CLIMATE & DEBATES - Is the long-run Demand for Air Transportation

While in the past the ever-increasing Gross Domestic Product (GDP) growth rate, the decreasing cost of air travel, the higher discretionary incomes, the improved levels of education, the population growth, and the increasing urbanisation rate were all signals that (correctly) led to hypothesize a growth in the air travel demand, the evolutions of some of these factors in the future has the potenti. [...] From a theoretical point of view, the model that will be used to forecast the US domestic air travel demand is relatively simple: the air travel demand has been determined in the past by the Gross Domestic Product and by the price of tickets (namely, airfares) and the main assumption is that these same drivers will influence the evolution of domestic air travel demand in the future as well. [...] 2 2.1 The demand for air travel As stated in the introduction, the purpose of this paper is to build an economic reduced-form model able forecast the evolution of the domestic air travel demand in the United States for the next 27 years. [...] In particular, even by assuming that the rate of productivity growth continues at the same rate of the last thirty years, the economic growth in the US is likely to be affected by different factors including the negative effects of climate change, the government fiscal imbalance, and the increasing income inequality (Gordon 2012, Gordon 2014). [...] From the simple approach retained in this paper, two main results emerge: first, the domestic air travel demand in the US is not set to decline anytime soon since the GDP growth and the reduction in the (real) airline ticket prices will still represent the main driver of growth of the aviation industry; and second, the Federal Aviation Administration’s projections appear to be slightly overoptimis.