Geographic Market Analysis
The econometric analysis of the IATA PaxIS Plus data
found statistically significant differences between
different geographic air travel markets. The estimated
elasticity multipliers for each market, along with the
reasons for why it is needed, are:
• Intra North America. This is our reference point
with an elasticity multiplier of 1. The market is well
established with relatively high levels of capacity and
traffic. Prices tend to be low, while distances are short
to medium haul.
• Intra Europe. Traffic in this region is estimated to be
more elastic, with an elasticity multiplier of 1.4. Intra
European routes typically have shorter average travel
distances, strong competition from other transport
modes and the use of very low prices in several
markets. The high market share of charter airlines is
being eroded by very low fare LCCs.
• Intra Asia. Moderately more inelastic estimates were
found in this region, with an elasticity multiplier of
0.95. LCCs are now emerging in Asia but average
distances are longer, and the key middle class is still
relatively small in many markets in this region.
• Intra Sub-Saharan Africa. This region is estimated to
have a relatively inelastic demand compared to North
America, with an elasticity multiplier of 0.6. African
economies have a much smaller middle class. Travel
is concentrated among higher income individuals who
are less price-sensitive.
• Intra South America. This region is estimated to be
at the more elastic end of the scale, with an elasticity
multiplier of 1.25. There is an emerging middle class
making the region more price elastic plus LCCs are
emerging in Brazil, Chile and Mexico.
Geographic Market AnalysisThe econometric analysis of the IATA PaxIS Plus datafound statistically significant differences betweendifferent geographic air travel markets. The estimatedelasticity multipliers for each market, along with thereasons for why it is needed, are:• Intra North America. This is our reference pointwith an elasticity multiplier of 1. The market is wellestablished with relatively high levels of capacity andtraffic. Prices tend to be low, while distances are shortto medium haul.• Intra Europe. Traffic in this region is estimated to bemore elastic, with an elasticity multiplier of 1.4. IntraEuropean routes typically have shorter average traveldistances, strong competition from other transportmodes and the use of very low prices in severalmarkets. The high market share of charter airlines isbeing eroded by very low fare LCCs.• Intra Asia. Moderately more inelastic estimates werefound in this region, with an elasticity multiplier of0.95. LCCs are now emerging in Asia but averagedistances are longer, and the key middle class is stillrelatively small in many markets in this region.• Intra Sub-Saharan Africa. This region is estimated tohave a relatively inelastic demand compared to NorthAmerica, with an elasticity multiplier of 0.6. Africaneconomies have a much smaller middle class. Travelis concentrated among higher income individuals whoare less price-sensitive.• Intra South America. This region is estimated to beat the more elastic end of the scale, with an elasticitymultiplier of 1.25. There is an emerging middle classmaking the region more price elastic plus LCCs areemerging in Brazil, Chile and Mexico.
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