Business Versus Leisure Passengers. In general,
all else being equal, business travellers are less
sensitive to travel price changes (less elastic) than
leisure travellers. Intuitively, this result is plausible;
business travellers generally have less flexibility to
postpone or cancel their travel than leisure travellers.
Nevertheless, the studies do show that even business
travel will decline in the face of price increases, albeit
not to the same extent as leisure travel.
• Short-Haul Versus Long-Haul Travel. Another
consistent result was that air travel price elasticities
on short-haul routes were generally higher than on
long-haul routes. In part, this reflects the opportunity
for inter-modal substitution on short-haul routes (e.g.
travellers can switch to rail or car in response to air
travel price increases).
• Airline Vs Market Vs National Elasticities. Some of
the studies supported the concept that the demand
elasticity faced by an individual airline is higher than
that faced by the whole market. For example, Oum,
Zhang, and Zhang (1993) estimated firm-specific
elasticities in the U.S. and estimated values ranging
from -1.24 to -2.34, while studies estimating market or
route elasticities ranged from -0.6 to -1.6. In contrast,
Alperovich and Machnes (1994) and Njegovan (2006)
used national-level measures of air travel in Israel and
the UK respectively and produced even lower elasticity
values (-0.27 and -0.7, respectively).
• Income Elasticities. Many of the studies also
included income as an explanatory variable of air travel
demand. This will isolate the effects of a shift along
the demand curve (caused by a change in air travel
price) from the effect of a shift of the whole demand
curve (caused by a change in incomes or GDP).
The studies including the income term all produced
positive income elasticities, as would be expected
(air travel increases as incomes increase). Virtually all
of these studies estimated income elasticities above
one, generally between +1 and +2. This indicates air
travel increases at a higher rate than income growth.
This has important implications for policies seeking to
manage air travel demand by raising the price of travel