As usual, the narrative employs standard rhetoric in respect of supply and demand, and of surveyed market confidence.
The obvious framework of neo-classical liberal economics flutters through these reports, and the surveyed voices are sometimes said to have it that simple pricing solutions at the user interface will move the market forward.
But can we find a new way to approach the subject of carrier and transportation economics? And, is there an acceptable manner of public speech that doesn’t lead the market audience towards false easy-fix market prognoses?
Unfortunately, the answer at this time is likely no.
To understand this we might compare the neo-liberal market narrative with the supply-sider controlled realities that turn out market consequences for capacity (or supply).
In the ocean containerised trades, capacity is ruled by supply-sider ideas: ocean carriers strategic desire to maintain or expand shares in trades and alliances, corporatist government views of shipyard and hub port unit capacity as strategic assets, the market in scrap metal that both lubricates new orders when it is up - and keeps old vessels in trades when it is weak, and that all important magic dust called financial market liquidity and funding. We start our ocean container capacity forecasting from this base and ride the effects of new building programmes downstream of a game locked in years before in another market.
Citing a reality case-in-point close to home in the air carrier market (ie: QANTAS - a combination passenger and freight carrier) why would we be surprised when there is a neo-classically inclined led attack upon QANTAS’s objective of maintaining a 65% domestic market share.
And why would we be surprised when such a contention is batted back by QANTAS at financial market and media critics by means of citing earlier published reports such as the one concluding that they have lost 15.5% market share in the past decade on international routes to Australia by failing to match competitors capacity increases (…and as a consequence their international airline business is a basket case)?
So both ocean and air carriers acknowledge, by means of order book action and reaction to financial market commentators that the reality is they surrender market share at their peril. We deal with markets that are, in part, a product of that capacity reality in a supply-sider world. If investors have gone along for the ride they might care to look at the daylight between their narrative and world views, and market reality.
Ahead of us are the issues of the fragility of the mega-hub and spoke models of global transportation systems, the fragility of air cargo freighter and engine economics, and the limits and dangers presented by “domestic mindedness” in the global commercial trade and transportation industry. We will return to these issues on another day.