Chapter 16 - The forwarders' power play effect on competition in the air cargo industry

Abstract

In this chapter, the role and position of the freight forwarder in the air cargo market will be assessed. The freight forwarder is considered to be one of the most important decision-makers in the air cargo market. In addition, shippers rarely go directly to an airline, meaning that freight forwarders control a large part of the air cargo market. However, very little is known about their position in the industry. The first stage of this chapter will further elaborate on the role of the forwarder and secondly, on its position in the air cargo market. Whereas the business concept of freight forwarders is based upon cooperation, the integrators offer a wholly integrated product. Competition between both market segments increased in the last couple of years. Freight forwarders benefit from the consolidation of many smaller shipments into a limited number of larger consignments. The aviation industry is strongly moving toward a consolidating trend in the air freight forwarding market, as evidenced by the many mergers and acquisitions. Competition will be assessed by looking at some concentration indices (e.g., CR4, Herfindahl-Hirschman Index, Gini-coefficient). The presence of a wide range of freight forwarders at an airport is believed to be beneficial for the development of the air cargo market at the airport. The presence of these forwarders at some selected airports is analyzed as well.