The rise of Middle Class and the

Credit Impact on Demand for Air

Transport in Brazil

SET 1

Aluno: Leonardo Carvalho da SilvaProfessor: Alessandro Oliveira

The Global Middle Class

For the first time half of the World population belongs to the Middle Class

Brazilian Middle Class4 to 10 minimum salaries

44,7 million has arise in Brazil to Middle Class (from 2003 to 2013)

Consumption of new products and services (as Air Transport)

Brazil: Airline industry

Will be the double in size until 2020 – adding 146 billion to the GDP

Increase of 2.5% in the airline industry for each 1% increase in GDP

2010: sales record of airline tickets due the Middle Class entrance

Source: ABEAR, 2013.

More PAX each yearThe domestic and international

travel growth from 2002 to 2012 is 180%

Reflex of Economic Growth

Increase expenditures in travels (2002-

12)

Passengers distribution:

monthly household income

Annual trips Frequency

% passengers only

Source: ABEAR, 2013.

Credit in the Air Travel

The usage o credit cards increased 142% from 2003 to 2008

Partnership with banks or development of their own card for payments

Literature and TheoryKharas

(2010)

Characterization of the global middle

class, trends, growth projections and

behaviour. About Brazil (in 1980) a

brief statement of the inequality as a

factor influencing growth and masking

certain indices. 

Banerjee

e Duflo

(2008)

Argues that the middle class has

stopped focusing exclusively on needed

items. With the social ascent other

consumption possibilities were opened. 

From 1.8 billion in 2010 to 4.9 billion in 2030, an increase of 85%

Expenses improving the life quality

Access a new forms of credit and loans

Great attention to emerging economies in particular China and India

Literature and Theory

Literature and TheoryBilotkach

(2005)

And

Ueda

(2012)

Three different scenarios for

acquiring tickets between London

and NY, the third one focussed on

advanced purchase with low and

homogenous fares. We can suppose

strongly that part of that

customers are from middle class

income.

Phenomenon that was observed by

Bilotkach can be applied in

Brazil: The study of GRU and

CGH identify similarities.

Brazil: Airline industry

Source: ABEAR, 2013.

Air transport is the cheapest way to travel planned long distances in Brazil

There was an increase in travellers with lower frequency of annual flights of 21 (less than ¼) to 37% (more than 1/3)

Travellers for personal reasons (not working), increased from less than half (48%, 2009) for approx. 2/3 (66%, 2013)

Literature and Theory

O’Connell e

Williams

(2006)

Brazil and India as emerging

economies, enables us to set

parallels regarding the air

transport of both countries.

The internet as instrument of

popularization and access of air

transport. Evidencing the use o

credit as main form of payment.

The Headlines

Literature and Theory

Dana

and

Orlov

(2009)

The use of internet has

increased the purchase of

airline tickets in the US.

Internet penetration have a

bigger impact on load factors on

flights in more competitive

markets and on flights with

fewer total passengers

HypothesisH1 - Aumento do crédito impacta positivamente a demanda por transporte aéreo.

H2 - A disponibilidade de Transporte aéreo varia negativamente com o aumento da desigualdade na distribuição de renda

H3 - A demanda de viagens aéreas da classe média brasileira é essencialmente por razões turísticas e de lazer

Modelo Conceitual

Aumento da Renda

Passagens mais

Baratas

Demanda de Transporte Aéreo da Classe Média

Crescimento da Demanda Desigualda

de na Distribuiç

ão de Renda

Aumento do Crédito

Aumento das viagens

Turísticas

H1 H3

H2

Econometric ModelOLS

ReferencesABEAR, Associação Brasileira das Empresas Aéreas. Agenda 2020. 2013.BANERJEE, Abhijit V.; DUFLO, Esther. What is middle class about the middle classes around the world? The journal of economic perspectives: a journal of the American Economic Association, v. 22, n. 2, p. 3, 2008.BILOTKACH, Volodymyr. Understanding Price Dispersion in the Airline Industry: Capacity Constraints and Consumer Heterogeneity. Darin Lee, Org. Advances in Airline Economics, vol. I. Elsevier. 2005DANA, James D.; ORLOV, Eugene. Internet penetration and capacity utilization in the US airline industry. Northeastern U. College of Business Administration Research Paper, n. 08-001, 2009KHARAS, Homi. The emerging middle class in developing countries. 2010.MARAZZO, Marcial; SCHERRE, Rafael; FERNANDES, Elton. Air transport demand and economic growth in Brazil: A time series analysis.Transportation Research Part E: Logistics and Transportation Review, v. 46, n. 2, p. 261-269, 2010.O’CONNELL, John F.; WILLIAMS, George. Transformation of India's Domestic Airlines: A case study of Indian Airlines, Jet Airways, Air Sahara and Air Deccan. Journal of Air Transport Management, v. 12, n. 6, p. 358-374, 2006.PARKER, John. Burgeoning bourgeoisie: A special report on the new middle classes in emerging markets. The Economist, v. 14, 2009.UEDA, Thiago Vinicius Alves. Partir do aeroporto de Congonhas é mais caro que de Guarulhos? Um estudo econométrico dos preços das passagens aéreas. Journal of Transport Literature, v. 6, n. 3, p. 121-135, 2012.

Obrigado!

Leonardo C. Silva