Determinants of air travel demand in Middle Income Countries

• We claim that that the income elasticity is the most important determinant and that it is slightly higher than one.
• The income growth multiplied by the income elasticity accounts for the 75 percent of total passenger growth.
• Public policies such as open skies agreements with the European Union have a positive effect on passenger growth.
• Structural changes such as Low Cost Carrier growth have a marginal effect on passenger growth.

The aim of this paper is to calculate the effects of air travel demand determinants in Middle Income Countries (MICs). Through static and dynamic panel data models from 32 countries during the period from 2002 to 2008, we found that the income elasticity is the most important determinant and that it is slightly higher than one. Income growth multiplied by income elasticity accounts for 75 percent of total passenger growth. Public policies such as an open skies agreements with the European Union have a positive effect on passenger growth, whereas structural changes, such as Low Cost Carrier (LCC) growth, have a marginal effect.