Demand dynamics shift according to different stages of a country’s economic development. Emerging markets throughout the world have shown that air travel is one of the first discretionary expenditures to be added as consumers join the global middle class. As emerging market demand begins to develop, it may take the form of nonscheduled services to leisure destinations. Later, the same demand may migrate to scheduled services of low-cost carriers or to network airlines.
In developed markets, demand for essential travel has been met, so growth comes from discretionary travel. GDP per capita matters less in these market contexts. Factors such as the availability of vacation days earned, the funds needed to travel, consumer confidence, service pricing, and service quality (for example, the availability of nonstop flights) tend to have a greater impact.
Within a given region, propensity to travel as measured in trips or in revenue passenger kilometers (RPK) generally increases with per-capita income. This increase varies considerably. Generally, markets that are more open are more responsive to changes in per-capita income because airlines are freer to add routes, frequencies, and seats to capture demand. In a more regulated environment, demand may increase with GDP per capita, but lower service quality and higher pricing may restrain travel growth. Geography may also influence travel within a region, with islands or poorly connected land masses necessitating more air travel.