Advanced Aviation Economics - Problem Set
Written Assignment: Estimating Regional Air Transportation Demand
The objective of this and the other written assignments in the course is to show how the managerial economic theory and tools presented in Baye are applied to a current airline industry problem. For this assignment, the objective is to develop an appreciation for the methods used by the two largest commercial aircraft manufacturers, Airbus (http://www.airbus.com) and Boeing (http://www.boeing.com/), to forecast demand for air travel and the market for commercial aircraft over the next twenty years. Fortunately, both make their forecasts available to the public. For this assignment, you are to review the Airbus Global Market Forecast and the Boeing Current Market Outlook. These reports are available on the Boeing and Airbus websites. The location of the forecasts varies from year to year but each can be accessed by a search within the website or from the site map. In your review, concentrate on the factors (independent variables) that Airbus and Boeing employ to estimate the demand for air travel growth and how these are used to generate regional estimates for specific aircraft types. First, look for sections in the reports that provide an overview of the forecast methodology. Regression analysis is used extensively, but the technical details are not provided or important for this assignment. An appreciation for how the estimates are generated is sufficient. After you look over the entire reports - they're lengthy, it is not necessary to read all sections - choose a region of the world for more detailed study.
First, briefly explain how Airbus and Boeing develop their 20-year forecasts. Note the factors that influence projected air travel growth; some factors affect the demand curves while others influence supply. Be certain to distinguish between the two. The connection between the microeconomic theory of supply and demand as presented in Baye and Doganis should be explicit. Then explain the forecasts for growth in the chosen world region. Provide some perspective to forecast growth in the rest of the world.
The paper should be approximately three pages not including a cover page, reference list, and any appendices you may wish to include. Both forecasts provide a wealth of detail that could support a much longer paper, but the objective is an overview similar to an executive summary for one world region, not an in-depth analysis. Managers are often tasked with analyzing business environments or specific problems for senior management review. Senior managers are usually pressed for time and value concise evaluation and recommendation. Discerning and summarizing the critical facts succinctly is difficult. More is not necessarily better; the page limit is intended to foster this skill.
APA style is required including a title page and reference listing. You may have only a few references, but these must be cited in both the main body of the paper and in a separate reference list. An abstract and table of contents are not required. The sample APA paper at the Purdue Online Writing Laboratory provides an excellent overview of the APA style. Even if you believe you have a good handle on APA format, a review is highly recommended. Be certain to include APA elements such as running head, page numbers, headings, source citations, introduction, and conclusion in your paper.