Determinants of Air Cargo Demand in The European Region

Abstract

Air cargo demand estimation is crucial for every part of the air industry for determining policies, making decisions on investments, pricing, marketing, etc. This study analyses factors affecting the air cargo demand of the European Region (23 countries) where no studies were found by making use of the two-step generalized method of moments (GMM). The effects of Total Airport Investments, Consumer Price Index, GDP Per Capita, Population, Foreign Trade Volume, Industrial Production Index, and Exchange Rate on Air Cargo Demand were examined with the data set covering the years between 2009 and 2018. The findings indicated that previous air cargo demand has explanatory power on current demand, and there was an inverse relationship between the change in the consumer price index and the amount of cargo. In addition, the panel regression estimator indicates a positive relationship between Foreign Trade and Industrial Production Index. The results show that price stability is of great importance not only from a macroeconomic perspective but micro economically also.