The impact of security oversight on air cargo price and demand

Arim Park (), Min Kyung Lee (), Hyosoo (Kevin) Park (), Ji-Hung (Ryan) Choi () and Ju Myung Song ()
Additional contact information
Arim Park: North Carolina A&T State University
Min Kyung Lee: Baylor University
Hyosoo (Kevin) Park: University of Dayton
Ji-Hung (Ryan) Choi: Eastern Michigan University
Ju Myung Song: University of Massachusetts Lowell

Journal of Transportation Security, 2023, vol. 16, issue 1, No 2, 22 pages

Abstract: Abstract This paper examines the effect of security oversight on air cargo price and demand. We exploit variations in security oversight instituted by the International Civil Aviation Organization (ICAO). We estimate a simultaneous equation model using proprietary operations data from a major airline in South Korea over the period 2009–2013. This study explores the shipping-charge behavior of a service provider through a modeling approach that considers air cargo security. Our findings show that security oversight increases air cargo demand, controlling for the effect of price. Improving security measures increases the air cargo price, but the magnitude of this increase is small. Our results should help policymakers gauge the benefit of improved security and help airlines design an effective model to determine future air cargo shipping charges under high uncertainty to mitigate short- and long-term financial risks.

Keywords: Air cargo; Shipping charges; Security premiums; Risk assessment; Security oversight (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s12198-023-00259-z

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