InterVISTAS Consulting reviewed the available literature
on demand elasticities. The review of previous studies
helps to provide a greater understanding of air travel price
elasticities and provides important insights for the new
econometric analysis. The different studies 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.
Nevertheless, the previous studies do show a number of
consistent themes. All of the studies reviewed found that
there was a significant demand response to changes in
air travel prices. This indicates that any policy action that
results in higher air travel prices (e.g. passenger taxes,
increased landing fees) will result in a decline in demand.
Critically, however, the extent of that decline will depend
on a number of factors