Though 'Price' is a major determinant of demand for any product or service,
it is not the sole determinant of demand for air transportation, because the
demand for air transportation also depends on several other determinants such as:
Factors affecting Demand of Air transportation
- The availability of seats,
- Time of a flight,
- Availability of alternative travel options,
- Local government regulations and restrictions,
- Weather, war etc. For instance Countries closing their national borders due to
The price a of an airline ticket plays a crucial role in creating a
demand for an airline. E.g. Ticket price from Delhi to Ranchi via Indigo
Airlines is 2500/- and via Vistara is 3000/- with both flight timings being
nearly the same. A consumer would prefer to take the cheaper air ticket.
- Competitor's Price:
If the competitor airline lowers its ticket price it
automatically creates a negative demand for other airlines because - Consumers
would prefer a cheaper airfare and many people who earlier were unable to afford
the ticket can now avail one.
- Income of the consumer:
Increase in income of the consumer is directly
proportional to the demand of air transportation. Eg. Due to Covid many people
lost their jobs or experienced pay-cuts, these people would now cut their travel
expenditure or switch to cheaper modes of travel.
- Level of development of the local economy:
Development level of an economy is
again directly proportional to demand for air travel i.e. rapid increase in
business avenues like manufacturing and export hubs or tourism would cause
increase in Air travel.
- Availability and possibility of alternative mode of transportation:
e.g. For travelling to Jaipur from Delhi, various modes of travel are available -air,
train, bus and car. The travelers need to choose based on the urgency to travel,
cost involved, time and experience.
- Benefits and amenities received from the transportation:
If Air Transport
provides comfort and safety to passengers and goods transported, saving time and
effort as compared to other alternatives, it would create demand for more
options to be available.
- Advertising, Sales & promotion:
Airlines which spend on advertising and
promotion can gain more demand for their service as compared to the ones who
advertise less. Taking reference from Porter's 4P's theory promotion is an
important element in creating demand.
- Frequency of services:
If there is increase Demand for flights for a particular
sector where none exists or present capacity is falling short, it would lead to
more supply options and subsequent increase in frequency of air services.
- Loyalty programs:
Frequent flying programs provide lucrative benefits/incentives
to the travelers thereby alluring them to travel with them.
Due 9/11 the air travel demand had reduced considerably as people
were scared to travel.
Since last 2 years the air transportation has suffered a
setback as the countries have closed their borders on and off to curb the spread
of Covid virus.
war situation in Ukraine is making airlines avoid the airspace above the
conflict zone thereby carrying more fuel resulting in increase in price and also
increasing flight times.
Weather- in case of volcanic eruptions or storms the flights tend to get
cancelled or re-routed thereby affecting demand for alternate routes and
Development of tourism in other countries:
e.g. All flights in to tourist
destinations like Maldives and Nepal usually stop over at Mumbai or Delhi
respectively increasing the flights to these airport hubs.
Supply in air transportation refers to the number of seats or number of trips
that can be provided by an airline at a given price and given period of time. In
air transportation, Supply is not based on demand, it exists irrespective of
Factors affecting Supply of Air transportation
- Nature of Commodity:
Based on nature, commodities are divided into perishable
goods and durable goods. In air transportation, the seats fall under perishable
goods which render the supply less elastic.
- Price of tickets:
Price is directly proportional to Supply. When the price of
air tickets increase, the airlines want to increase their supply but because the
no of seats in a aircraft is fixed they can do so only by flying more frequently
which again may or may not be possible.
- Price of resources:
This is inversely related to Supply. Resources can refer to
raw materials used to manufacture an aircraft, fuel (ATF) used to fly an
aircraft, the staff etc. any increase in price of the resources would affect the
supply. Eg. Increase in price of ATF would lead to increase in cost of flying
the aircraft which would severely impact an airline because if the airline were
a loss-making venture it would want to reduce operations inorder to reduce cost
and sustain in the market.
Thus, reducing the Supply. For instance, during Covid
pandemic many airlines who had placed orders for new aircrafts prior to pandemic
to increase their fleet have either cancelled the same or are still waiting its
delivery. Deliveries of these aircrafts have been slow on account of several
reasons where one of them is the availability of raw materials to manufacture an
for instance improvement in technology can reduce consumption of ATF
by aircrafts which would reduce the cost of flying an airplane. This would
ensure that that the airlines continue operations. With technological
improvements and adoption of new technologies such use of Artificial
Intelligence (AI) in air transport, the overall cost of running an airline or
- Entry of new service providers:
When new airlines come into the market , they
tend to increase the supply as now more seats are available to the travelers,
more options to travel to different part of the globe would open up.
- Government policies and regulations:
Eg. Closing of national borders to curb the
spread of Covid-19 resulted in no air travel as flights had stopped flying
thereby reducing the supply
Contemporary developments bring changes in these factors. For instance, the UDAN
scheme in India enhanced the regional connectivity thereby affecting both demand
and supply in air transportation. Further the increase in Low-cost carriers
(LCC) are enabling people from all income groups to enjoy travelling by air.
technological developments in areas like navigation have made air transportation
possible in areas which earlier were just a dream thus giving rise to demand if
air travel in those areas. As stated above the technological advancements also
help in less consumption of fuel which reduces the cost of running an airline
thereby reducing the price of ticket which results in increase in demand.
pandemic situation caused the governments to take policy decisions to close
their national borders for certain time period which affected both demand and
supply of air travel. The unrest situation in Afghanistan, Syria or Ukraine etc
do affect the demand and supply of air transportation.
Thus, we see that any changes that happen in the world whether good or bad,
technologically or politically, they bring about changes in the factors
affecting the Demand & Supply for air transportation.