Feeling the Pulse of Global Value Chains: Air Cargo and COVID-19

In: https://dspace.library.uu.nl/handle/1874/415234

Abstract

This paper focuses on air cargo market development, with special attention to the connections between countries in Asia, the European Union, and the United States. Before the coronavirus disease (COVID-19) crisis, we show that participation in global value chains played a crucial role in how countries in Asia increased their exposure to the European Union market, which was hit hardest by the COVID-19 crisis. Analysing the effects of the crisis in 2020 – using a fuzzy set complexity approach and recent high frequency data on air cargo transport – we show that such demand effects, together with domestic contraction conditions, explain a large share of the variation in air cargo dynamics across countries in Asia. However, we also show that implementing best practices in pandemic control positively impacts air cargo recovery for countries that cannot rely on export market rebounds. After reviewing the convergence in air cargo business models since 2010, the paper continues to assess recovery options. The main conclusion is that business models will converge on long haul point to point models that combine passengers and cargo, moving away from the current hub and spoke system.