Estimating Regional Air Transportation Demand

| November 24, 2016

MBAA 523
Written Assignment 1: 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.
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