At the present time, the airline industry faces many
cost pressures. The industry has made remarkable
achievements in improving its efficiency. But cost
pressures continue, from record high fuel prices to
unjustified increases in charges from monopolistic airports,
to further taxes imposed by governments. Higher costs
inevitably lead to higher prices for airline passengers.
Therefore, it is crucial that reliable and appropriate
estimates are available to assess how higher prices
impact on the level of demand for air travel. This impact
will, of course, differ according to the level and location at
which prices are changed.
This report provides groundbreaking new research into
the sensitivity of air travel demand to changes in air travel
prices and incomes. It provides clear guidelines for the
appropriate use of demand elasticities and robust and
reliable estimates of their value.
Air transport provides economic benefits not just for its
passengers and cargo shippers, but also for the wider
economy by connecting businesses and individuals to
global markets. Modern, just-in-time, global supply chains
and multinational businesses are made possible by global
airline networks. Yet governments often fail to recognise
this and continue to implement air transport policies
that are not in the best interests of the aviation industry
and the wider economy. Monopolistic airports that raise
charges but do not improve the services they offer will see
passengers quickly shift elsewhere. Governments that
impose new taxes on the industry are taking advantage
of less sensitive movements in demand at the national
level to raise revenues at the industry’s expense.