India’s air cargo sector is entering a critical phase, where rising demand is colliding with cost pressures and infrastructure gaps, even as the country positions itself as a global manufacturing and logistics hub.
The segment, which plays a key role in time-sensitive trade such as pharmaceuticals, perishables and high-value exports, is facing a squeeze driven by geopolitical disruptions, longer flight routes and capacity constraints.
This comes at a time when India’s logistics sector is expanding rapidly, with over 4.6 billion tonnes of freight movement annually and logistics costs falling to under 8 per cent of GDP, according to industry estimates.
“Cargo prices in the industry have kind of doubled in the last one to two months,” said the Air India Cargo Head Rameh Mamdiwala, highlighting the sharp escalation in freight costs.
Speaking with BW Businessworld on the sidelines of the Logistics Shakti Summit 2026, Mamdiwala said airlines operating long-haul routes are increasingly being forced to take longer paths, leading to higher fuel consumption and reduced cargo capacity.
“Airlines are being forced to take longer routes due to geopolitical issues, which means carrying more fuel, increasing costs and reducing cargo capacity,” Mamdiwala said. “When the cost of operation goes up, it has to be passed on to customers,” he said, adding that the impact is cascading across trade and ultimately reaching end consumers.
Scaling Capacity, Shifting Demand
India’s air cargo ambitions are also running up against a capacity challenge, even as demand is expected to rise sharply over the next decade. The sector currently handles around 3.5 - 3.7 million tonnes of cargo annually, with projections indicating a scale-up to 10 million tonnes by 2031 - 32 and 25 million tonnes by 2047.
A key constraint remains the concentration of cargo operations, with nearly 70 - 80 per cent of volumes handled by just four to five major airports, limiting the effective utilisation of capacity across the wider network.
“Airlines need to bring in more freighters. Airports need to invest in infrastructure, especially in tier 2 and 3 cities,” Mamdiwala said. He added that while connectivity across cities has improved, the availability of dedicated cargo capacity remains limited, particularly outside major hubs.
According to industry estimates, India’s warehousing market is projected to grow at a CAGR of 15 per cent to reach USD 35 billion by 2027, with Tier-2 and Tier-3 cities emerging as key logistics hubs. The shift is further supported by government initiatives such as the Urban Infrastructure Development Fund, which allocates Rs 100 billion annually for infrastructure in smaller cities.
“More penetration of e-commerce and manufacturing in tier 2 cities will improve demand,” Mamdiwala told BW Businessworld. He added that these cities are likely to function as feeder networks, connecting to metro hubs for exports while also strengthening domestic cargo flows.
Time Over Cost Advantage
Air cargo continues to account for a small share of India’s overall freight movement, estimated at just 1 - 2 per cent, but handles a disproportionately high share of time-sensitive, high-value shipments such as pharmaceuticals, electronics and perishables, underscoring its critical role in fast-moving supply chains.
As supply chains become increasingly time-sensitive, businesses are factoring in not just transportation costs but also delays, inventory holding and potential losses, shifting the focus towards speed and reliability over upfront pricing.
“If you take the cost of time, it is not going to increase. Today, for example, somebody manufacturing in a tier 2 city trucks goods for four to five days, keeping high-value cargo on the road. If you take the cost of time, reliability and damages, air cargo will be cheaper than surface transportation,” Mamdiwala said.
Scaling Through Headwinds
Despite strong demand fundamentals, India’s air cargo sector continues to face pressure from geopolitical disruptions, rising fuel costs and capacity constraints, which have increased operational complexity for airlines.
Mamdiwala noted that the sector has been navigating multiple global shocks over the past few years. “We had Covid, which impacted global supply chains, and just as things were stabilising, the Russia-Ukraine war added further pressure through higher fuel costs and geopolitical disruptions,” he said, adding that these headwinds have continued to affect operations and costs.
He added that while these challenges have impacted efficiency in the short term, the long-term growth trajectory of the sector remains intact. “We are in the right direction… as demand increases, investments will come,” he said.
He further emphasised that unlocking this growth will require coordinated efforts across industry and policy. This includes expanding freighter capacity, strengthening airport infrastructure in tier 2 and 3 cities, and improving operational efficiency through faster clearances and greater automation in areas such as customs and aviation security.
“Only then air cargo can become complementary for the growth that we are looking at,” he said. |
