International Air Passenger Demand Modeling in Nepal

Abstract

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