ASYMMETRIC IMPACTS OF OIL SUPPLY AND DEMAND SHOCKS ON AIR TRAVEL DEMAND IN KOREA

This study examines the asymmetric effects of crude oil price fluctuations on air travel demand, a key determinant of airline operating expenses and fare pricing. Despite its significance, the asymmetric impacts of different oil price shocks on air travel demand in Korea remain unexplored. Employing a Structural Vector Autoregressive (SVAR) model and a Nonlinear Autoregressive Distributed Lag (NARDL) approach, we analyze the effects of oil supply, aggregate demand and oil-specific demand shocks on the air travel demand of Korean Air (KAL) and Asiana Airlines. Using data from 2000 to 2022, our analysis reveals that oil supply shocks have a negligible influence, while aggregate and oil-specific demand shocks significantly impact air travel demand over both short and long-term horizons. Long-term asymmetries are particularly evident in responses to oil supply and oil-specific demand shocks across both airlines. These results underscore the importance of accounting for the distinct components and asymmetric effects of oil price shocks, alongside airline-specific data, to accurately assess air travel demand dynamics in Korea. This study contributes to the literature by offering deeper insights into the economic implications of oil shocks and providing actionable strategies for policymakers and industry leaders to enhance the resilience of the aviation sector.