MBAA 523 Advanced Aviation Economics - Discussion

This activity will allow you to check your understanding of the theory of supply and demand against airline data.  In 2008, the world entered the worst recession since the Great Depression of the 1930s.   Of course, many people lost their jobs and houses while others became uncertain about their financial future.  Use the theory of supply and demand to predict the effect the recession would have on airline demand (the willingness and ability of people to purchase airline tickets), supply (the willingness and ability of airlines to provide flights), and price (the average price of an airline ticket). 

The federal government collects and makes an immense amount of data on the US economy available to the public, including large airline datasets.  To find airline statistics, go to the Bureau of Transportation Statistics website at http://www.transtats.bts.gov/ (Links to an external site.).  Then select “Browse Statistical Products and Data” from the menu.  You will find several airline statistics on the “Airline Data Transtats” page.  More data are available on the “Airline Information” page.   Pricing data are found in a table of national fares located under Data and Statistics/Air Fares Data/National Level Fares since 1995. Use the quarterly data, U.S. Average (Inflation-Adjusted $).  Here’s a link:  http://www.rita.dot.gov/bts/airfares/national/table

Choose one or two airline statistics that you believe would be pro or countercyclical with the recession.  Post your findings.  Explain your initial predictions.    Although not required, a graphical depiction would be helpful.  Then discuss whether the data support your predictions.  Graphs of the data are easily prepared in Excel.  Again, these are not required, but would be helpful. 

A few airline terms will be helpful. Airline supply is usually measured in Available Seat Miles (ASM). Measures of demand are Revenue Passenger Miles (RPM) and Enplanements. Passenger Load Factor is yet another indication of demand.