Price elasticities in aviation and marine shipping (literature study)

At the request of RIVM, the National Institute of Public Health & Environmental Protection, CE analysed the price and income elasticities of air transport and the price elasticity of marine shipping services. This information is important for forecasting future trends in these two transport sectors and for estimating the likely effect of price changes on volume performance and on sectoral environmental impacts. A literature study was conducted to assess the impact of price changes per litre fuel, per aircraft/vessel kilometre and per passenger/freight-tonne kilometre on fuel consumption, total aircraft/vessel kilometres, total passenger/freight tonne kilometres and total tonnage transported or transhipped. With respect to air passenger transport, the majority of studies report an estimated price elasticity (passenger kilometres with respect to ticket prices) of from –0.4 to –1.2 for business flights and from –1.1 to –2.7 for holiday flights. A likely figure for aviation fuel price elasticity is between –0.2 and –0.4. Income elasticity for air passenger transport is about 1.5 for business flights and 2.0 for holiday flights. Literature on the price elasticities of air freight transport and marine shipping is too scarce for quantitative conclusions to be drawn.

Report in Dutch

Delft, November 2001