EXTRANS GLOBAL - Air Freight News - Week 47 2024

Air Cargo General

1) Korean Air and Asiana Airlines Merger at the 80% Completion Stage

The merger between Korean Air and Asiana Airlines has passed the 80% completion stage, with the remaining steps being final approval from the European Union (EU) and the U.S. Department of Justice (DOJ).
The European Commission (EC) has notified Korean Air that the passenger sector preconditions have been met. However, the review of the cargo sector remains unfinished, so the final announcement of the EC's approval is still pending.
Korean Air stated in its quarterly report on the 14th that it expects to complete the transaction (acquisition of new shares in Asiana Airlines) by December 20 and plans to expedite the completion of merger approval.
Once the EC approval is finalized, Korean Air will acquire new shares in Asiana Airlines for approximately 1.5 trillion won, securing a 63.88% stake. This will allow Korean Air to consolidate Asiana Airlines into its financial results and initiate the full integration process.
Korean Air and Asiana Airlines still need to secure approval from the EC and DOJ among the 14 essential reporting countries required for the merger. The final approval from the EC, in particular, is a key variable for the merger's success.
The EC has expressed concerns that the merger could lead to a monopoly on European routes and has requested the transfer of four major routes—Frankfurt, Paris, Rome, and Barcelona—to low-cost carriers (LCCs).
In response, Korean Air has agreed to transfer these routes to the domestic LCC T'way Air to meet the EC's demands. Additionally, Korean Air has fulfilled all conditions by selling Asiana Airlines' cargo business to the LCC Air Incheon.
Consequently, while the EC has recently acknowledged that the passenger sector requirements have been met, the review of the cargo sector is still ongoing.
Korean Air's proactive response to address monopoly concerns raised by the EC and DOJ is likely to lead to final approval, and if the EC grants approval, the DOJ is expected to follow suit.

2) Air Cargo Peak Season: Strong Performance in the Asian Market, but Are Europe and the U.S. Being Left Behind?

As the global air cargo industry anticipates a weaker peak season effect than in previous years, the Asian outbound air cargo market is performing relatively well, while the European and U.S. markets are experiencing significant neglect.
Major global logistics companies point out that shippers have piled up inventory in warehouses by pre-shipping cargo, and with a reduction in shipping rates and no strikes due to delays in U.S. port labor disputes, overall air cargo demand has been dispersed, resulting in a peak season that is not meeting market players' expectations.
According to the Baltic Airfreight Index, which reported air cargo rates for October, global average air freight rates rose by 8.1%, showing a solid trend; however, this is below expectations considering it is the traditional peak season ahead of Thanksgiving and Christmas.
Specifically, while routes from Asia to Europe and North America have shown steady increases, experts analyze that the overall increase in demand has been lower than anticipated.
Global major logistics companies had expected strong performance compared to this summer's peak season, but currently anticipate a relatively weak peak season until the end of the year.
Nevertheless, freight rates for the 12 months until November 2024 have risen by 10.9% compared to the previous year. Notably, rates from Hong Kong rose by 8.2% in the four weeks leading up to November 4, increasing by 10.2% on an annual basis, highlighting strong growth in major Asia outbound routes.
However, the issue is that growth in the European and North American markets remains relatively stagnant. Chicago has seen a decline contrary to the global trend, with a 18.4% drop compared to the previous month and a 15.1% decrease year-on-year. Frankfurt also reported a 10.9% increase in October rates compared to the previous month, but a 3.2% decrease year-on-year.
This stagnation in the European economy is due to low growth, high government debt ratios, and declining competitiveness in key industries, preventing a recovery in air cargo demand. The weakening competitiveness of the German automotive industry is particularly noticeable.
Despite being a peak season, the neglect of the European and U.S. markets has led the air cargo industry to consider differentiated strategies for each region.

3) Only Hong Kong Air Cargo Rates 'Soar Alone'... TAC Index Reports Global Market Average Rates Dropped by 1.6%

As of November 18, global air cargo rates saw a slight decline over the past week, but rates from China continued to rise.
The global Baltic Airfreight Index (BAI00) fell by 1.6% over the past week. This figure is somewhat weaker than expected as the market approaches its peak season. Nevertheless, the global BAI00 index remains 1.0% higher than the same period last year, which was also a time when the market entered a clear peak season uptrend.
Last week, air cargo rates from China, particularly on trans-Pacific routes to the eastern U.S., continued to rise.
The Hong Kong route index (BAI30) increased by 1.9% compared to the previous week, maintaining an upward trend on most major routes and recording a 0.2% increase year-on-year. However, the Shanghai route index (BAI80) dropped by 2.8% from the previous week, showing a downward trend on most major routes, though it still remains 4.0% higher than the previous year.
In the Asia region, rates from Vietnam to Europe and the U.S. saw further increases compared to the previous week, and rates from India to the U.S. also rose again. However, rates to Europe declined from both India and Bangkok; nonetheless, both regions still recorded significant year-on-year increases on routes to Europe.

4) TIACA 2024 Air Cargo Forum – Waiting to See on Trump Administration Tariffs and E-commerce Regulations

At the TIACA 2024 Air Cargo Forum held in Miami, various opinions were expressed on how the new tariffs imposed by the Trump administration and e-commerce regulations will impact the air cargo industry in the future.
Currently, the U.S. air cargo industry is closely monitoring the effects of President Donald Trump's new tariff policies and the strengthening of e-commerce import regulations, but for now, the general sentiment is one of "wait and see."
Summarizing the comments from market leaders at TIACA, it appears that the imposition of additional tariffs would significantly affect the air cargo sector, but there is a suggestion that there could be a surge in cargo movement before the actual tariffs are imposed.
However, there is a consensus that there have been no clear signals from customers regarding this shift, and in the e-commerce sector, Chinese e-commerce companies are reportedly already preparing countermeasures, so a major impact is not anticipated.
Notably, it was pointed out that "goods will still be produced and transported to the U.S.," and it remains unclear how the tariff policies will actually function, emphasizing the need for the air cargo industry to demonstrate flexibility.
This highlights the importance of adapting quickly to market changes, regardless of how regulations and policies are implemented, while experts suggest there is a possibility that production may shift to countries other than China if tariffs are imposed.
Meanwhile, many experts have noted that the global air cargo market has performed better than expected this year.
In particular, due to issues with the Panama Canal and instability in maritime transport in the Red Sea region, there has been a significant modal shift from sea to air.
Consequently, strong demand is expected in early 2025, with additional air routes from China anticipated to continue.

5) Airline/GSA Movement

LJ - JINAIR December Schedule and Aircraft Changes: The ICN-BKK route will change from the existing 738 passenger aircraft to the 777-200ER, and the ICN-HKT route will change from four times a week to daily.
Air Cargo Liability Limits to Increase in December: ICAO has raised the limit from 22 SDR per kg to 26 SDR (currently equivalent to 47,735 KRW based on current exchange rates)."

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