The Effect of the Interstate System on Short-Haul Air Passenger Demand

Abstract

When an interstate highway is completed between two cities less than 200 miles apart, some people find it more convenient to switch from air travel between the two cities to automobile or bus travel. This paper employs a multiple regression model to quantitively examine this effect of interstate highway construction on short-haul air market. Several techniques are used to isolate the impact of changing highway quality on the short-haul air market from a myriad of other influencing factors. The city-pairs chosen for the regression sample are all between 105 and 185 miles apart so that the distance variable is constrained. An “airport use” variable is introduced to reflect changing environmental demand determinants such as income and population. The regression is run in first difference form, which eliminates multi-collinearities as well as the influence of static factors. Finally, quarterly data is used rather than yearly data to provide more degrees of freedom, and quarters are compared with the same quarters in an earlier year to eliminate the effect of seasonal variations. The coefficients of the resulting regression indicate two important conclusions. First, short-haul air markets are growing only about half as fast as the air market as a whole. Second, a significant number of travelers do switch from airplane travel to automobile travel when an interstate highway is made available for a one hundred to two hundred mile trip.