Elasticities of demand for leisure air travel: A system modelling approach

Abstract

In this study, the UK outbound demand for leisure air travel has been examined using a demand system which takes into account the ways in which the expenditure on air fares interacts with both the expenditure on non-fare components of travel abroad and with expenditure on domestic leisure. The findings suggest that there is a strong link between total consumer expenditure and expenditure on air travel with the expenditure elasticity greater than one but that, considered in aggregate, the demand for air travel is moderately inelastic with respect to air fares alone. However, the findings also show that interactions between air travel expenditure, other costs of travel abroad, as well as expenditure on leisure activities in the UK, involve sizeable cross-price elasticities.