Business travel will continue to increase but discretionary travel will provide

Business travel will continue to increase but

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Business travel will continue to increase, but discretionary travel will provide the majority of new passengers. The growing middle class will have sufficient disposable income to choose air travel for pleasure. As ethnic groups disperse across the world, travel to visit or reunite relatives, known as visiting friends and relatives in the industry, will increase. Increasing leisure time, on the other hand, spurs travel to holiday destinations. Air Cargo Growing world trade also increases the demand for air cargo. The historical growth in air cargo as shown in Figure 2.5 is similar to the growth of passenger traffic (Figure 2.1); however, air freight is more closely tied to the world business cycle. Note, for example, the more than 10% drop in cargo volume during the Great Recession beginning in 2008. In fact, air freight volume is one indicator of the current state of business. Air freight is much more expensive than competing forms of land and sea transportation, so air cargo is limited to high value-low volume, perishable, and emergency freight. Figure 2.5 shows that air cargo has grown at an average of 5.5% since 1980, but periods of negative growth are also evident. Figure 2.5 Air Cargo Growth. Source: Boeing, 2012 Forecasting Air Travel Demand Forecasts of future demand are the basis for planning and essential to manufacturers, airlines, airports and most other aviation-related firms. Long-term forecasts of air transport demand are most important for aircraft manufacturers because of the length of time and expense in developing and marketing new aircraft. New aircraft will likely be in service for thirty or more years, so the manufacturers’ horizon is long. Airports and airlines also depend on long-range forecasts to accommodate passenger and freight demand. Both Airbus and Boeing develop 20 year forecasts which are updated and published annually (Airbus, 2012; Boeing 2012). As Boeing states, “The forecast has
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Demand for Air Transportation 36 several important practical applications. It helps shape our product strategy and provides guidance for our long-term business planning. We have shared the forecast with the public since 1964 to help airlines, suppliers, and the financial community make informed decisions.” (Boeing, 2012, p. 1). Macro Forecasting Macro estimates of air travel demand usually begin with gross domestic product to which it is closely correlated. Gross domestic product is the market value of all final goods and services produced in a country during a given period of time, usually one year. Individual country GDPs can be aggregated to obtain a world region GDP or a global GDP.Figure 2.6 shows the close relationship between air travel and GDP. Figure 2.6 Air Travel and GDP. Source: Airbus, 2012 Note in Figure 2.6, the different scales for the percentage annual change in air traffic, measured in revenue passenger kilometers (RPK),and the change in GDP; RPK change is on the left vertical axis while GDP change is on the right. The high correlation between the two metrics is clear, but RPKs have historically grown faster than GDP.
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  • Fall '16
  • Kelly Lawton
  • United Airlines, Delta Air Lines, Pan American World Airways, Cab, Douglas DC-3

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