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Long range forecasting of domestic and international boarding pasengers at Canada airports by multiple regression analysis Gamey, Ronald Kenneth

Abstract

The purpose of this thesis is to attempt to explain the forces behind the past growth of Canadian air travel and to use the explanation as a basis for forecasting the long-run growth of Canadian air travel. The forecasting attitude adopted in this study is that of the Department of Transport wishing to quantitatively forecast, to 1975, total Canadian domestic and international air passenger boardings independent of other modes, on the basis of average total Canadian data. Accurate forecasts are important to the Department of Transport since new airports cannot be constructed instantaneously, but at the same time, premature construction of airports is undesirable. There are a great variety of forecasting methods. Due to the problems of inadequate Canadian air passenger travel data, however, the author felt that the only appropriate quantitative method of forecasting air passenger boardings at the major Canadian airports, would be with dynamic and static, multiple regression models. The dynamic model is a new approach at forecasting air passenger boardings, since at the time of this study, not one example of its use in forecasting air passenger boardings could be found. The dynamic model of this thesis expresses the idea that current decisions are influenced by past behavior i.e. habit formation. Also, although there are many examples of the use of a static model for forecasting air passengers, the form of this study's static models is quite unique since it tries to take into account the increasing air travel elasticity of rising per capita incomes. There are many factors affecting demand but it was not possible to provide explicitely in multiple regression forecasting formulas for all of them because of the complexities involved and the lack of data with respect to some of them. It was found that one of the major factors affecting future boardings per capita will be fare policy. The long-run fare elasticity was found to be approximately -2.30. In forecasting air passenger boardings, five different assumptions were made with respect to future fare levels. The growth patterns of each of this thesis's five air passenger boarding forecasts based on the five future fare assumptions had two things in common: (1) all showed a declining rate of growth both in terms of boardings per capita and total Canadian boardings and (2) all showed absolute annual increments which in general increased from year to year throughout the entire forecast period. These two trends are both major characteristics of a growth industry which has not yet matured. An average annual decrease of 0.1334 current cents in the air passenger yield per passenger-mile seems the most reasonable future fare assumption. If this is so, the growth of total air passenger boardings will progressively decline from a 7.81 percent increase in 1968 to a 6.54 percent increase in 1975 and the growth of boardings per capita will progressively decline from a 5.07 percent increase in 1968 to a 4.35 percent increase in 1975. This forecasted growth is much lower than in the historical period of 1955-1966 when the average percent growth in total boardings was 11.4 percent and in boardings per capita was 8.48 percent. Of course, national forecasts of total domestic and international air passenger boardings are of little value in comparison to air passenger boarding forecasts of individual Canadian cities. Fortunately, the largest twenty-five air transportation hubs, which have accounted for 89 percent to 93 percent of the total of all Canadian air passenger boardings in the past, have through time each maintained a generally consistent relationship to the national total. Thus, by fitting numerous least-squares trend curves through each community's past percentage of national air passenger boardings and modifying where necessary because of the advice of experienced people in Canadian air travel, forecasted percentages of total Canadian boardings were arrived at for each of the largest twenty-five Canadian air transportation hubs.

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