Empirical estimation of price and income elasticities of air cargo demand: The case of Hong Kong |
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| Institution: | 1. Fung Business Intelligence Centre, Fung Group, Hong Kong;2. Department of Logistics and Maritime Studies, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong;3. Sauder School of Business, University of British Columbia, Canada;1. Logistics Engineering College, Shanghai Maritime University, Shanghai, China;2. Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hong Kong;1. Air Transport and Operations, Faculty of Aerospace Engineering, Delft University of Technology, Building 62 Kluyverweg 1, 2629 HS Delft, Netherlands;2. Transport & Planning, Faculty of Civil Engineering and Geosciences, Building 23 Stevinweg 1, 2628 CN Delft, Netherlands;3. Engineering Systems and Services, Faculty of Technology, Policy and Management, Building 31 Jaffalaan 5, 2628 BX Delft, Netherlands;1. Department of Shipping and Transportation Management, National Kaohsiung Marine University, 142 Hai-Jhuan Road, Nan-Tzu, Kaohsiung, 811, Taiwan, ROC;2. Department of Shipping and Transportation Management, National Kaohsiung Marine University, Taiwan, ROC |
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| Abstract: | This paper estimates the price and income elasticities of air cargo demand and examines how they may change after the 2008 financial crisis. Using a set of time series data, we simultaneously estimate the aggregated demand and supply functions of air cargo at Hong Kong International Airport (HKIA). We find that during the entire sampling period of 2001–2013, the price elasticity for air cargo transport demand at HKIA ranges from −0.74 to −0.29, suggesting that air cargo demand in Hong Kong reacts negatively to price (as expected) but does not appear to be very sensitive to price. The income elasticity ranges from 0.29 to 1.47 and appears sensitive to seasonality adjustment approaches. However, in terms of the speed of changes, air cargo demand changes much faster than overall economy, indicating the presence of a pro-cyclical pattern of air cargo traffic with respect to the overall economy. Our analysis shows that air cargo demand becomes more sensitive to changes in both price and income after 2008. |
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| Keywords: | Air cargo Cargo demand Price elasticity Income elasticity Hong Kong |
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