The Demand for Air Travel

Air travelers fall into two distinctly different categories: those traveling for business reasons and those traveling for personal reasons. Business travelers must travel at specific times and to a specific destination. Timeliness is important to business travelers, and they cannot be persuaded to go at another time or to another destination. Personal travelers may have considerable latitude in the choice of destination and time, and a lower price may even persuade them to make a trip they had not been planning.


Analysis of the growth in business and personal air travel in various regions of the world shows that it is highly correlated with regional gross domestic product (GDP) and that personal air travel is also correlated with decreasing average yields. Air travel grew very rapidly in the United States in the 1938–1978 period and in Europe in the 1960–1980 period, and it is now growing very rapidly in Asia along the Pacific Rim.

For example, in the period from 1938 to 1958, U.S. domestic air transport grew at an annual rate of 21% (doubling in less than five years), decreasing to 10% in the jet era (1958–1978) and to 5% in the wide-body era since 1978. Growth rates in Asia have been in the 10% to 15% range, corresponding to rapid growth in GDP in that area, and are expected to be at least 8% in the 1990s.

U.S. domestic air travel, which was 68% of the world market in 1945 declined to roughly 30% in the 1990s, but this was still higher than the 25% share of the world's economy that the U.S. GDP represents. In terms of revenue passenger miles (RPM) per capita, North Americans average 1,740 air miles per person annually, four times the European average and much more than that of other areas of the world. In 1960 fewer than 10% of U.S. adults had taken at least one flight within the year. In 1990 this value had risen to more than 31%, and for adults whose annual household income was over $60,000 it was 63%.

The fear of flying by the traveling public, once a great concern of the airline industry, has virtually disappeared, as evidenced by the fact that U.S. travelers very rarely purchase flight life insurance, since the risks of death per boarding are now less than one in 10 million for U.S. domestic flights. (The risks for commercial flights in other parts of the world, while also improving, are ten times higher.)

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