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Direct air transport and demand interaction: A vector error-correction model approach

Journal Article


Abstract


  • The goal of this paper is to impose a cause-effect structure into the relation between tourism demand and air transport capacity. Specifically, we apply a vector error-correction model to assess if, and to what extent, capacity or passenger demand are first-movers that return to long-run equilibrium following short-run deviations. Using data on international aviation between Australia and our test cases of China and Japan, we find that demand on the Japan-Australia market corrects for short-run deviations from the long-run equilibrium quicker than the China-Australia market. Reasons for such variation in adjustment speeds are discussed and we show that the results are robust to the phenomenon of airlines pre-empting demand when setting capacity.

Authors


  •   Koo, Tay T. R. (external author)
  •   Tan, David T.
  •   Duval, David Timothy (external author)

Publication Date


  • 2013

Citation


  • Koo, T. T. R., Tan, D. T. & Duval, D. (2013). Direct air transport and demand interaction: A vector error-correction model approach. Journal of Air Transport Management, 28 14-19.

Scopus Eid


  • 2-s2.0-84875811249

Has Global Citation Frequency


Number Of Pages


  • 5

Start Page


  • 14

End Page


  • 19

Volume


  • 28

Place Of Publication


  • United Kingdom

Abstract


  • The goal of this paper is to impose a cause-effect structure into the relation between tourism demand and air transport capacity. Specifically, we apply a vector error-correction model to assess if, and to what extent, capacity or passenger demand are first-movers that return to long-run equilibrium following short-run deviations. Using data on international aviation between Australia and our test cases of China and Japan, we find that demand on the Japan-Australia market corrects for short-run deviations from the long-run equilibrium quicker than the China-Australia market. Reasons for such variation in adjustment speeds are discussed and we show that the results are robust to the phenomenon of airlines pre-empting demand when setting capacity.

Authors


  •   Koo, Tay T. R. (external author)
  •   Tan, David T.
  •   Duval, David Timothy (external author)

Publication Date


  • 2013

Citation


  • Koo, T. T. R., Tan, D. T. & Duval, D. (2013). Direct air transport and demand interaction: A vector error-correction model approach. Journal of Air Transport Management, 28 14-19.

Scopus Eid


  • 2-s2.0-84875811249

Has Global Citation Frequency


Number Of Pages


  • 5

Start Page


  • 14

End Page


  • 19

Volume


  • 28

Place Of Publication


  • United Kingdom