Driving Down Personal Aviation Demand

This paper investigates the potential long-run effects of autonomous and electric vehicles, and a carbon tax, on personal domestic aviation demand in Australia. We estimate a discrete choice disutility model with two travel modes — car and air — using Australian National Visitor Survey data and Bayesian priors. We use multiplicative Fréchet errors, consistent with a constant elasticity of substitution utility function for a representative consumer of both modes. An elasticity of substitution of almost 4 replicates the observed transition to air travel as distances increase. Combining in turn electrification, autonomy, the use of overnight robotaxis, a 10 kph increase in average car speeds, and an AUS$200/tCO2e carbon tax leads to air passenger reductions of 5%, 19%, 22%, 28% and 43%, respectively. Reductions are highest for shorter flights, so aggregate emissions do not decline as much as passenger numbers, while the number of aircraft trips declines more.