Due to COVID-19, South Korea's Air Cargo Drops by up to 90%, Urgent Measures Needed

[Asia Economy Reporter Changhwan Lee] It has been reported that air cargo in South Korea has plummeted by up to 90% due to the spread of the novel coronavirus infection (COVID-19). Following the decline in passenger flights, the reduction in cargo has pushed the aviation industry to the brink of bankruptcy, highlighting the urgent need for additional government support.

On the 6th, the Federation of Korean Industries (FKI) cited data from the global logistics company Agility Logistics, revealing that air cargo originating from Korea has decreased by approximately 90-100% on almost all routes based on destinations due to the reduction in passenger flights. Cargo flights have also been cut back, resulting in a decrease of over 50-60%.

In contrast, Vietnam experienced only a 1-10% decrease in cargo load on flights to China and Japan, and a 30-40% decrease on flights to Europe. Furthermore, cargo backlog at airports has reached a critical level. This is analyzed to be because Korea, following China, experienced an earlier COVID-19 outbreak period and implemented widespread entry restrictions (covering a total of 180 countries and regions) early on, which had a relatively large impact on cargo transportation.

As air cargo transportation shrinks, international freight rates continue to soar. In China, where aircraft have been grounded as much as in Korea, the Shanghai-North America air cargo rate, based on the TAC Index as of the 30th of last month, surged by about 117% compared to the last week of February, reaching a record high of $6.59 per kilogram since the index was established in 2016.

The FKI explained that in crises like the current one, demand for air transport, which is faster than shipping or land transport, tends to surge sharply due to supply chain issues. Without an early resolution to the supply of cargo transport, continuous increases in freight rates are inevitable, which could ultimately increase the burden on Korean export companies and weaken their competitiveness.

They emphasized that lifting entry restrictions and providing immediate support to the aviation industry, which is facing the risk of bankruptcy, are urgent priorities to resolve export difficulties and normalize air transport networks.

Looking at overseas cases, Taiwan has injected support worth approximately 2.2 trillion KRW targeting all airlines, and Germany has announced unlimited financial support for its national airlines, demonstrating comprehensive support measures.

The Korean government has also announced measures including an emergency loan of 300 billion KRW for low-cost carriers (LCCs) and various cost reductions and payment deferrals for airlines. However, the FKI argued that more comprehensive support is necessary to overcome the difficulties currently felt by the industry.

Kim Bongman, Director of International Cooperation at the FKI, stated, "For the Korean economy, which has driven growth through exports, the current situation is an unprecedented crisis. Although the export decline rate in March was limited to -0.2% year-on-year, appearing to hold up well, we should not be optimistic because last year’s exports were already sluggish."

He added, "To prevent exports, the lifeblood of our economy, from collapsing due to the COVID-19 crisis, active government support for export companies, logistics companies, and especially the aviation industry is necessary. While the government’s current support measures, including various financial aids and employment retention support for companies, are welcome, they remain insufficient compared to other countries. In particular, proactive government support for the aviation industry, which underpins exports, is urgently needed."

This content was produced with the assistance of AI translation services.