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  February 23rd, 2017 | Written by

Post-Hanjin: Limited Shift to Air Cargo

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  • Hanjin’s bankruptcy may have given airfreight carriers false bargaining power to raise prices.
  • Container lines didn’t lose much cargo to airfreight after Hanjin collapse.
  • There isn’t a bonanza of business returning from air to ocean.

The logistical chaos caused by Hanjin’s bankruptcy helped boost airfreight rates, but there is limited statistical evidence of cargo switching modes.

A recent analysis from Drewry looked at the impact of Hanjin’s demise on the airfreight market, which according to some sources benefited as some nervous shippers were said to have shifted cargoes to the air.

IATA (International Air Transport Association) has reported that international airfreight traffic grew by 3.8 percent in 2016. IATA noted that the speed of growth picked up in the second-half of the year and previously speculated that some of the acceleration could have been caused by a temporary mode shift following the collapse of Hanjin, and also from companies, so used to weak market conditions, becoming complacent and getting caught by an unforeseen demand rebound, leading to a last-minute reliance on airfreight.

While the big-picture numbers do imply a reversal of the long-term trend towards ocean freight, airfreight occupies only a tiny part of market volumes, even if its share of goods by value is on a par with container shipping.

US customs data shows that airfreight carried just 2.5 percent of all tonnage moved by either air or container vessel into the US in 2016, down marginally from 2.6 percent in 2015. Because most of what is flown is of higher value, airfreight’s share of the value of US inbound goods between the two modes was 44 percent last year.

The collapse of Hanjin did coincide with a sharp hike in airfreight rates, which implies that the event did have some impact on the market regardless of any significant cargo transfer. One reason the airfreight rates rose faster in the US-inbound market could be explained by a greater demand pull from that country, but the steepness does imply other factors were at play.

US customs data doesn’t support the idea that a significant amount of goods normally transported by ocean shifted to air in the immediate aftermath of Hanjin’s bankruptcy. During the fourth quarter of 2016, airfreight posted stronger year-on-year growth in just four of the leading 10 commodities transported by container vessel into the US.

In the two customs classifications that airfreight arguably competes with container shipping over, the share flown by air carriers did increase in the fourth quarter over the third, but this was merely a seasonal pattern as more cargo gets flown in the run up to the US holiday season.

At least as far as the Asia-to-US trade is concerned, it appears that there was only limited mode shift as a direct consequence of Hanjin’s bankruptcy but that this event may have given airfreight carriers a false bargaining power to raise prices. The implication for container lines is that because they didn’t lose much cargo in the process, there won’t be a bonanza of returning business to compete for.