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The implications of environmental costs on air passenger demand for different airline business models

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  • Lu, Cherie

Abstract

Various environmental measures, including both regulations and fiscal instruments, have been used at airports globally to reduce the impacts of aircraft noise as well as aircraft engine emissions. Internationally, it is recognized that the costs of environmental and social externalities of air transport must be internalized and paid for by the aviation industry and its users. The use of noise related charges or taxes, which theoretically should be based on their respective social costs, has been proved to be effective at some European airports. This research aims to investigate the impacts of environmental costs, through environmental charges, on air passenger demand for different airline business models. The paper presents the mathematical models measuring the social costs of aircraft noise and engine emissions as a basis for setting up environmental charges. Six intra-European short-haul routes in two city pairs, namely London–Amsterdam and London–Paris, are selected for the empirical analysis. The environmental charges are then hypothetically applied to airlines with two different business models, full service carriers (British Airways and Air France-KLM) and low cost airlines (EasyJet). The results show that the potential percentages of demand reduction for both leisure and business passengers would be higher for Easyjet's markets, although with less environmental cost per passenger.

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  • Lu, Cherie, 2009. "The implications of environmental costs on air passenger demand for different airline business models," Journal of Air Transport Management, Elsevier, vol. 15(4), pages 158-165.
    • Handle: RePEc:eee:jaitra:v:15:y:2009:i:4:p:158-165
    DOI: 10.1016/j.jairtraman.2008.09.019
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    5. Oesingmann, Katrin, 2022. "The effect of the European Emissions Trading System (EU ETS) on aviation demand: An empirical comparison with the impact of ticket taxes," Energy Policy, Elsevier, vol. 160(C).
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    8. Mengyuan Sun & Yong Tian & Yao Zhang & Muhammad Nadeem & Can Xu, 2021. "Environmental Impact and External Costs Associated with Hub-and-Spoke Network in Air Transport," Sustainability, MDPI, vol. 13(2), pages 1-21, January.
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    10. Davies, Zoe G. & Armsworth, Paul R., 2010. "Making an impact: The influence of policies to reduce emissions from aviation on the business travel patterns of individual corporations," Energy Policy, Elsevier, vol. 38(12), pages 7634-7638, December.
    11. Grampella, Mattia & Martini, Gianmaria & Scotti, Davide & Zambon, Giovanni, 2016. "The factors affecting pollution and noise environmental costs of the current aircraft fleet: An econometric analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 310-325.
    12. Scheelhaase, Janina & Maertens, Sven & Grimme, Wolfgang & Jung, Martin, 2018. "EU ETS versus CORSIA – A critical assessment of two approaches to limit air transport's CO2 emissions by market-based measures," Journal of Air Transport Management, Elsevier, vol. 67(C), pages 55-62.
    13. Grampella, Mattia & Lo, Pak Lam & Martini, Gianmaria & Scotti, Davide, 2017. "The impact of technology progress on aviation noise and emissions," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 525-540.
    14. Lo, Pak Lam & Martini, Gianmaria & Porta, Flavio & Scotti, Davide, 2020. "The determinants of CO2 emissions of air transport passenger traffic: An analysis of Lombardy (Italy)," Transport Policy, Elsevier, vol. 91(C), pages 108-119.
    15. Salvador Cruz Rambaud & Joaquín López Pascual & Juan Carlos Meléndez Rodríguez, 2021. "Sustainability in the Aerospace Sector, a Transition to Clean Energy: The E 2 -EVM Valuation Model," Sustainability, MDPI, vol. 13(12), pages 1-17, June.
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