In theory both supply and demand can have an effect on growth in air travel.
However, the biggest influence usually arises from price factors, such as rise in price of substitute goods or general fall in air travel. Supply factors include, emerge of lower cost airlines and increased number of airports. These and other supply and demand factors can be analysed closely in order to evaluate the reasons for increased growth in air travel. In the recent years there has been a significant increase in the number of low cost airlines, including Ryanair and Easyjet, with Ryanair owning 19% of the national market of air transport.This has therefore increased the supply of flights.
Further this leads to increased competition within the market and hence a fall in relative prices of air fares. A fall in price is beneficial for any business as it will lead to an increase in demand as consumers will be more willing to purchase the product, as in the case of air travel. Another factor in relation to price is the increase in the price of substitute goods, bus and rail transport.
In this case consumers are likely to switch from using rail or bus, to air transport where possible.For example, consumers who normally would choose a train to travel from Edinburgh to London will choose to travel by plane, if rail prices rise. This will be both less expensive and time efficient for the consumer, and will also increase demand for air travel.
Deregulation of European air services and the introduction of the open skies system have placed a serious impact on the growth of air travel. Deregulation opened the market for new firms, especially low fare airlines. This has therefore made the market of air travel more contestable, by removing the barriers to entry.