International air transport demand: drivers and forecasts in the Indian context

Abstract

Purpose – This paper aims to provide a framework for the airlines to forecast demand, specifically on international routes operated from major metros of the USA and position their services by designing the service positioning matrix. Major benefits include route contemplation, effective fleet scheduling, decisions on aircraft and fuel purchases and developing optimal fare policies. Much effort has been directed to developing forecasts of air transport demand, particularly by airline companies and professional bodies in the air transport industry. However, detailed analysis of the characteristics of demand for air transport over long-haul or international routes is less researched. Design/methodology/approach – Major methodologies used were regression, time series analysis – Holts’ exponential smoothing method. Two econometric models are formulated that capture the direct and indirect drivers of airline demand in the Indian context. Forecasts of demand are made over the next seven years until 2020. Findings – It is interesting to find that demand not only is influenced by direct parameters such as population- and behavior-oriented parameters such as income, but the macroeconomic environment of the country concerned also plays a major role in demand origination. Variables like investment, gross domestic product, etc. contribute a lot in terms of international airline demand. It is also expected that in the Indian context, demand is on a spike path over the next seven years considering the macroeconomic environment and other general economic conditions. Research limitations/implications – This paper is developed and applied in the Indian context. Results may change when applied to different countries depending on their macroeconomic conditions. Practical implications – This study will be useful for any airline in route planning, and in formulating major policy decisions. Other benefits include effective fleet scheduling, decisions on aircraft and fuel purchases and developing optimal fare policies. Originality/value – This paper adds to the existing literature by developing two demand drivers’ models in the Indian context. It is first such attempt to analyse the Indian aviation industry ever since the Indian economic liberalization in 1991. Forecasts provided yield major benefits for airlines operating to and from India.