher than other
continents though the airlines have seen reduction in profitability due to rising fuel costs, lower yields
and intense competition.
The last decade has seen emergence close to 100 firms in the commercial operating leasing space.
A vast majority of the new entrants are attracted by the potential margins that operating leasing offers.
Though rising competition in the leasing space is leading to contraction in the margins. Chinese banks
have entered the operating leasing market which has increased the liquidity in the leasing market to
a great extent. The leasing business is primarily a spread business which is highly scale dependent.
Thus, there has been an uptick in the M&A activity in the leasing spectrum in a race to achieve higher
scale. Experts in the operating leasing business expect a consolidation in this space since highly
competitive leasing business is unsustainable. The recent rise in liquidity due Chinese entry into the
space has led to highly competitive leasing which is driving down the profitability of the business.
The present competitive scenario in the operating leasing market in favouring the airlines due to
resulting lower operational costs. But with consolidation in the leasing industry on the cards, higher
leasing costs may become an emerging risk for the airlines.
Air Cargo
Air freight grew slightly in 2018 compared with 2017. Buoyed by the global inventory restocking cycle,
industry-wide freight tonne kilometres (FTK) increased 9.7% in 2017. In 2018, FTK likewise grew, but
a mere 3.4%. This was in line with global trade volumes, which trended broadly sideways in the first
part of 2018 and contracted in the year’s fourth quarter. The lesser increase for air freight also
reflected the typical slowdown following an inventory rebuild. The second half of the year also saw
the industry face a number of headwinds. There was a moderation in world trade—a result in part of
the heightened trade tensions between the United States and China—and a deterioration in some
leading indicators, such as the new export orders component of the global Purchasing Managers

21. 20| A i r C a r g o S u m m i t - 2 0 1 9
Index. Having said that, not all air freight sectors were equally affected. E-commerce and
pharmaceuticals continued to perform strongly.
The rise of protectionist policies looms large over the sector and, indeed, over the global economy.
The prosperity that globalization generates and to which air cargo contributes is dependent on borders
that are open to people and trade. Demand for air cargo, though, is also affected by other elements.
These include the end of the business restocking cycle; weak global economic activity; the contraction
of the export order books of all major exporting nations, with the exception of the United States; and
wavering consumer confidence. And with most if not all of these elements in play, the macroeconomic
outlook has deteriorated such that global GDP and trade forecasts have been revised downward. The
greatest opportunities in air cargo are in e-commerce and special needs cargo, such as time- and
temperature-sensitive shipments. To capitalize, however, it is critical that air cargo modernizes its
processes significantly.

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2. Indian Macroeconomic Environment
India is the world’s fastest growing large economy which is expected to grow to US$ 10 trillion from
the present levels of US$ 2.3 trillion by 2032. India is expected to displace Germany as the world’s
fourth largest economy by 2022. India is projected to grow at a steep pace to such levels primarily
due to the its demographic potential.
After an excellent economic performance in 2017 – 18, the Indian growth engine has slowed down
due to global demand contraction, idiosyncratic corporate and environmental policy uncertainty and
concerns of health of the non-banking industry. India grew at 5 per cent in the June quarter which is
the lowest in 6 years. Industrial production contracted by 1.1 per cent in August, worst performance
in almost seven years. Though the crude prices are up from the levels a year back when India seemed
to be in a positive groove, the rise in prices is insignificant in comparison to the slowdown in economic
activity and does not explain the downturn. Most agencies have reduced their growth expectations for
India. World Bank reduced its growth projection for 2019 for India from 7.5% to 6%. IMF reduced its
projection from 7% to 6.1%. Moody’s forecasted the lowest growth at 5.8% for 2019. Even RBI
corrected its growth expectation to 6.1% for 2019. India’s growth is expected to witness an uptick in
growth in 2020 but would be lower than the earlier expectations. Markets are expected a expansionary
move from the RBI to provide a fillip to the growth but small decrease in repo rate would not go a long
way in correcting the situation since the banking institutions are not in a very good state and hence
the transfer of benefit to the economy would be marginal.
Today, India is one of the youngest nations in the world with more than 62% of its population in the
working age group (15-59 years), and more than 54% of its total population below 25 years of age.
Its population pyramid is expected to bulge across the 15-59 age group over the next decade. India's
labour force is expected to touch 160-170 million by 2020, based on rate of population growth,
increased labour force participation, and higher education enrolment, among other factors. In spite of
the potential for demographic dividend, India hasn’t been able to capitalize on its potential. There has
been no improvement in the unemployment numbers and the bigger question of under-employment
still haunts the Indian economy.
In all, India has a huge domestic market and an equally huge labour force and thus holds tremendous
potential to develop and evolve into a large developed economy. However, the potential has to be
realized without which the India remains the rising star only on paper.
In realizing the inherent potential of India, the government would be the vanguard of the
transformation of the economy. The government must realize the responsibility and diligently work
towards closing the inefficiencies in the developmental process. Recently, the RBI, acting on the

23. 22| A i r C a r g o S u m m i t - 2 0 1 9
recommendation of the Bimal Jalan committee, transferred INR 1.7 lac crore in surplus to the
government indicating a possibility of strong steps from the government to support the weakening
demand. As expected, Indian government reduced the corporate taxes to improve the ecosystem for
manufacturing SMEs to develop. This move is extremely controversial in the context of Raghuram
Rajan and Urjit Patel being against the transfer of surplus citing the need to restructure bank balance
sheets and improve economic stability.
Policy Making is an important aspect of governance and India’s bureaucracy has long been blamed
for red tape. Until now, the bureaucracy has left the private sector out of the policy making and
inclusive policy making can a step towards improving systemic efficiency. The recent NITI Aayog
report mentions – “Today, the rising complexity of the economy has meant that policy making is a
specialized activity” and therefore private participation in form of industry specialists would ensure
superior policy decisions.

24. 23| A i r C a r g o S u m m i t - 2 0 1 9
3. Indian Aviation Industry
3.1. Passenger Traffic
India is the fastest growing domestic aviation market in the world and has grown at a CAGR of 12.7%
for an extended period of 12 years from 2006 to 2018. India is witnessing a growth elasticity (ratio of
passenger traffic growth to GDP growth) of around 1.5 which is higher compared to China which has
a growth elasticity of around 1.3. The driver of high passenger traffic growth rates in India are rising
propensity to fly and reducing air travel costs.
The aviation market contributes extensively towards job creation by employing more than 450,000
people and supporting another 980,000 more in the supply chain. According to Invest India, aviation
market in India supports over 8 million people. Overall the industry contributes some US$ 40 billion
annually to India’s GDP.
It is the third largest domestic passenger market in the world and will overtake UK to become the third
largest aviation market by 2024. More than 300 million passengers were registered in 2018, which
was 16% higher than the previous year. This was the 4th straight year in which the growth was
registered in double digits.
From 2016 to 2019, the domestic passengers have grown at a rate of 12% and international
passengers have grown at a rate of 8.4%. Currently, domestic passengers are 4 times the
international passengers.
The key drivers of Indian air passenger demand are the increasing propensity to fly and improving
air travel affordability due to rising disposable incomes and decreasing air travel costs. These factors
are favourable and supportive of ongoing growth over the longer-term.
0
250
500
750
1000
2001 2004 2007 2010 2013 2016
MnPassengers
Fig 3.1 Air Passenger
Source: World Bank Air Traffic
China United Kingdom Indonesia India United States

25. 24| A i r C a r g o S u m m i t - 2 0 1 9
According to IATA, Indian aviation market will grow at 6.6% per year on average for the next 20 years
– the number of annual air passenger journeys is forecast to increase by more than 414 million over
the period, moving to over 570 million journeys in 2037.
Comparative analysis of air travel in major economies around the world indicates a relation between
the GDP per capita of an economy and the propensity to fly among the population. Even among
comparables, India has lower propensity to fly. Over the last decade, India has seen a rise in the
propensity to fly through two factors: approaching comparable economies and rising per capita
income.
Due to increasing share of LCCs and cut-through competition in the Indian aviation market, the ticket
prices have been continually falling. This has made flying more affordable for the middle class and
hence penetrating the middle class to provide a significant boost to aviation traffic growth. At the
current air travel fares, India is the cheapest country in the world in which to fly domestically.
89
106
122
116
122
139
169
206
243
275
41
43
47
51
55
59
65
69
-10%
-5%
0%
5%
10%
15%
20%
25%
0
100
200
300
400
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Fig 3.2 Passenger Traffic in India
Source: AAI, Auctus Analysis
Domestic International Domestic Growth International Growth
4.2
5.0
6.3 6.5
7.0 7.3
9.2
0
4
8
12
Malaysia India Turkey Indonesia Sweden South Africa Phillipines
AverageCost($/100km)
Fig 3.3 Air Ticket Affordability
Source: Kiwi.com

26. 25| A i r C a r g o S u m m i t - 2 0 1 9
India has over 460 airports and airstrips, of which 125 airports are completely owned by Airport
Authority of India, a statutory body of the Ministry of Civil Aviation (MoCA) in India. There are 17
scheduled airline operators and 100+ non-scheduled airline operators in the country. In the scheduled
airline segment, IndiGo leads the market with a of share of 40%, followed by Spice Jet and Air India
at 13% and 12% respectively. Jet Airways and Jet Lite combine held 17% of the market in FY 18 but
were recently taken off the market due to insolvency and bankruptcy proceedings.
In spite of grounding of a major airline, Indian domestic traffic grew at a healthy rate of 13.2% in FY
19 which clearly indicates the supply and demand resilience in the aviation market. The slot cleared
by Jet airways were taken up by the remaining major airlines like Indigo, Spice Jet and Go Air and
the new-comer – Vistara. In a credit strained economy and a losing making industry which only a few
years back has begun recovering it’s loses, putting up the added investment shows an intent to stay
invested and expand. From the demand perspective, grounding of Jet Airways came with its own
hiccups with significant impact on the passenger convenience. In spite of this inconveniences, the
traffic growth was surprisingly healthy which only re-iterates the resilience of the aviation sector.
41%
13%
13%
8%
19%
Fig 3.4 Indian Airlines Market Share
Source: DGCA
IndiGo
Spice Jet
Air India
Go Air
Vistara
Air Asia
Others (inc Jet)

27. 26| A i r C a r g o S u m m i t - 2 0 1 9
3.2. Indian Air Cargo Market
Air cargo handled at Indian airports grew by more than 40 times from 0.08 MMT (million metric tons)
in 1972-73 to 3.6 MMT in 2018-19. During the period 2013-14 to 2018-19, the volume accelerated
sharply and grew with a CAGR of around 10%.
Domestic cargo is under-developed in India due to higher transportation costs, inefficient cargo
management at the airports and the administrative effort involved. Thus, out of the total air cargo in
India, International cargo contributes 60% in volume terms. FY 19 growth rates of cargo are expected
to be low due to reduced trade due to global demand slowdown, uncertain economic environment
and trade tensions. International cargo grew at 15.6% in 2017-18, however the growth is expected to
drop to only 6% this year. Even the domestic cargo growth is expected to slow down to around 8%
due to grounding of Jet Airways.
The Air Cargo Industry is currently concentrated at the major airports with top 6 JV International
airports accounting for 78% of international cargo and 65% of domestic cargo by volume. Even within
the major airports, the operations are highly skewed towards Delhi and Mumbai. Delhi and Mumbai
process 57% of India’s air cargo combined. Indian air cargo volume stands at around 3.6 million MT
in FY19; however, this volume merely represents 2% of the global cargo volume which clearly
indicates the under-development in the cargo sector. Indian GDP size, domestic and international
trade volumes indicates huge unmet demand / potential for cargo traffic. Thus, major initiatives must
be undertaken the cargo sector to realize the potential. On the positive trend, Indian air cargo market
is increasing at a healthy rate of 17% per annum.
Despite the healthy growth, the volume of air cargo handled in India is significantly lower as compared
0.7
0.9
0.8
0.8
0.8
1.0
1.0
1.1
1.2
1.4
1.3
1.5
1.5
1.4
1.4
1.5
1.7
1.9
2.1
2.2
-10%
0%
10%
20%
30%
0
1
2
3
4
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Fig 3.5 Cargo traffic in India
Source: AAI, Auctus Analysis
Domestic International Domestic Growth International Growth

28. 27| A i r C a r g o S u m m i t - 2 0 1 9
to top airports in the world. As per Airports Council International (ACI), combined cargo handled by
all Indian airports is less than that handled by Hong Kong, Memphis and Shanghai airports individually
in the year 2017.
While the value of cargo shipped through air is 35% of the total market, this only represents only 1%
of the total cargo by volume. Roads still account for 65% and rail accounts for 30%.
The aviation logistics in the country today is confronted with serious issues like inordinate dwell times,
missing and non-traceable cargo, damaged cargo, lengthy cargo processing times and queues at the
cargo terminals, etc. The air cargo infrastructure in India has not been planned to keep in mind the
medium and long-term requirements and is woefully inadequate and overloaded. The existing
processes at the airports for cargo act as a stumbling block for growth of this industry. Comparison of
performance standards for some of the key parameters of Indian Air Cargo Industry with other
countries shows substantial gaps in the existing supply chain. Lack of enabling infrastructure, lack of
automated material handling systems, high manual intervention in the processes and inadequate
skilled manpower are some of the key areas where Indian air cargo industry lags global peers.
Recognizing the need to bolster the air cargo movement in India, the Government of India’s released
the National Air Cargo Policy Outline 2019 which envisages making Indian air cargo and logistics the
most efficient, seamless and cost and time effective globally by the end of the next decade.
The National Air Cargo Policy aims to make India one of the 5 largest air freight markets by 2025 by
making transport shipment hubs across multiple airports in the country. The policy outlines the
operational targets and strategic initiatives to achieve the goal making India the Top-5 air freight
markets by 2025. The policy mentions initiatives on the operational side to improve the cargo handling
29%
27%
12% 10%
5% 4%
13%
Fig 3.6 Indian Air Frieght Market Distribution
(Airport Wise)
Source: AAI
Delhi
Mumbai
Chennai
Bangalore
Kolkata
Hyderabad
Other

29. 28| A i r C a r g o S u m m i t - 2 0 1 9
at the airports and improving the processes and transparency of operations to reduce the shipment
delays and dwell times. Additionally, the policy recognizes the need of investment in the cargo
industry. On the strategic front, the policy mentions the express cargo opportunity and developing the
inter-model integration to ensure seamless flow of cargo.
While the passenger demand is extremely sensitive to the air fares, air cargo demand is relatively
inelastic and hence incremental air cargo demand can shape the airline profitability significantly. This
can be succinctly illustrated by the yield per weight metric: the yield per weight unit from cargo is more
than 10 times the yield per unit passenger weight. The airlines can improve their weight load factor
and monetize the space by carrying air freight and establish an effective cash cow for the business
operations. According to CARE, airlines should aim to accrue 25% of the total revenue from cargo
businesses.
Drivers of Air Cargo
Domestic cargo, Imports and exports have different drivers. Domestic cargo is a function of the overall
agricultural and industrial economic activity in the country, imports are a function of consumption in
the economy and the exchange rate while exports are a function of industrial activity in the country,
exchange rate and global demand. India functions as a part of the overall supply chain for many MNCs
and hence, imports and exports are not completely independent. Majorly in electronics industry, India
imports electronics to assembly the product and then export to demand destinations.
E-commerce
Mobile penetration is increasing exponentially in India and is expected to continue the growth
trajectory. Smartphone user in India have grown 5 times in the last 5 years and estimated to be around
350 million. Internet penetration has witnessed a similar growth strategy growing 2.5 times in the last
5 years which is estimated at around 500 million. Continuing growth trajectories are expected to result
in around 550 million smartphone users and internet penetration of around 850 million by 2025. Even
the online shoppers in India have shown immense growth and are currently estimated to be around
120 million. Online shoppers are expected to triple till 2025. Thus, e-commerce is set to grow
explosively in India in the coming years. Air cargo is an important leg in e-commerce deliveries since
a major chunk on intra-city deliveries are supported by air cargo due to insufficient and slow road /
rail transportation.
Tier 2 and 3 e-commerce deliveries are expected to contribute to around 60 per cent of online
shoppers in 2025. As India matures, road and rail transportation infrastructure are expected to
improve. Thus, Metro and Tier-1 deliveries may contribute a lower proportion of air cargo. On the

30. 29| A i r C a r g o S u m m i t - 2 0 1 9
contrary, at least for the next 20 – 30 years, Tier 2 and 3 deliveries would involve air cargo. Thus, e-
commerce is projected to expand to around 2 million metric ton by 2035.
Pharmaceuticals
The pharmaceuticals market in India is expected to reach more than $85 billion by 2020. Life Sciences
is one of the cornerstones of the Indian economy with exports growing at over 60% in FY‟17. India
has become one of the prominent global export hubs for pharmaceuticals with India-USA trade route
accounting for around 30% of the global pharma cargo traffic. With an aim to further tap the high value
pharmaceuticals cargo market, India developed its first integrated, on-airport perishable-cargo
handling centre, CoolPort at the Kempegowda International Airport in Bengaluru amidst increasing
controls and requirements of pharma shippers for their high-value shipments.
National Air Cargo Policy 2016
The National Civil Aviation Policy (NCAP) 2016 was launched by the Civil Aviation ministry. This is
the first time since independence that an integrated Civil Aviation Policy has been brought out by the
Ministry. The policy aims to take flying to the masses by making it affordable and convenient, establish
an integrated eco-system which will lead to significant growth of the civil aviation sector to promote
tourism, employment and balanced regional growth, enhance regional connectivity through fiscal
support and infrastructure development and enhance ease of doing business through deregulation,
simplified procedures and e-governance. The policy is very comprehensive and covers more than 22
areas.
The policy covers all three categories of air cargo transport - domestic cargo to ensure efficient flow
of goods across India; international cargo facilitating all indigenous export and import of goods; and
transit international cargo by making India the transit cargo hub of choice to and from other parts of
the globe. As per the policy, 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. It also aims to promote the development of a last mile/first mile connectivity
program at international/regional gateways, as per the document. The policy also aims to improve
process transparency to develop a fully automated paperless trade environment with minimum face-
to-face interactions to reduce shipment delays, costs and dwell time,

31. 30| A i r C a r g o S u m m i t - 2 0 1 9
As per NCAP 2016, the government has set a target to reach 10 million MT in cargo volume in India
by 2027 which was 12% year on year growth target in 2016. The next 2 years (2017 and 2018) have
shown double digit growth rate, albeit lower than the target 12%. This growth has been largely in-line
with the global growth in cargo movement as discussed in the earlier section. 2019 has been a mute
year in terms of cargo growth which validates the cargo growth dependence on external factors than
internal improvements. Thus, there has been little improvement in the cargo ecosystem in terms of
infrastructure & facilities, policy or operational efficiency which would be necessary to achieve the
target growth.
As of 2019, Indian air cargo traffic would have to increase at 13.6 per cent CAGR to achieve the
NCAP vision. With existing cargo ecosystem and expected economic environment, cargo is expected
to grow at 7% CAGR. A lower growth rate expectation originates from a muted global growth and
reduction in growth expectation in the global economy; and under-performing Indian manufacturing
sector. Recent taxation policy changes are expected to provide a fillip to the manufacturing SME
sector in India, but it is too early to comment on the materialization of the policy change.
In order to achieve the government target published in the NCAP, major steps would have to be taken
to improve the policy environment, grow and improve cargo facilities and infrastructure and develop
operational efficiencies.

32. 31| A i r C a r g o S u m m i t - 2 0 1 9
4. Challenges in Air Cargo Industry
4.1. Capacity and Infrastructure Constraints
Airline Capacity constraints: One of the biggest challenges faced by the e-retailers has been
insufficient cargo capacity for shipments via air which is leading to delayed deliveries in distant
markets. This is mainly due to lack of freighter jets and lower priority to belly cargo by passenger
airlines. There is need for airlines to relook at their freight strategy and develop plans to optimize belly
capacity.
Airport Capacity Constraints: Historically, airports have always been developed from passenger
standpoint of view, and thus requirement of cargo facility development has been relegated and
considered not important. Therefore, the entire logistics of cargo is woefully inadequate and poorly
managed area of the airport.
Cargo infrastructure at any airport is just not the cargo terminal building that houses the warehouse
but also the related facilities including special facilities for express freight, frozen foods, airmail, and
hazardous goods. It is essential to develop capabilities to handle all types of cargo. Further, quick
throughput of cargo requires
Connectivity
Cost
Capacity
Capability
Lack of connectivity
to smaller towns and
cities
Increased cost of
logistics due to use of
air cargo
Process inefficiency
leading to higher
dwell times
Lack of airport and
airline capacity

33. 32| A i r C a r g o S u m m i t - 2 0 1 9
specialized equipment, fast processes, truck parking and loading zones and separate access roads
for cargo vehicles. Today, lack of capacity is a major reason Indian air cargo industry is suffering from
high dwell time at international airports
Manpower Capacity Constraints: The logistics industry is facing a shortage of skilled workers able to
help meet complex supply chain challenges and sustain the industry’s growth rate, according to a
new report commissioned by the World Bank. Not only do logistics employers find it tough to recruit
good candidates for positions, but many existing employees are not sufficiently qualified, and this
skills shortage is likely to worsen in the absence of new initiatives One reason for the shortage is the
difficulty of competing with other industries for talented staff, in part because the pay is low, working
conditions are poor, and the industry’s reputation is not good. There needs to be a substantial
increase in the amount of time and resources devoted to logistics training at all levels.
4.2. Capability
Inefficient Processing & Lack of Automation: Inefficiencies are created in system due to involvement
of multiple procedures with lengthy processing times and long queues at the airports. Further, lack of
automation resulting in high manual intervention, inordinate dwell time, missing and untraceable
cargo. As per IATA, each cargo shipment on an average today carries around 30 types of document
and well over 100 copies thus resulting into significant documentation overheads, increased dwell
times and supply chain opaqueness. Therefore, certain systems/ processes such as automation and
digital platform are essential to capitalize on the technological advances to promote a hurdle free
system for movement of cargo.
Lack of transparency & governance: While the e-retailers and logistics players can provide
transparency at all other parts of the value chain, this transparency is completely lost once the
shipments are handed over to the airlines in cargo terminal. There is lack of capability in the airline/
airport system to record data providing a status regarding movement of goods. This furthers makes it
difficult to measure service quality at the airport.
4.3. Connectivity for cargo
Connectivity becomes important from e-commerce perspective where speed is of essence. With
faster customer delivery as the focus and top priority, air shipment connectivity to these locations is a
key requirement. As discussed earlier, Tier-2 and Tier-3 cities contribute to around 50 – 60% of the
orders on e-commerce. These cities do not lie in the service radius of existing fulfilment centres and
hence air connectivity to these cities becomes important. With increasing traffic on these routes, the
cargo potential would be set to increase

34. 33| A i r C a r g o S u m m i t - 2 0 1 9
4.4. Cost of air transport
Logistics capture a high share of the available margins to the players; representing 10 to 20% of the
overall value of the order, where gross margins range from 15 to 40%. Thus, optimization of logistics
and delivery cost is one of the key financial success parameters for the players Mode mix optimization
and modal shift from air to less expensive or perceived more environmentally friendly waterway or rail
transport has been occurring for some years. Freight forwarders offer more air/sea, air/road or air/rail
products that combine to create price and total shipment time flexibility. Today its railways, tomorrow
it will be waterways and emerging technologies such as hyperloop. With the introduction of GST, road
travel has become more attractive as local taxes have been abolished. But it also presents a unique
opportunity for air cargo as ease of doing business increases and so does the potential for
digitalization.

35. 34| A i r C a r g o S u m m i t - 2 0 1 9
5. Measures to ensure growth in air cargo
5.1. Capacity Transformation
Capacity transformation needs to be undertaken by all stakeholders in the ecosystem, such as
airlines, airports and manpower, so as to create a conducive environment for cargo growth.
Airlines
Airlines have been concentrating on the passenger traffic growth, and rightly so since the passenger
traffic growth has been explosive in the past decade. But as Indian aviation market matures and with
airlines having developed the experience to manage high growth, should shift focus towards cargo
traffic. Presently, most of the cargo movement is belly-hold cargo. Airlines would have to optimize
their belly-hold cargo capacity and increase cargo carriers on their fleets to support the cargo growth.
These developments are expected to bring down the air transportation costs which would certainly
provide an impetus to cargo growth.
In FY 2019, SpiceJet declared that it would commence cargo operations on domestic and international
routes and plans to add freighters to its fleet. On the contrary, Indigo is planning to increase
perishables cargo through belly-hold capacity optimization. Focused cargo capacity development by
leading Indian LCCs is certainly a good development on the Airline capacity front.
Peripheral Infrastructure
Development of Cargo Villages
Secondary infrastructure, linked to air cargo terminals, should be developed in order to ease the
pressure on cargo terminals. Some of the processes at the cargo terminals can be managed at the
secondary facility to strike a balance between the two entities. Such facilities can improve the
operating efficiency of the process by clear division of labour.
Cargo villages are defined as logistics centres, where the cargo from different transport modes can
be reloaded, compiled and prepared for transportation. Such cargo villages create an integrated
logistic ecosystem by bringing together different transport modes (road, rail, air), transport companies
(freight forwarders, warehousing), supplementary transport service (vehicle services, consultancy
services) as well as industrial and trading companies. The spatial proximity promotes cooperation and
division of labour of the enterprises on site enabling increased efficiency and reduced costs.

36. 35| A i r C a r g o S u m m i t - 2 0 1 9
Skill development
The growth of Air Cargo in the country risks being hamstrung by the shortage of appropriate skills
required in the complex supply chain. The manpower crunch has twin implications – it raises the cost
of operations on the one hand and on the other, has safety 29 implications as well. It is, therefore,
pertinent to address these shortages on priority. There needs to be a substantial increase in the
amount of time and resources devoted to logistics training at all levels. Government should create
necessary eco-system and architecture for ensuring full utilization of skill development capacities of
the institutes under the control of Government / Public Sector Undertaking. It should consider setting
up new universities either by itself or through PPP to bridge the skill deficit.
5.2. Process Transformation
Implementation of Single Window System
Single window system is a platform where all stakeholders can update the shipment details and
clearance papers at a single point. This system will eliminate the duplicate data entry, reduce
paperwork by giving authorised access of data to relevant supply chain stakeholders. However,
except customs and FSSAI other ancillary regulatory authorities (Drug controller, WCCB, plant and
animal quarantine departments etc.) do not have required skills, hardware and software capabilities
to implement the Single window system. Therefore, all the stakeholders should meet all the
requirements of single window system to reap its real benefits. Also, the success of the Single window
system depends on the effectiveness of Electronic Data Interchange (EDI) system. Therefore, to get
away with human interface between officials and agents, Single window system should be fully
integrated with EDI system.
Upgradation of EDI system
Electronic data interchange was implemented in import-export cargo process to move to paperless
environment. The objective of EDI system was to transmit 10 import and 7 export messages
electronically. In spite the introduction of this system from past 16 years in air cargo industry,
custodian still manually sends import-export messages to the customs in form of hard copy. Also,
there is a frequent breakdown of EDI system which leads not only to high dwell time but also to high
transaction cost. For instance, EDI system broke down at least 5-6 times a month at IGIA, Delhi with
minimum delay of 5-6 hours to maximum of 75 hours. Therefore, there is an urgent need for improving
the IT infrastructure of the air cargo process to remove the hurdles in the custom process.

37. 36| A i r C a r g o S u m m i t - 2 0 1 9
Central KYC & Onetime registration
Authorized dealer code is 14- digit code that is received by the importer/exporter from the bank against
the current account opened for import-export transactions. Under the current process, the importer/
exporter registers at each airport terminal for AD code for custom clearance of goods. This makes the
custom process cumbersome and time consuming. With the centralised EDI system, AD code
registration process should also be centralised and integrated in the EDI system. The centralised AD
code will be acceptable at all the airports of the country. This system will avoid the requirement of
multiple registrations by importer/exporter, thus, reducing the dwell time and making the business
operations smoother.
Additionally, Import-export transhipment cargo is the shipment of cargo to intermediate airports
between the origin and destination airport. To ensure that TP cargo reaches safely to its destination,
bond with bank guarantee is executed by the airline carriers engaged for the transhipment of cargo.
In the current process, airline carriers file for separate bonds at each station and custom offices
maintain separate registers for the
same. This system amounts to huge transaction cost and inconvenience to both airline carriers and
customs. There should be single nationalised running mother bond which will save the time and efforts
of both the stakeholders. Further, transhipment cargo is under the custody of Custodian, therefore,
the need of bank guarantee should be waived off.
24x7 availability of stakeholders
To reduce high dwell time of import and export cargo and make air cargo at par with international
standards, AAI initiated 24x7 customs clearance of import-export cargo at 13 airports. All the
stakeholders were required to work 24X7 for clearance and release of import-export cargo. But,
reduction in dwell time at airports imposed without having the correct infrastructure for allied agencies
to be present has resulted in higher costs and delays for the EXIM trade. There are still some
stakeholders who are not working 24X7 thus, creating a hurdle in the smooth operations of cargo
process. There is acute shortage of Custom officers at airports such as Mumbai, Bangalore and
Chennai.
To ensure the working of 24x7 custom clearance process CBEC need to issue necessary notification
regarding the same with 24X7 import-export cargo transportation within the city and between airport
and importer-exporter. There should be no daytime restrictions of movement of cargo loaded vehicle
in the city.

38. 37| A i r C a r g o S u m m i t - 2 0 1 9
In addition to it, 2nd Saturdays are holidays at customs followed by Sunday, thus creating export load
problem for airline carriers. Therefore, for the smooth operations of airlines, six days a week policy
should be initiated to promote export cargo. Custodian is responsible for the correct of import cargo
given out of charge by customs. Therefore, role of custom gate officer should be dispensed to avoid
the overlapping of duties.
Tech-enablement of process
Tech-enables processes would be efficient from a process operation perspective and planning
perspective. Each cargo shipment today carries ~30 types of document and well over 100 copies
resulting into significant documentation overheads, increased dwell times and supply chain
opaqueness. Therefore, digitalization and automation are essential to capitalize on technological
advances to promote a hurdle free system. E-AWB penetration has been increasing in India and
further penetration would improve the process efficiency substantially.
From a planning perspective, a data base needs to be created that monitors the cargo operations.
Today there exist a plethora of analytical tools that would help in identifying the problems in the
existing processes. Proper performance measurement system is the first step towards employing
analytical tools for cargo development. Further, machine learning algorithms can help with predictive
planning and ensure facility readiness to improve operational efficiency.
5.3. Policy Transformation
Industry Status for Air Cargo
The air cargo logistics sector in India has not been accorded any industry status and presently it is
being handled by multiple Ministries at the centre such as Ministry of Civil aviation, Ministry of roads,
Ministry of Commerce & Industry etc. The lack of industry status poses problems for the stakeholder
from freight forwarders/ integrators to Cargo terminal operators/ air express operators who find it
difficult to raise funds through organized banking or financial channels. Therefore, it is virtually
impossible for them to invest in modern equipment and technology to increase efficiency and reduce
transportation costs.
Thus, providing industry status to Air Cargo logistics sector would assist in the development of the
sector and bring down the current logistics costs. Further, it would facilitate easier access to finance
through availability of organized financing. Additionally, investment in air cargo would then be able to
access various government benefits and incentives. Therefore, Government should consider the long
pending demand of air cargo industry to grant it industry status along the lines already in place for
other modes of transport.

39. 38| A i r C a r g o S u m m i t - 2 0 1 9
Dedicated National Policy for Air Cargo
The draft policy for air cargo was shared by the government and finalization of the same must be
expedited. In the context of the global uncertainty, clarity on the policy would enable cargo growth in
India. Additionally, there is a need to develop a larger warehousing and logistics policy for India and
link it with the air cargo policy to enable seamless multi-modal cargo movement. The final policy
should cover the following aspects:
➢ The policy should aim at developing at least four international cargo hubs in India with the
vision to achieve 10 million tons of cargo throughput till 2027.
➢ Development of a single body for development of Air Freight Stations and Villages.
➢ Incentivize freighter operations to Tier-2/3 cities through a scheme similar to the RCS scheme
for passenger connectivity thereby boosting development of a wide cargo network.
➢ To establish processes to identify key benchmarks of service level across the entire supply
chain which should be monitored and standards which should be complied with.
➢ Policy to promote the vision for a 24x7 import-export cargo operating model with identification
of necessary steps to allow smooth transportation of cargo within the city and between airport
and importer-exporter.
➢ To reduce dwell times and increase smooth movement of cargo, government should set up
single window system which is fully integrated with the EDI system for all custom approvals
➢ Policy shall actively promote and facilitate aviation cargo education and training infrastructure
to ensure availability of adequate number of skilled/trained personnel at all levels for meeting
the growing needs of the industry.

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