International Air Passenger Demand Modeling and Airport Choice Modeling in Nepal

Abstract

Air travel demand forecasting is an important task for the concerned civil aviation authority as well as airlines. This paper intends to analyze and forecast international air travel demand in Nepal and apportion the demand between TIA, the only existing international airport of Nepal and the other proposed international airports. Econometric variables like GDP, CPI, remittance, employment migration, tourist arrivals, exchange rates, GDP per capita, net national income per capita, world GDP etc were taken as an explanatory variable for the demand generated in aviation industry. A regression model was developed using above mentioned variables as explanatory variable. The statistical result showed almost perfect correlation between themselves, as suggested by variance inflation factor (VIF) value which made the model biased in terms of coefficients. Furthermore, several models considering different combinations of independent variables were developed. Finally a regression model considering exchange rate, number of labour permit, number of tourist arrival as explanatory variable showed satisfactory result and was taken as demand model for the forecast.