The review looked at several academic and government
commissioned studies . The different studies
7
produced a
wide range of air travel price elasticity estimates, varying
in accordance with the markets analysed, the time period
assessed, the methodology used and the available data.
Even within some particular studies, a range of elasticities
are estimated for different markets.
For example, a commonly referenced study by Gillen,
Morrison and Stewart
8
found demand elasticities ranging
from -0.1 to -1.7, depending on the relevant market. It
identified various elasticity estimates for several distinct
markets for air travel, such as:
Long-Haul Price Elasticities
International Business: -0.3•
Domestic Business: -1.1•
International Leisure: -1.0•
Domestic Leisure: -1.1•
Short-Haul Price Elasticities
Business: -0.7•
Leisure: -1.5•
Key Themes
A review of the existing literature of previous studies on air
travel price elasticities shows a number of consistentthemes.
All of the studies reviewed, spanning a period of over 25
years, found that there was a significant demand response
to changes in air travel prices. The consistency of this result
strongly indicates that any policy action that results in higher
prices (e.g. passenger taxes, increased landing fees) will
result in a decline in demand. However, critically, the extent
of that decline will depend on a number of factors:
The review looked at several academic and government commissioned studies . The different studies7 produced a wide range of air travel price elasticity estimates, varying in accordance with the markets analysed, the time period assessed, the methodology used and the available data. Even within some particular studies, a range of elasticities are estimated for different markets. For example, a commonly referenced study by Gillen, Morrison and Stewart8 found demand elasticities ranging from -0.1 to -1.7, depending on the relevant market. It identified various elasticity estimates for several distinct markets for air travel, such as:Long-Haul Price ElasticitiesInternational Business: -0.3• Domestic Business: -1.1• International Leisure: -1.0• Domestic Leisure: -1.1• Short-Haul Price ElasticitiesBusiness: -0.7• Leisure: -1.5• Key ThemesA review of the existing literature of previous studies on air travel price elasticities shows a number of consistentthemes. All of the studies reviewed, spanning a period of over 25 years, found that there was a significant demand response to changes in air travel prices. The consistency of this result strongly indicates that any policy action that results in higher prices (e.g. passenger taxes, increased landing fees) will result in a decline in demand. However, critically, the extent of that decline will depend on a number of factors:
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