Air Passengers Vertex Curve Theorem - Evidence from ASEAN Countries

Abstract

This study examines new generic hypotheses and theorems of the aviation industry’s model for air passengers for ASEAN countries. A static panel data model consists of a simple panel unit and root and cointegration tests were established for the period from 1997 to 2016. Initially, we hypothesized that internet connection, income level, tax and tourism expenditures all have significant impacts on the volume of air passengers in ASEAN countries. Our main findings showed that gross national income (GNI) has a positive significant impact on air passengers’ volume and it is also the peak of the vertex. In addition, according to the hypothesized vertex theorem, the policy-impact of taxation on air passenger volume showed a weak significance, while the digital-impact hypothesis of broadband and mobile technology exhibited a mediocre and substitution impact. Our conclusion from the findings highlighted that fundamentals of domestic economic growth should be strengthened in order to increase internal economic capacity. By achieving this, the volume of the air passenger could be doubled and therefore would bring back a growth of income and prosperity to the nation, particularly in the ASEAN market.