Air Cargo Transportation Route Choice Analysis
Using a unique feature of air cargo transshipment data in the Northeast Asian region, this paper identifies the critical factors that determine the transshipment route choice. Taking advantage of the variations in the transport characteristics in each origin-destination airports pair, the paper uses a discrete choice model to describe the transshipping route choice decision made by an agent (i.e., freight forwarder, consolidator, and large shipper). The analysis incorporates two major factors, monetary cost (such as line-haul cost and landing fee) and time cost (i.e., aircraft turnaround time, including loading and unloading time, custom clearance time, and expected scheduled delay), along with other controls. The estimation method considers the presence of unobserved attributes, and corrects for resulting endogeneity by use of appropriate instrumental variables. Estimation results find that transshipment volumes are more sensitive to time cost, and that the reduction in aircraft turnaround time by 1 hour would be worth the increase in airport charges by more than $1000. Simulation exercises measures the impacts of alternative policy scenarios for a Korean airport, which has recently declared their intention to be a future regional hub in the Northeast Asian region. The results suggest that reducing aircraft turnaround time at the airport be an effective strategy, rather than subsidizing to reduce airport charges.