There has been very little research in the area of air cargo demand analysis and forecasting. This thesis attempts to investigate the application of gravity models to air cargo. Using international export volumes from Vancouver International Airport in 1998, a gravity model was built. The inclusion of tariffs as an impedance factor allowed testing of the effect of tariffs as predicted by gravity models. The results were consistent with international trade theory that tariffs provide a barrier to international trade. Further, a comparison is made between aggregate and disaggregate models (across commodities). It was found that aggregation eliminates commodity specific characteristics. In using the gravity model, there are two adjustments which need to be made to reduce the bias in the model: firstly, adjustment is necessary to the bias inherent in the constant term of a log-linear model; and a further adjustment is required when forecasting actual levels rather than log levels. Even after adjustments for both types of bias, the gravity model did not produce accurate forecasts. The aggregate model produced better forecasts than the disaggregate model, but both sets of forecasts did not accurately predict the actual volumes transported. This could be as a result of the stable nature of the variables included in the model, which tend to change very slowly over time. Further, it is apparent that other additional explanatory variables should be included in the models to better capture the short-term changes in air cargo.

There has been very little research in the area of air cargo demand analysis and forecasting. This thesis attempts to investigate the application of gravity models to air cargo. Using international export volumes from Vancouver International Airport in 1998, a gravity model was built. The inclusion of tariffs as an impedance factor allowed testing of the effect of tariffs as predicted by gravity models. The results were consistent with international trade theory that tariffs provide a barrier to international trade. Further, a comparison is made between aggregate and disaggregate models (across commodities). It was found that aggregation eliminates commodity specific characteristics. In using the gravity model, there are two adjustments which need to be made to reduce the bias in the model: firstly, adjustment is necessary to the bias inherent in the constant term of a log-linear model; and a further adjustment is required when forecasting actual levels rather than log levels. Even after adjustments for both types of bias, the gravity model did not produce accurate forecasts. The aggregate model produced better forecasts than the disaggregate model, but both sets of forecasts did not accurately predict the actual volumes transported. This could be as a result of the stable nature of the variables included in the model, which tend to change very slowly over time. Further, it is apparent that other additional explanatory variables should be included in the models to better capture the short-term changes in air cargo. / Business, Sauder School of / Graduate