THE DETERMINANTS OF DOMESTIC AIR TRANSPORT DEMAND IN ETHIOPIA

The main objective of this study is to investigate the determinants of Domestic air transport demand in Ethiopia during the period 2000/2001-2013/2014. The Autoregressive Distributed Lag Approach to Co-integration and Error Correction Model are applied in order to investigate the long-run and short-run relationship between the domestic passengers and its determinants. The finding of the Bounds test shows that there is a stable long run relationship between number of Domestic revenue passenger, income, airfare, price of competing services (Buses), road length and population. The empirical results reveal that income, price of competing services and population are found to have positive impact on the domestic air transport. However, Yield has negative impact on the domestic air transport. In the short run, the coefficient of error correction term is -0.62 suggesting about 62 percent annual adjustment towards long run equilibrium. This is another proof for the existence of a stable long run relationship among the variables. The estimated coefficients of the short-run model indicate that population, income and airfare are the main contributor to the domestic air transport demand.