The Effect of Price Elasticity of Demand in Airline Industry
Using a single elasticity for all market segments is inappropriate as elasticity in airline industry is anything but unanimously identical as an aggregated market. In air travel, ideally market segment boundaries should be defined by first separating leisure and business passengers and second longhaul and shorthaul flights. The reason is that we expect different behaviour in each of these markets. Given that no statistical figures as to elasticity in China airline market are available, the Canadian research data is employed as follow which works the similar way by nature.
The ranges of values shown capture the middle onehalf of the estimates and encompass the median, which is represented by a black dot.
As the figures indicate, elasticity values can and do differ significantly between travel distance, type of traveller and even domestic and international routes. Longhaul international business segment represents the highest price inelasticity, which means that price variation has little effect on passenger turnout. Meanwhile, shorthaul business comes second at 0.7, which is also price inelastic. Shorthaul leisure segment has the greatest absolute value of price elasticity, which means that passenger turnout is heavily influenced by pricing mechanism. In general, longhaul flight is less elastic than shorthaul

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