Abstract

"Turbulent Growth. On the Volatile History of the Air Cargo Industry since the 1990s"

Hartmut Berghoff, Göttingen University (Berghoff@uni-goettingen.de)

Air cargo is one of the driving forces of globalization. With the increasing division of labor in the world, the share of high-value and time-sensitive goods in the rapidly growing foreign trade increased, so that the global volume of air freight more than doubled between 1997 and 2019. Expensive and perishable goods, such as flowers or fruits, biotechnology materials, or urgently needed spare parts, were increasingly transported by air. Air freight can be the safest and most cost-effective option for certain goods, as storage costs and waiting times are eliminated or minimized.
This paper deals with the air cargo industry’s rapid growth since the 1990s which coincided with enormous economic problems of those who provided the transport services and were the potential beneficiaries of this growth. However, economic results remained mixed. Unpredictable variations in costs and demand as well as fierce competition plagued the industry. Many airlines went bankrupt while other operated on relatively small margins.
This paper focuses first on the response of the airlines who sought to improve their profitability through rationalization and cooperation, esp. airline alliances. The second part deals with the establishment of global cartel structures that stabilized the industry between 1999 and 2006. The result was the largest prize-fixing cartel in the history of civil aviation. The paper analyses the cartel’s mode of operation and its dissolution as well as the sanctions of law enforcement agencies around the world. Penalties amounted to more than 2 billion dollars. By making use of leniency programs and handing over evidence to the authorities, Lufthansa as one of the cartel’s founding members avoided sanctions in Europe and the US. The following is an outlook of the industry’s development in subsequent years until the present time.