CLEAR SKIES AHEAD: India’s Cargo Aviation Soars with Revived Open Sky Policy

The aviation landscape in India is undergoing a transformative change with the reintroduction of the Open Sky Policy for foreign cargo carriers. While during COVID, international carriers were restricted to operate from a handful of international airports in metro cities, the burgeoning demand for air freight and the increasing congestion at airports has led the Government of India to recognize the need to improve efficiency and competitiveness in the air cargo sector. After nearly three years, the Ministry of Civil Aviation has breathed a new life into the policy, igniting optimism and anticipation among stakeholders. This feature explores the implications, challenges, and opportunities heralded by the revived Open Sky Policy, charting a course towards a more resilient and vibrant aviation ecosystem.

In a recent development, India’s Open Sky Policy, which allows foreign carriers to operate non-scheduled cargo flights freely in the country, has gotten a lease of life.

In 2020, the Ministry of Civil Aviation put stringent curbs on foreign carriers, restricting the movement of foreign non-scheduled flights to only six metro airports in India. This was an attempt to provide a level playing field for domestic carriers at a time when COVID significantly impacted the Indian aviation sector.

After the suspension of air travel during COVID, airline operators in India reported losses worth more than Rs 19,500 crore, while airports reported losses worth more than Rs 5,120 crore. During this time, Indian carriers saw an opportunity in cargo operations (with now only essential goods moving to and from destinations) and ramped up their cargo capacity by converting passenger aircraft to freighters.

This endeavor was supported by the government’s revision of the Open Sky Policy in December 2020, restricting non-scheduled freighter flights to six airports: Bengaluru, Chennai, Delhi, Kolkata, Hyderabad, and Mumbai.

Indian airlines, which carried 19% of cargo in contrast to foreign airlines transporting 81% of it after the amendment, witnessed an increase in their share of international cargo traffic as well as revenue from cargo.

The idea was to provide a backup to the airlines in the eventuality of a slowdown in passenger traffic, which is exactly what happened.

Union Minister Jyotiraditya Scindia stated in 2022, during a Rajya Sabha reply, that in the FY 2020-21, Indian airlines’ cargo revenue increased from INR 1,498 crore to INR 2,300 crore, representing a significant 50% increase in revenue from cargo during that period.

However, exporters have been protesting that goods capacity had shrunk as Indian carriers failed to deploy enough aircraft to meet demand and asked to revisit the Open Sky Policy.

Now, after almost 3 years, the Ministry of Civil Aviation has reinstated the Open Sky Policy. A Circular issued by the Directorate General of Civil Aviation (DGCA) on February 2, 2024, read that “the open sky policy for foreign cargo carriers has been reviewed by the government. The operations of foreign and non-scheduled freighter charter services shall be allowed at all international airports for three years to facilitate air cargo movements and to give sufficient time to Indian carriers to develop their capacity.”

Revision of the Open Sky Policy: A Welcome Move?

Despite the potential impact that retrieval of the Open Sky Policy will have on the cargo handling capacity of the Indian airlines, the government’s decision has been widely welcomed by industry stakeholders, including airports, airlines, exporters, and airlines.

Satyaki Raghunath, COO, Bangalore International Airport Ltd. (BIAL), appreciates the move and calls it in harmony with the government’s wider objective for the sector.

“This policy can play an important role in achieving the government’s ambitious target of 10 million metric tons of air cargo by 2030. The policy is also expected to enhance air cargo movements, particularly perishables trade, by permitting foreign cargo carriers to operate from all international airports. This initiative enables farm producers and exporters in the interior regions of India to access global markets. We are hopeful that this new move will help create a more dynamic and competitive air cargo environment, ultimately benefiting exporters and the Indian economy as a whole,” Raghunath said.

On a similar note, Glyn Hughes, Director General, TIACA, calls the move an excellent one, emphasizing the benefits it will yield.

“It will boost efficiency, it will boost exports, it will lead to lower transportation supply chain costs, and it will help facilitate the government’s target of achieving a USD 5 trillion economy by moving 10 million metric tons of air cargo. The extension for a 3-year period applies to both scheduled and charter operations, which will also boost seasonal exports of perishable products,” Hughes said

The revival of the policy will add up to significant gains for the non-metro airports (like Goa, Chandigarh, Amritsar, Lucknow, and Baroda), which have developed robust cargo infrastructure in recent years, and it will bolster the Indian economy and offer additional export capacity.

It is believed that the policy will help with better connectivity closer to cargo-origin points as major hub airports grapple with growing congestion issues. The congestion caused at airports has led to an increase in air freight rates and delays in the handling and processing of export cargo.

The new reinstatement of the policy will resolve this issue by meeting demand, giving enough time to Indian airlines to build up their capacity, and also encouraging foreign airlines to introduce new connections outside and within India.

“With the revision of the policy, foreign airlines are showing renewed interest in resuming cargo operations in India. This development is especially beneficial for non-metro airports that have diligently invested in robust cargo infrastructure in recent years and their local customers. Consequently, this policy change is expected to strengthen the Indian economy and provide additional export capacity,” Kamesh Peri, CEO, Çelebi Delhi Cargo Terminal Management said adding that the Open Sky Policy will certainly facilitate air freight connectivity closer to cargo origin points, thereby addressing congestion issues at times faced by major hub airports.

 For instance, Kenya Airways recently commenced a twice-a-week offering from Mumbai to Nairobi with a B737-800 freighter.

 Furthermore, sharing Etihad Cargo’s plans to introduce new routes, Giridharan Srinivasan, Area General Manager, Indian Subcontinent, Etihad Cargo says, “Etihad Cargo fully supports the implementation of the Open Sky Policy. India is one of our largest markets, and we commenced operations in Calicut and Trivandrum in January 2024. Additionally, we will be launching further routes in 2024, including the introduction of Jaipur to our summer schedule.”

 Srinivasan highlighted that this new policy initiative from the Government of India is poised to benefit all stakeholders, including airlines, exporters, and forwarders.

But what triggered the retrieval of the Open Sky Policy implemented in 2020? And what role did the lobbying efforts of exporters play in influencing the restoration of the policy?

This is an abridged version of the Special Feature published in the April edition of the Logistics Insider Magazine. To read the complete story, click here.

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