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Observations of fundamental changes in the demand for aviation services

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  • Mason, Keith J.

Abstract

This paper addresses the seemingly inexorable decline in yield in the airline industry. The external shocks to the industry of the terrorist attacks of 9/11/2001, wars in Afghanistan and the Arabian Gulf and SARS all had downward impacts on the demand for air travel. However, these effects mask a more fundamental change in the demand for aviation services. The analysis uses published sources and a survey of 264 travellers to examine the fall in yields. The traffic mix of economy, business and first class passengers is shown to have changed over a 10year period as proportionally more travellers choose to use economy class products. This combined with a fall in yield by a third in this cabin during the same period has lead to a significant fall in industrywide yields. Behavioural shifts in business travel and leisure demand are examined. Business travellers have switched from business class products as the difference between business class and leisure fares have increased significantly and as economy class and low-cost carrier products are increasingly viewed as acceptable for business traveller needs, particularly in short-haul markets. Leisure travel has increased as low-cost carriers have introduced low fares, generating new traffic and winning market share from scheduled and charter airline competitors alike.

Suggested Citation

  • Mason, Keith J., 2005. "Observations of fundamental changes in the demand for aviation services," Journal of Air Transport Management, Elsevier, vol. 11(1), pages 19-25.
  • Handle: RePEc:eee:jaitra:v:11:y:2005:i:1:p:19-25
    DOI: 10.1016/j.jairtraman.2004.11.007
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    References listed on IDEAS

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    1. Mason, Keith J., 2001. "Marketing low-cost airline services to business travellers," Journal of Air Transport Management, Elsevier, vol. 7(2), pages 103-109.
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    1. Tsai, Dungchun & Chang, Shaochi & Chen, WeiWei & Tran, Chau-lan, 2008. "The market valuation of new route announcements," Journal of Air Transport Management, Elsevier, vol. 14(5), pages 252-256.
    2. Lu, Jin-Long & Peeta, Srinivas, 2009. "Analysis of the factors that influence the relationship between business air travel and videoconferencing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(8), pages 709-721, October.
    3. Koo, Tay T.R. & Wu, Cheng-Lung (Richard) & Dwyer, Larry, 2010. "Ground travel mode choices of air arrivals at regional destinations: The significance of tourism attributes and destination contexts," Research in Transportation Economics, Elsevier, vol. 26(1), pages 44-53.
    4. Nucciarelli, Alberto & Gastaldi, Massimo, 2009. "Collaboration in the airport business through the development of an IT platform," International Journal of Production Economics, Elsevier, vol. 121(2), pages 562-573, October.
    5. Ryley, Tim & Davison, Lisa, 2008. "UK air travel preferences: Evidence from an East Midlands household survey," Journal of Air Transport Management, Elsevier, vol. 14(1), pages 43-46.
    6. Pitfield, D.E., 2008. "Some insights into competition between low-cost airlines," Research in Transportation Economics, Elsevier, vol. 24(1), pages 5-14.
    7. Lohmann, Gui & Vianna, Camila, 2016. "Air route suspension: The role of stakeholder engagement and aviation and non-aviation factors," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 199-210.
    8. Anger, Annela & Köhler, Jonathan, 2010. "Including aviation emissions in the EU ETS: Much ado about nothing? A review," Transport Policy, Elsevier, vol. 17(1), pages 38-46, January.
    9. repec:dau:papers:123456789/6792 is not listed on IDEAS
    10. Teichert, Thorsten & Shehu, Edlira & von Wartburg, Iwan, 2008. "Customer segmentation revisited: The case of the airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(1), pages 227-242, January.
    11. Martínez-Garcia, Esther & Ferrer-Rosell, Berta & Coenders, GermÃ, 2012. "Profile of business and leisure travelers on low cost carriers in Europe," Journal of Air Transport Management, Elsevier, vol. 20(C), pages 12-14.
    12. Kopsch, Fredrik, 2012. "A demand model for domestic air travel in Sweden," Journal of Air Transport Management, Elsevier, vol. 20(C), pages 46-48.
    13. Eugenio-Martin, Juan L. & Inchausti-Sintes, Federico, 2016. "Low-cost travel and tourism expenditures," Annals of Tourism Research, Elsevier, vol. 57(C), pages 140-159.
    14. Mason, K.J., 2007. "Airframe manufacturers: Which has the better view of the future?," Journal of Air Transport Management, Elsevier, vol. 13(1), pages 9-15.
    15. Sheu, Jiuh-Biing, 2014. "Airline ambidextrous competition under an emissions trading scheme – A reference-dependent behavioral perspective," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 115-145.
    16. Lara Gitto & Fulvio Minervini, 2007. "The Performance of European Full Service Airlines after Liberalisation: An Econometric Analysis," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 105-122, January-F.
    17. Maertens, Sven, 2011. "The market potential of all-premium class services on medium haul leisure routes from Germany," Journal of Air Transport Management, Elsevier, vol. 17(3), pages 181-186.
    18. Fan, Terence Ping Ching & Lingblad, Mats, 2016. "Thinking through the meteoric rise of Middle-East carriers from Singapore Airlines' vantage point," Journal of Air Transport Management, Elsevier, vol. 54(C), pages 111-122.
    19. Koo, Tay T.R. & Tan, David T. & Duval, David Timothy, 2013. "Direct air transport and demand interaction: A vector error-correction model approach," Journal of Air Transport Management, Elsevier, vol. 28(C), pages 14-19.
    20. Hugon-Duprat, Cindy & O'Connell, John F., 2015. "The rationale for implementing a premium economy class in the long haul markets – Evidence from the transatlantic market," Journal of Air Transport Management, Elsevier, vol. 47(C), pages 11-19.
    21. Adler, Nicole & Gellman, Aaron, 2012. "Strategies for managing risk in a changing aviation environment," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 24-35.
    22. repec:dau:papers:123456789/6794 is not listed on IDEAS
    23. Pels, Eric, 2008. "Airline network competition: Full-service airlines, low-cost airlines and long-haul markets," Research in Transportation Economics, Elsevier, vol. 24(1), pages 68-74.

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