For air transport there are five main levels (for the scope of the market) for which demand elasticities can be estimated:
•Price Class Level. This is the most disaggregate level, where passengers make a choice between different price classes (e.g. first class, business class, economy class) on individual airlines. At this level, the elasticities are arguably highest, with passengers easily able to switch between price-class levels and airlines, while also (in some cases) having the option to use another mode of travel or simply to choose to not travel (i.e. other activities act as a substitute for air travel).
•Airline / Air Carrier Level. This reflects the overall demand curve facing each airline on a particular route. Where there are a number of airlines operating on a route , the demand elasticity faced by each airline is likely to be fairly high. If an airline increases its price unilaterally, it is likely to lose passengers to other airlines operating on that route.5
•Route / Market Level. At the route or market level (e.g. London Heathrow–Paris CDG or London-Paris), the elasticity response is expected to be lower than at the price class or carrier level. Travellers faced with a travel price increase on all carriers serving a route (e.g. due to an increase in airport fees and charges), have fewer options for substitution. However, they can still choose to travel on an alternative route, while also (in some cases) having the option to use another mode of travel or simply choose to not travel.
•National Level. At the national level, travel price elasticities are expected to be lower, as travellers have fewer options for avoiding the price increase. For example, if a national government imposed a new or increased tax on aviation, travellers could only avoid this increase by travelling elsewhere, using another mode (which may not always be possible), or choosing not to travel. For example, if the UK government imposed an increased tax on aviation departures, UK residents travelling to mainland Europe could respond by travelling by Eurostar or by ferry, or choose not to travel. Similarly, travellers in France could respond by travelling to the UK by another mode or by switching their destination to another country, such as Germany or Spain.
•Supra-National Level. This represents a change in prices that occurs at a regional level across several countries. For example, an aviation tax imposed on all member states of the European Union. In this case, the elasticity is expected to be even lower, as the options for avoiding the price increase are even further reduced.
For air transport there are five main levels (for the scope of the market) for which demand elasticities can be estimated:•Price Class Level. This is the most disaggregate level, where passengers make a choice between different price classes (e.g. first class, business class, economy class) on individual airlines. At this level, the elasticities are arguably highest, with passengers easily able to switch between price-class levels and airlines, while also (in some cases) having the option to use another mode of travel or simply to choose to not travel (i.e. other activities act as a substitute for air travel).•Airline / Air Carrier Level. This reflects the overall demand curve facing each airline on a particular route. Where there are a number of airlines operating on a route , the demand elasticity faced by each airline is likely to be fairly high. If an airline increases its price unilaterally, it is likely to lose passengers to other airlines operating on that route.5•Route / Market Level. At the route or market level (e.g. London Heathrow–Paris CDG or London-Paris), the elasticity response is expected to be lower than at the price class or carrier level. Travellers faced with a travel price increase on all carriers serving a route (e.g. due to an increase in airport fees and charges), have fewer options for substitution. However, they can still choose to travel on an alternative route, while also (in some cases) having the option to use another mode of travel or simply choose to not travel.•National Level. At the national level, travel price elasticities are expected to be lower, as travellers have fewer options for avoiding the price increase. For example, if a national government imposed a new or increased tax on aviation, travellers could only avoid this increase by travelling elsewhere, using another mode (which may not always be possible), or choosing not to travel. For example, if the UK government imposed an increased tax on aviation departures, UK residents travelling to mainland Europe could respond by travelling by Eurostar or by ferry, or choose not to travel. Similarly, travellers in France could respond by travelling to the UK by another mode or by switching their destination to another country, such as Germany or Spain.•Supra-National Level. This represents a change in prices that occurs at a regional level across several countries. For example, an aviation tax imposed on all member states of the European Union. In this case, the elasticity is expected to be even lower, as the options for avoiding the price increase are even further reduced.
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