Structure and dynamics of the core US air travel markets: A basic empirical analysis of domestic passenger demand

The air transportation industry in the US has undergone significant restructuring since 2001. While adjustments in costs have been the focus of the industry, changes in the demand structure have also occurred. This paper analyses the structure and dynamics of the origin and destination of core air travel market demand using 1995-2006 US quarterly time-series data. Despite the industry consolidating its network following the terrorist attacks of 2001, passenger travels in core markets have exhibited strong growth in recent years. This increase was driven mostly by the gains in the larger markets. When segmented by types of markets, super-thin markets are seen to have lost services while other markets gained. A majority of passengers use the thick markets that account for only a small portion of all markets and their demand has continued to grow. Relatively fewer passengers fly in the thin and super-thin markets, but they account for a substantial portion of all markets. Empirical estimates align well with the events and adjustments that have been experienced during the time series we examined.