Air cargo plays a unique role in global trade. While ocean freight moves nearly 99% of world trade by volume, dominated by low-value bulk commodities like oil, ores, and grains, air freight carries less than 1%. Yet, it accounts for almost 35% of trade value, serving as the backbone for perishable, high-value, and time-sensitive goods.

Air cargo growth has historically underperformed as compared to the more relatable passenger numbers in India. There is structural dependence on the limited “cheap” belly and the regulatory and policy bottlenecks have constrained the cargo volume growth. 

But there is light at the end of the policy tunnel perhaps with BCAS recently eliminating screening requirements for transfer cargo and allowing tail to tail transfers. The infrastructure really needs to catch up – ball is in the court of the airport operators and ground handlers.

Back to the history lesson – if we merely extrapolated 10 years of pre-covid air cargo growth performance, we would end up with 3.2 million tons for domestic and 5.3 million tons for international in 2040. That signifies a CAGR of about 5.5-5.8% for domestic and international. In the overall context, this represents an uptick in the growth witnessed from 2010 to 2020 – 6.3% CAGR for domestic and 4% CAGR for international – but not by much. The 2026 export volumes are discounted due to the second round of tariffs on high value goods such as gold and jewellery, and some textiles.

We don’t buy the hypothesis that the growth is going to be muted for long due to the tariffs or continue along the trend line. For various reasons, India’s air cargo sector now stands at an inflection point. The country is South Asia’s largest air cargo market. That’s not a surprise. 

What’s behind the inflection point in the trend?

The value of the iPhones and electronics consignment has exponentially grown with numbers only out of Chennai Port (~$10.6 billion in export). Data from Counterpoint Research shows that 71 per cent of iPhones sold in the US between April and June this year were made in India, up sharply from 31 per cent a year earlier. The rise of high value manufacturing will continue – the second round of tariffs are not going to have an impact on iPhone prices. 

Ecommerce has grown around 25% year on year for the last 3 years. The gross merchandise value of e-commerce is expected to be scale-up 5x to 500 billion USD in the next 10 years. 

Significant investments are being made in augmenting the cargo handling capacity in India – the new Bangalore domestic cargo terminal and upcoming Multi-Modal Cargo Hub in Noida airport are examples of state of the art cargo infrastructure. Avinia was fortunate to have led mandates for Cargo Master Planning and capacity assessment on the two nation building projects.

And the supply on the belly side isn’t a problem in the near-term, with the supply side forecast outpacing the regression based demand numbers by a mile – 2.1 million tons of supply by 2030 for domestic and 3.8 million tons of supply by 2030 for international.

There is a potential upside or high case with a more conducive tariff environment that could result in up to 20-25% higher volumes than the baseline. Encouraging greater widebody penetration, attracting dedicated freighter operators, and aligning belly-hold strategies with cargo demand corridors could create disproportionate growth. The infrastructure readiness will align with the demand growth ultimately. There is a compelling return on investment (ROI) case for private capital to enter the air cargo and logistics sector.