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Efficiency and Growth of Ethiopian Air Transport IndustryGrowth Determinants of Ethiopian Air Transport

Efficiency and Growth of Ethiopian Air Transport Industry: Growth Determinants of Ethiopian Air... [This study investigates the short-run and long-run growth determinants of Ethiopian air transport using annual time series data for the period 1988–2018. The air transport model is estimated using the autoregressive distributed lag (ARDL) and vector error correction (VEC) models. The study’s aim is explaining determinant variations in annual passenger air traffic of Ethiopian Airlines (henceforth Ethiopian), other airlines, and air freight cargo. The determinants of air transport growth include Ethiopian’s average airfare per passenger, national per capita income, real gross domestic product, average exchange rate, the world consumer price index, crude oil prices, and the volume of imports and exports. The national per capita income has a positive and significant short-run and long-run causal relationship with other airlines’ passenger growth. However, per capita income only has a long-run positive and significant effect on Ethiopian’s passenger growth. The results of the three services’ growth determinants have the expected signs. The model shows that a large share of the disequilibrium from the previous year’s shock converges back to the long-run equilibrium in the current year. Such a highly significant VEC provides evidence of the existence of a stable long-run relationship between the air transport demand and respective explanatory variables. The study’s major findings show that most variables are significant in the short-run and in the long-run, hence, their respective VEC is also significant and as expected. This shows  that, there is a strong causal relationship among the explanatory variables.  Macroeconomic variables such as a continued increase in the average exchange rate, crude oil prices, the consumer price index, heavy dependency on imported goods and services, no close substitute for passenger air transport, and growing aggregate demand for Ethiopian air transport result in unexpected signs for some variables. Finally, Ethiopian should consider the changes in the determinant macroeconomic variables to reduce unintended effects.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Efficiency and Growth of Ethiopian Air Transport IndustryGrowth Determinants of Ethiopian Air Transport

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Publisher
Springer Nature Singapore
Copyright
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
ISBN
978-981-19-3431-5
Pages
159 –211
DOI
10.1007/978-981-19-3432-2_5
Publisher site
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Abstract

[This study investigates the short-run and long-run growth determinants of Ethiopian air transport using annual time series data for the period 1988–2018. The air transport model is estimated using the autoregressive distributed lag (ARDL) and vector error correction (VEC) models. The study’s aim is explaining determinant variations in annual passenger air traffic of Ethiopian Airlines (henceforth Ethiopian), other airlines, and air freight cargo. The determinants of air transport growth include Ethiopian’s average airfare per passenger, national per capita income, real gross domestic product, average exchange rate, the world consumer price index, crude oil prices, and the volume of imports and exports. The national per capita income has a positive and significant short-run and long-run causal relationship with other airlines’ passenger growth. However, per capita income only has a long-run positive and significant effect on Ethiopian’s passenger growth. The results of the three services’ growth determinants have the expected signs. The model shows that a large share of the disequilibrium from the previous year’s shock converges back to the long-run equilibrium in the current year. Such a highly significant VEC provides evidence of the existence of a stable long-run relationship between the air transport demand and respective explanatory variables. The study’s major findings show that most variables are significant in the short-run and in the long-run, hence, their respective VEC is also significant and as expected. This shows  that, there is a strong causal relationship among the explanatory variables.  Macroeconomic variables such as a continued increase in the average exchange rate, crude oil prices, the consumer price index, heavy dependency on imported goods and services, no close substitute for passenger air transport, and growing aggregate demand for Ethiopian air transport result in unexpected signs for some variables. Finally, Ethiopian should consider the changes in the determinant macroeconomic variables to reduce unintended effects.]

Published: Sep 20, 2022

Keywords: Air transport; Economic growth; Airline performance; Passenger and cargo; Times series ARDL; VEC model; Ethiopia; L93; O4; L25; L91; C22

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