INTERNATIONAL SCHOOL OF BUSINESS & MEDIA

QUANTITATIVE TECHNIQUES II

PROJECT ON REGRESSION ANALYSIS OF WORLD

ANNUAL AIR PASSENGER TRANSPORT TRAFFIC
PRESENTED BY – Group 8 , sec B
SUBMITTED TO -
PROF. ARNAB CHAKRABORTY SIR NIKITA NIGAM(N20212208)
ISHU GUPTA(N20212237)
PIYUSH GANGRADE(N20212264)
GUNJAN BHAJIPALE(N20211031)
DEEPAM KUNDU(N20211024)
 CONTENT
 INTRODUCTION
 LIST OF DETERMINANTS FROM INDUSTRY REPORTS AND ACADEMICS
RESEARCH PAPERS
 5 DETERMINANTS
 GRAPHICAL REPRESENTATION OF DETERMINANATS
 MANAGERIAL INFERENCE
 LEVEL OF SIGNIFICANCE
 MULTICOLLINEARITY
 THE TRENDS OF CONTRIBUTION OF COUNTRIES TO THE WORLD
 REFERENCE
 LEARNING OUTCOMES

2
 INTRODUCTION
Air transport facilitates integration into the global economy and
provide vital connectivity on a national, regional, and
international scale.
OBJECTIVE:-
1. In this project we look how the different determinants has
affected the air transportation in the last 50 years.
2. To understand the variability of data and dependency on
each other through regression and correlation analysis.

3
 LIST OF DETERMINANTS FROM INDUSTRY
REPORTS AND ACADEMICS RESEARCH PAPERS
 GDP  Trade Flow
 Distance and Hub  Buying power index
 Language  Inflation
 Annual Import Value  Fuel Price
 Per Capita Income  Population
 Unemployment rate  Fare
 Consumer Price Index  Service Frequency
 Tourist Flow  Open Sky Policy

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 5 DETERMINANTS
• It is widely acknowledge that the number of passengers at airport around the world grows
GDP at a rate of about 1.5 times of the worldwide GDP.

• As population increases, it is expected to increase in demand for air transport as well.

POPULATION

• Rate of inflation is significant and is more variable and highly dependent on the type of
INFLATION secular trend and time periods used in regression.

• Fluctuation of the fuel prices followed by the economic downturn to the economy
FUEL PRICE provides an excellent opportunity to analyse ticket data.

• Growth of global middle class status plays a vital role as it shows the significant shift in
PER CAPITAL
INCOME
income, as leading to positive relationship between income and demand of air transport.

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 NO.OF PASSENGERS (in Billions) GDP (in $ TRILLIONS) POPULATION (in Billions)
5.000 8 9
4.500 8
4.000 6 7

GDP IN TRILLION DOLLAR

3.500
NO. OF PASSENGERS

6
3.000 4

POPULATION
5
2.500
2 4
2.000
1.500 3
1.000 0 2
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18
0.500 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 1
-2
0.000 0
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18
19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 -4 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20
YEARS YEAR YEARS

Graphical Representation of Determinants

PER CAPITA INCOME ($) INFLATION (%) FUEL PRICES (in $)
14000 18 120
12000 16
100
14

FUEL PRICES IN DOLLARS

10000
PER CAPITA INCOME

12 80
INFLATION IN %

8000 10
60
6000 8
6 40
4000
4
2000 20
2
0 0 0
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18
19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20
YEAR YEARS YEARS
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 MANAGERIAL INFERENCE
Null Hypothesis :- determinants are related to the
intercept, i.e, GDP, Per capita income, Inflation,
population, fuel prices are related to no. of
passengers.

Alternate Hypothesis :- determinants are not related

to the intercept, i.e, GDP, Per capita income,
Inflation, population, fuel prices are not related to
no. of passengers.

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Gross domestic product as a determinant taken individually is very highly
significant as the P value is under the level of significance of 5%. Therefore, we
accept the null hypothesis.
Inflation as a determinant taken individually is very highly significant as
the P value is under the level of significance of 5%. Therefore, we accept
the null hypothesis.
Population as a determinant taken individually is very highly
significant as the P value is under the level of significance of 5%.
Therefore, we accept the null hypothesis.
Per capita income as a determinant taken individually is very highly
significant as the P value is under the level of significance of 5%.
Therefore, we accept the null hypothesis.
Fuel price as a determinant taken individually is very highly significant
as the P value is under the level of significance of 5%. Therefore, we
accept the null hypothesis.
 Y= -0.5262+0.0896X1+0.0627X2-0.0135X3-0.0040X4+0.0003X5
 Multiple R is the degree to which independent variable is correlated to
dependent variable.
 From the excel sheet:- when independent determinants taken together , the
,multiple R value is 94.41% which shows that all the independent variables
are correlated to dependent variable.
 R Square – when independent variables are taken together, it describes the
variation In dependent variable.
 From the excel sheet:- 89.13% shows the deflection in dependent variable
when independent variable changes.
 Adjusted R square:- additional variable has a positive or negative impact on
the series.
 Standard Error – 38.47%, it shows the accuracy of predictions with
regression line.
 Observations (no. of years) - 51

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 LEVEL OF SIGNIFICANCE
When taken individually
 DETERMINANTS:- very highly
significant because P-Value is
under the range of significance
level of 5%.
 The Significance of Line of
regression is very high and
equal to the significance of
individual determinant taken.
When taken together
 GDP and Per Capita income are
significant because P-Value is
under the range of significance
level of 5% whereas, population,
fuel price and inflation are not
significant as it exceeds the
significance level of 5%.
 Line of regression significance is
very high.
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 MULTICOLLINEARITY
When two or more independent variables are highly
correlated with one another in a regression model.
 Yes, Multicollinearity exists as inflation, fuel prices and
population are highly correlated to each other.
 Individually the P-Values of population, inflation and
fuel prices were significant but when taken together,
the P-Values were not significant.

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The trends of contribution of countries to the world
1970
USA, Canada, Japan,
Germany, France and UK
were among top
countries based on per
capita income and GDP
as it has always been
significantly high and
been contributing to the
world annual air
transport traffic

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1970 - 1975
USA, Japan, and UK
were top 3 whereas
Canada fall to second
tier because of oil crisis
in 1973.
1975 - 1980
US, Japan and UK is at
top. There was a
significant growth
among Spain, France
and Germany.
1980 - 1985
US, Japan and UK
retained the top 3
positions. Other than
Germany and Mexico
there wasn’t any
significant growth in
any other country.
1985 – 1990
There was a lot of
competition amongst
other countries
during this era, but
US, Japan and UK
retained the top 3
positions.

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1990 - 1995
In 1991, Russian federation
went under economic
reforms including
privatisation and trade
liberalisation due to which
Russia was amongst the
top 3 contributors while
China and France were
showing significant growth
in this period.
1995 – 2000
US and Japan were on
the top again. From
1995 there was
tremendous growth in
the GDP of China
resulting in China being
in top 5 contributing
countries in the Air
transport.
2000 - 2005
UK showed decline in
contribution because
spending on motor vehicles
went down abruptly due to
which military spending
went down by government
which affected their
economy. China became
the 2nd largest contributor
in the aviation sector.
2005 – 2010
US, China and
Germany were in the
top 3 positions. Brazil
entered as an
emerging country and
showed a significant
development in the
aviation sector.
2010 – 2015
In India the number of
passengers were
growing at the rate of
16.3 % and this showed
a significant growth in
Indian aviation sector.
2015 – 2020
US and China remains
the top contributors in
air transport. India
became world’s 3rd
largest civil aviation
market and was
amongst top 3
contributors in the
world.
 LEARNING OUTCOMES
◉ Data interpretation and its analysis.
◉ We learned the various concepts of QT-2 like regression
and correlation.
◉ It helps us to determine the effects of independent
determinants of air transport.
◉ Detailed learning about the industry and academic
research papers for the topic.
 REFERENCE
• 1] Li Yen Chang, “Analysis of bilateral air passenger flows: A non-parametric multivariate adaptive regression spline approach “in
Journal of air transport management, 2014, pp.123-130.
• 2] Seraj Y. Abed, Abdullah O. Ba-Fail, Sajjad M. Jasimuddin, “An econometric analysis of international air travel demand in Saudi
Arabia” in Journal of air transport management, 2001, pp.143-148.
• 3] David A. Smith and Michael F. Timberlake, “ An Empirical analysis of global air travel links” in World city networks and
hierarchy,2001, pp.1656-1678.
• https://www.sciencedirect.com/science/article/pii/S0969699715000927

• www.worldbank.org

• https://www.jstor.org/stable/40904912

• https://www.mdpi.com/499546

• https://carijournals.org/journals/index.php/JBSM/article/view/173

• https://www.sciencedirect.com/science/article/pii/S0969699714001239

• https://www.sciencedirect.com/science/article/pii/S0969699714001239

• https://www.ingentaconnect.com/content/lse/jtep/2016/00000050/00000003/art00005
THANK YOU