A dynamic demand analysis of the United States air‐passenger service

This study examines the short‐ and long‐run effects of various determinants on the demand for US air passenger‐services using the Johansen cointegration analysis and a vector error‐correction (VEC) model. Results show that, in the long‐run, airfare, disposable income and NASDAQ have significant effects on US air travel demand. The combined short‐run dynamic effects of disposable income, NASDAQ, population and airfare jointly explain changes in air passenger‐miles. Finally, we find that the 9/11 terrorist attacks drop air passenger demand by 5% during 2001:Q3–2002:Q2, which in turn pushes down the seat capacity by 4%. However, it has little impact on airfare.