ABSTRACT
This chapter combines theory, applications, and exercises to illuminate the importance of the theory of demand and supply for airline companies. Airline demand analysis is concerned with understanding passenger behavior, measuring and characterizing the airline response to a change in ticket prices or incomes, and deriving the demand-side information necessary to make sound business decisions. In the airline industry, demand is usually assessed in terms of the number of passengers, revenue passenger miles, or revenue ton miles. In a competitive market environment, the frequency of an airline's service between two cities will also affect demand. An airline with several flights between two cities has a greater probability of meeting a travelers' schedule than an airline with only a few flights. Airlines such as Virgin Atlantic, Emirates, and Singapore Airlines have been very successful at generating increased demand through a perceived level of strong service.
