Air Travel in Small Communities: An Econometric Framework and Results

Abstract

In this paper, we examine the relationship between origin and destination (O&D) travel and local area characteristics for small communities. By combining data from Bureau of Transportation Statistics/United States Department of Transportation (BTS/DOT) on O&D travel with that of local area economic and demographic activities supplied by the United States Bureau of Economic Analyses (BEA), Department of Commerce, we specify a semi-log linear demand relationship for O&D travel in small communities. The resultant dataset covering the period 1999-2000 has more than 4,700 observations; 2,686 for communities without any small hubs, and 2,087 for communities with small hubs. Using a weighted least squares method, we estimate demand for air travel, defined by O&D pairs, for smaller communities. Our results indicate that average fare affects passenger demand negatively for both types of communities. Our results also confirm that local area income affects travel positively in both cases. However, the levels of travel tend to be affected by population differently; origin population affecting traffic negatively for smaller communities without any hub and positively for communities with small hubs. Presence of smaller hubs affects air travel positively; and market concentration of airlines affects O&D travel negatively. We demonstrate in this paper that factors affecting the economic framework are the ultimate factors driving the demand for air travel in the small communities in the long run. We also discuss approaches using our methodology for deriving bottom-up projections. These projections have distinct characteristics that may make them more useful for analyzing flow features, such as passenger and aircraft flows by local areas, determining and prioritizing infrastructure investment requirements by local areas, and determining revenue potential from these travels.