ECONOMETRIC RESULTS
The new econometric research supports the discussion
from previous chapters that the sensitivity of passengers
to the level of air travel prices depends significantly on the
level of the market being considered and its location. The
results are based on a synthesis of the new econometric
results and the review of previous research. Base
elasticity estimates are developed for the different levels
of aggregation (route, national and supra-national level).
Multiplicative estimates were then developed to adjust
the elasticities to reflect specific geographical markets.
i) Level of Aggregation
In summary, the econometric results found that at the
route level (where competition between airlines or citypair
markets is high) the sensitivity of demand to price
is very high. However, at the national or regional level,
air travel is relatively price insensitive. The results support
demand elasticities of:
• Route Level: -1.4
• National Level: -0.8
• Supra-National Level: -0.6