Demand Patterns in Air Passenger Transportation: Application of Gravity Model

This chapter presents an econometric model of estimating passenger demand levels by employing a gravity model on selected countries, which include Kenya, Tanzania, Uganda and Rwanda. The purpose of the model development is to determine whether the volume of passenger traffic between the city pairs is sufficient to justify direct, point-to-point flight connections between city pairs, as inherent in the low-cost model. Gravity Model is widely used by transportation researchers, airlines and consultants to determine the demand potential between city and country pairs. It has been found to be extremely useful and preferable to predict demand. The primary objective is to identify the relevant parameters, which are observed to have a strong correlation in determining the traffic forecasts. The selection of parameters is conducted under the ambit and essence of the Gravity Model. Since this chapter is examining the East African markets, the assumption is that the strength of attraction between two places is conditioned by their economic mass and the distance between them is predicted to inversely affect the strength of attraction. The volume of traffic between origin (i) and destination (j) is therefore given by the magnitude of traffic between cities and is thus similar to the gravitational pull between masses. It is clear from the research findings that most routes present sufficient demand levels to justify direct point-to-point services between the sample city pairs at a typical European low-cost aircraft configuration.