The Determinants of Domestic Air Transport Demand in Ethiopia
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Date
2016-06
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Addis Ababa University
Abstract
The main objective of this study is to investigate the determinants of Domestic air transport demand in Ethiopia during the period 2000/2001-2013/2014. The Autoregressive Distributed Lag Approach to Co-integration and Error Correction Model are applied in order to investigate the long-run and short-run relationship between the domestic passengers and its determinants. The finding of the Bounds test shows that there is a stable long run relationship between number of Domestic revenue passenger, income, airfare, price of competing services (Buses), road length and population.
The empirical results reveal that income, price of competing services and population are found to have positive impact on the domestic air transport. However, Yield has negative impact on the domestic air transport. In the short run, the coefficient of error correction term is -0.62 suggesting about 62 percent annual adjustment towards long run equilibrium. This is another proof for the existence of a stable long run relationship among the variables. The estimated coefficients of the short-run model indicate that population, income and airfare are the main contributor to the domestic air transport demand.
This study has also an important policy implication. The findings of this study imply that domestic air transport demand can be improved significantly when the price of competing service, population and income increases and airfare decreases. Hence the governmental organizations (Ethiopian Civil aviation authority, Ethiopian Airports Enterprise & Ethiopian Airlines) should have an integrated plan to optimize the benefit obtained through the development of the national economy and the population growth
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Keywords
Domestic Air Transport, Economic Policy analysis