Air Travel Prices
and Total otal Travel Costs
There often appears to be some confusion in policy discussions about the sensitivity of airline passengers to the cost of travel. Some researchers have questioned whether estimated air travel price elasticities are consistent with changes in the total cost of travel (which may also include hotel, ground transport to/from the airport, food, entertainment, etc). In particular, there is an apparent paradox whereby:
Passengers are becoming increasingly sensitive • to price, led by the boom in low cost travel, the transparency brought by the Internet and the intense competition on deregulated markets.