The Implication of Environmental Costs on Air Passenger Demand for Airline Networks

The aviation sector has developed dramatically in recent decades. However, environmental and social concerns are gradually posing limitations on the growth of the air transport industry. Air travel contributes to climate change, and causes significant environmental damage. It is therefore subject to environmental impact charges, which will intensify over time. These environmental charges will influence air travel. This research aims to investigate the impact of environment costs by examining their influence on air passenger demand within the context of two major airline network models: the hub-and-spoke network and the point-to-point network. The additional costs, caused by environmental rehabilitation, will affect both the networks and profit structures of airlines, and these structures will need to be amended in time. This study may contribute to the South Korean aviation industry, especially to the airlines that will be affected by the CO2 constraints imposed by the European Union Emissions Trading System from 2012 onwards.