AIR TRAFFIC DEMAND FORECAST The first step of the master planning process is to determine the long-term air traffic demand forecast up to 2030. International Air Transport Association (IATA) Consulting has been commissioned to undertake this task, which is a very structured process involving – (a) Evaluating the best model to apply for the forecast; (b) Compiling gross domestic product (GDP) forecast; (c) Producing preliminary traffic forecasts based on GDP; (d) Adjusting traffic forecasts based upon the latest market changes; (e) Carrying out reality checks with aviation-related industries; (f) Determining a set of primary projections for passenger and cargo traffic and air traffic movements (ATMs, also known as flight movements); and (g) Conducting sensitivity analysis to produce a range of estimates for high, low and base cases. demonstrated that air traffic growth bears a strong correlation with the global GDP growth. Figure 3.2 shows the two trends in the past four decades. As Hong Kong is an international city with an open market and externally-oriented economy, the correlation between air traffic growth and GDP growth in Hong Kong is even more pronounced, as can be seen from the close correlation between historical traffic derived from the regression formulae used by IATA Consulting and the actual traffic (see Figures 3.3 and 3.4). For passenger demand forecast, IATA Consulting adopted simple linear regression based on Hong Kong GDP FORECAST Compiling a GDP forecast is a very important step as it provides the essential building block for the entire traffic demand forecast. IATA Consulting’s research clearly Figure 3.1 A Structured Air Traffic Demand Forecast Process Preliminary Passenger Traffic Forecast Based on GDP GDP Forecast for Hong Kong and World Markets Preliminary Cargo Traffic Forecast Based on GDP Revised Passenger Traffic Forecast Adjustment Factors Revised Cargo Traffic Forecast Reality Check with Industries + - Air Traffic Movement Forecast Sensitivity Analysis GDP Based Preliminary Forecast Adjustments and Finalised Forecast Movement Forecast Sensitivity Analysis 14