This report discusses the key findings from extensive research undertaken on behalf of IATA by InterVISTAS Consulting Inc. to estimate air travel demand elasticities applicable to a wide range of air transport markets. It provides important new evidence for estimating elasticities in different locations and scenarios, based on access to comprehensive air travel databases. It builds upon previous academic research into air travel demand elasticities.
The report is structured as follows:
What are Demand Elasticities?
Chapter 3 provides definitions for different categories of demand elasticities and discusses how each can be interpreted. It outlines three key concepts: price elasticity of demand, cross-price elasticity of demand and income elasticity of demand. It also discusses key factors that influence both the demand for air transport and the sensitivity of this demand to changes in prices and incomes.
How can this be applied to air travel demand?
Chapter 4 discusses the different types of demand elasticity that can be estimated for air travel. It discusses how the relevant demand elasticity can change in relation to the market size and its geographical location.
Previous estimates
Chapter 5 summarises the key findings from the review undertaken by InterVISTAS Consulting Inc. of previous academic studies that have estimated air travel demand elasticities. It outlines the wide range of estimates that have been produced, as well as the common themes between the majority of the studies.
New evidence for air travel demand elasticities
Chapter 6 outlines the key findings from a comprehensive econometric analysis of the data from three key air travel data sources. The results from this analysis provide important new evidence of the relevant demand elasticity in different markets.
What does this mean for air transport policymakers?
Chapter 7 discusses how this new evidence can be applied to air transport policy decisions. It provides guidelines for the application of air travel demand elasticities for different types of decisions. It helps to ensure that policy decisions are made on the basis of appropriate and reliable estimates of their impact on demand.
Chapter 8 provides a summary and conclusions.