Air Cargo Market Boom... "Continues into Q1 This Year"

Air cargo being loaded onto a Korean Air cargo plane (unrelated to the article).

[Asia Economy Reporter Yoo Hyun-seok] The favorable conditions in the air cargo industry are expected to continue into the first quarter of this year. This is due to ongoing global supply disruptions centered around port congestion.

According to the aviation industry on the 30th, as of December last year, air cargo freight rates on the Hong Kong-North America route (based on the TAC air freight index) reached a record high of $12.72 per kilogram. This represents a 97.82% increase compared to $6.43 per kilogram in January 2021. Additionally, the Hong Kong-Europe route and Frankfurt-North America route also set record highs, recording $8.00 and $5.21 per kilogram respectively.

In particular, the high air cargo transportation costs in the fourth quarter of last year were influenced by the ongoing global logistics crisis and the year-end shopping season. Bottlenecks caused by congestion at global ports due to COVID-19 and other factors persisted. Furthermore, as the year-end shopping season began, there was a large influx of cargo requiring rapid transportation into the air cargo market.

Alongside this, the rise in international oil prices also contributed to the increase in freight costs. Geopolitical risks escalated with Russia's threat of attacking Ukraine and drone attacks on oil facilities in the United Arab Emirates (UAE). As of the 28th, Brent crude futures on the London ICE Futures Exchange reached $90.03 per barrel.

As a result, Korean Air benefited from this situation. Korean Air recorded sales of 2.8259 trillion won and an operating profit of 704.4 billion won in the fourth quarter of last year. The operating profit was the highest ever on a quarterly basis. Notably, the cargo business recorded 2.1807 trillion won in the fourth quarter, marking the highest quarterly sales in history. Previously, the highest was 1.6503 trillion won recorded in the third quarter of last year. A company official stated, "Due to the year-end peak season effect, demand increased and freight rates rose due to a shortage of belly (lower cargo hold) capacity caused by reduced passenger flights."

On the afternoon of the 24th, Asiana Airlines personnel are loading cargo onto an A350 passenger aircraft at Incheon International Airport Terminal 1. Photo by Airport Photographers Group

The industry and securities firms expect the favorable air cargo market conditions to continue. Kang Sung-jin, a researcher at KB Securities, said, "As global supply chain disruptions persist, the benefits for cargo companies are expected to last longer. The average Shanghai-West Coast North America container freight index in the fourth quarter of last year rose 18.5% compared to the previous quarter, and the average for the first three weeks of this year is 17.5% higher than the fourth quarter average last year." He added, "Since global supply disruptions centered on port congestion are occurring, the air cargo market is expected to remain stronger than anticipated in the first quarter of this year."

On the other hand, some analysts suggest that the first quarter, being an off-season with a base effect, may peak and then decline. Jung Yeon-seung, a researcher at NH Investment & Securities, said, "Although air cargo volumes remained solid in December last year, the growth rate is gradually slowing due to the base effect. Since mid-December, entering the seasonal off-season and the clearance of urgent shipments have caused air cargo freight rates to reverse and decline." He added, "As we enter the off-season in the first quarter, the air cargo freight index (TAC index) is showing signs of adjustment."

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