This activity will allow you to check your understanding of the
theory of supply and demand against airline data. In 2008, the world
entered the worst recession since the Great Depression of the 1930s. Of
course, many people lost their jobs and houses while others became
uncertain about their financial future. Use the theory of supply and
demand to predict the effect the recession would have on airline demand
(the willingness and ability of people to purchase airline tickets),
supply (the willingness and ability of airlines to provide flights), and
price (the average price of an airline ticket).
The federal government collects and makes an immense amount of data
on the US economy available to the public, including large airline
datasets. Having made your predictions or hypotheses, use the US airline
industry data from the US Bureau of Transportation Statistics (BTS) to
see if the industry reacted as you expected.
To obtain the data to test your predictions (hypotheses), find a BTS
customizable data table following these steps: 1) Do an Internet search
for “Transtats,” 2) From the upper menu, select Browse Statistical
Products and Data from the top menu, 3) select Airline Information, 4)
scroll down to Customize table below Data and Statistics/Air Traffic.
(Note: The BTS occasionally changes the presentation of the data which
affects the steps needed to find data. It may be necessary to modify
this search slightly.)
Customize your data by selecting: 1) From 2007 until the end of the
recession or to an end point of your interest, 2) Domestic, 3)
Scheduled, and 4) Passengers, then select the statistics of interest
(scroll to the bottom for selection criteria).
Prices are, of course, another piece of this puzzle. BTS provides a
table of national fares. To find these data, follow the steps above.
At step 4, scroll down to Domestic Air Fare Data for US Carriers,
1993-present. Use the quarterly data, U.S. Average (Inflation-Adjusted
Post your findings. Explain your initial predictions. Would either
the supply and/or demand curves shift? What is the predicted effect on
quantity supply and demanded and on average price? Although not
required, a graphical depiction would be helpful. Then discuss whether
the data support your predictions. Graphs of the data are easily
prepared in Excel®. Again, these are not required but would be helpful.
A few airline terms will be helpful. Airline supply is usually
measured in Available Seat Miles (ASM). Measures of demand are Revenue
Passenger Miles (RPM) and Enplanements. Passenger Load Factor is yet
another indication of demand. Should you ever wish to do more research,
perhaps for the GCP, the BTS has all the airline statistics you will
probably ever need.