Income Elasticities
The main focus of the research was on price elasticities.
Nevertheless, the analysis also considered the sensitivity
of demand to changes in incomes. The econometric
research and review of previous estimates found that air
transport income elasticities were consistently positive and
greater than one. This suggests that as households and
individuals get more prosperous, they are likely to devote
an increasing share of their incomes to discretionary
spending such as air travel.
The statistical evidence suggests:
• Developed country travel markets have base income
elasticities for short-haul routes of around 1.5. At the
national level, this declines to an estimated income
elasticity of 1.3.
• US travel markets have slightly higher income
elasticities with air travel perhaps less budget-oriented
than in other developed economies. Using the DB1A
data suggests short-haul route income elasticities of
1.8 at the route level and 1.6 at the national level