EXTRANS GLOBAL - Air Freight News - Week 52 2025

Air Cargo General

1) Korean Air to Dominate Further in 2026 – Aviation Industry Polarization Worsens

South Korea’s aviation industry is set to enter a structural polarization phase in 2026, where the performance gap between Korean Air and other carriers will widen to an insurmountable extent. Amid the triple pressures of high exchange rates, high oil prices and rising labor costs sweeping the industry, low-cost carriers (LCCs) with relatively weak fundamentals are expected to be driven into a cut-throat survival competition in the shrinking short-haul market.

On the contrary, Korean Air is projected to maintain its solo flight and boost its market dominance to an absolute level, backed by its exclusive position in long-haul routes, solid cargo revenue and premium passenger demand. According to a comprehensive analysis of NICE Credit Rating’s 2026 Industry Outlook - Air Transportation report and major airlines' Q3 earnings reports on the 16th, the biggest risk for the aviation market next year will be the supply-demand imbalance, with slowing demand growth but explosive supply expansion.

Overcapacity will be the biggest headache for the LCC sector in 2026. LCCs once raced to expand fleets by capitalizing on the COVID-19 endemic, but this is now boomeranging on them. Parata Air’s resumption of operations is identified as a key variable that will fuel the decline of short-haul route fares next year. Industry insiders widely believe that with major LCCs such as Jeju Air, T’way Air and Jin Air struggling to defend their market shares, Parata Air’s entry will likely turn the fare competition on lucrative routes to Japan and Southeast Asia into a chicken game.

T’way Air slipped into losses in Q3 this year due to costs related to launching European routes. Jeju Air and Jin Air also saw their operating profits plummet year-on-year, scrambling to maintain profitability. The result stems from vulnerable cost structures of LCCs, which have to absorb the burden of rising exchange rates and fuel costs without passing them on to fares.

Meanwhile, industry leader Korean Air dominates the market with an unparalleled portfolio that competitors cannot replicate, with its core competitiveness lying in long-haul routes and premium services. Its air cargo business also serves as a strong pillar: despite fears of tariff hikes by the Trump administration, surging exports of high-value semiconductor products such as High Bandwidth Memory (HBM) amid the AI semiconductor boom are expected to underpin cargo revenue and prevent sharp declines.

It also boasts robust financial strength: while continuously investing trillions of won to introduce over 15 new aircraft annually, it is projected to maintain unshakable financial stability relying on accumulated cash assets and strong cash generation capacity.

2) LCCs Compete for Jakarta Route Redistribution – Why Air Premia Stands Out?

The Jakarta route has long been a core international route operated by Korean Air and Asiana Airlines with large aircraft of over 200 seats, with a high proportion of business demand. The route has limits on flight frequencies but no constraints on seat supply. The industry opines that capacity cuts amid route redistribution may cause passenger inconvenience, so carriers that can maintain existing demand while ensuring stable supply should be selected.

Air Premia and T’way Air are mentioned as promising candidates meeting the criteria, both equipped with fleets capable of operating medium-to-large aircraft. However, given the Jakarta route is dominated by business demand, industry evaluations note that cabin environment and service completeness matter more than sheer seat count.

Air Premia is widely favored, mainly because it operates a single fleet of Boeing 787-9 and offers both premium economy and economy classes. Its overall service system including seat configuration, in-flight meals and personal entertainment is said to be closest to the experience of former Korean Air passengers.

The Jakarta route redistribution is essentially seen as a process to select a replacement for Korean Air. In this context, deploying large aircraft is a basic requirement, while comprehensive competitiveness including service continuity, long-haul operational stability and transfer networks is expected to exert a significant impact on the final decision, which strengthens the assessment that Air Premia is in a relatively advantageous position.

3) 2026 Air Cargo Market to See Normalized Uncertainties – "AI and E-commerce Remain Growth Drivers"

2025 is recorded as the most uncertain year in global trade and economic policy over the past 20-odd years. The escalation of US-China trade frictions, the US’s all-round tariff hikes and abolition of the de minimis rule, coupled with geopolitical risks, have shaken the global trade order. Nevertheless, contrary to initial concerns, the air cargo market wrapped up 2025 with a relatively resilient performance.

Global air cargo demand registered a moderate annual growth of 3-4% in 2025, supported by frontloading to avoid tariffs, e-commerce shipments and rising high-value cargo related to AI and semiconductors. However, air cargo fares are estimated to drop 1-2% annually due to weak market sentiment and supply expansion, according to analysis.

The macro environment for 2026 is set to cool further: the International Monetary Fund (IMF) projects global GDP growth at 3.1% in 2026, while the World Trade Organization (WTO) forecasts merchandise trade growth to plunge from 2.4% in 2025 to 0.5% in 2026. Air cargo traditionally has higher volatility than the real economy, so it is highly likely to be directly impacted by the slowdown, meaning the 2026 air cargo market is expected to generally converge with global economic growth.

Industry insiders note that the market’s strength in 2025 was largely driven by temporary factors from tariff risks rather than structural demand expansion. The US effective tariff rate averaged around 16% in 2025, hitting the highest level since the 1930s, which was ultimately passed on to businesses and consumers through rising import prices.

Route performance shows distinct differentiation: Asia-North America routes bore the brunt of shrinking US-China trade, posting a nearly double-digit cumulative decline in 2025. In contrast, Asia-Europe routes delivered outstanding double-digit growth, benefiting from e-commerce development and supply chain restructuring. Notably, Europe is strengthening its role as a bypass and transit hub in the global supply chain.Air cargo fares are widely expected to drop 5-10% overall in 2026.

4) UN Officially Adopts Negotiable Cargo Documents (NCD) Convention – AWB Becomes Negotiable for In-transit Cargo Sales

The UN General Assembly officially adopted the Convention on Negotiable Cargo Documents (NCD) on the 9th and launched the signing process. The convention will enter into force once ratified by 10 or more member states, legally binding all signatories thereafter.

It expands the concept of in-transit cargo sales, previously limited to maritime transport, into a unified global legal framework covering all modes of transport including air and land, especially multimodal transport. In other words, it not only extends the bill of lading (B/L)-based in-transit sales from maritime to all transport modes but also applies to enterprises engaged in multimodal transport.

Most importantly, NCD enables banks to use negotiable cargo documents as collateral for trade finance loans, which is expected to effectively help small and medium-sized shippers access trade finance.

Some predict that under the convention, shippers can choose to resell instead of taking delivery if cargo value surges during transit; conversely, if market conditions change after shipment and the cargo is no longer needed, they can abandon taking delivery and opt for resale, providing more flexible options for shippers.

5) Airlines Movement

Jeju Air: Plans to introduce large Boeing 787 aircraft in 2027, with Los Angeles (LAX) and Sydney (SYD) routes as key candidates
Jin Air: Emerged from capital erosion this year, posting a net profit of 2.4 billion won in Q3

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