The value of time and the impact on the air freight product portfolio - A study of the South Korean market 2017–2021

Abstract

Traditionally, time was a crucial factor in determining competitiveness in the air cargo market. This study demonstrates that products whose value changes drastically over time could increase the air transport demand. This study represents that the shipper having products with enormous time sensitivity is more willing to endure the higher fare, indicating the possibility that time-sensitive products will drive the air cargo market's growth. This study also provides empirical evidence for the influence of time factors by showing that time-sensitive products are being transferred from sea to air transport based on ICN and South Korean data. The analysis results are as follows. First, an emerging type of cargo, not a traditional type of cargo, has a significant effect on increasing air transport share. The emerging type of items appeared before Covid-19, and Covid-19 has accelerated their growth. Second, even if airfares increase relatively, the proportion of air transportation does not decrease. It seems to be the result that an emerging type of cargo with higher time sensitivity significantly affects the recent increase in air freight volume. Demand increases in an emerging type of cargo, more sensitive to time, can affect the rise in the air transport share, restricting the negative effect from a relative increase in air freight rates. Last, Covid-19 significantly affects the increase in air transport share. In this regard, this study provides practical implications for the recent growth drivers of the air cargo market. Especially in addition to variables traditionally considered to impact air freight volumes, such as income and price, this study suggests changes in transport items as a growth driver for the recent air cargo market.