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A Forecast of Scheduled Airline Revenue Passenger Traffic in Brazil

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A Forecast of Scheduled Airline Revenue Passenger Traffic in Brazil A FORECAST OF SCHEDULED AIRLINE REVENUE PASSENGER TRAFFIC IN BRAZIL by Anthony Eric Rickards, B.A. A thesis submitted to the Faculty of Graduate Studies and Research in partial fulfilment of the requirements for the degree of Master of Arts. Department of Economies and Political Science, McGill University, Montreal. March 1961 A FORECAST OF SCHEDULED AIRLINE REVENUE PASSENGER TRAFFIC IN BRAZIL TABLE OF CONTENTS Page No. Chapter I Introduction •••••••••••••••• 1 Chapter II An Analysis of the Brazilian Economy ••••••••• 3 Chapter III The Brazilian Transportation System • • • • • • • • • • • • . • • • • • • • 44 Chapter IV An Analysis of the Economie Position of the Brazilian Airline Industry •••••••••• 52 Chapter V Discussion of Methods used in Forecasting Air Passenger Traffic ••••••••••••••••••• 66 Chapter VI Forecast of Revenue Passenger Kilometres to be performed by Scheduled Airlines in Brazil ••••••••..•••••••••• 116 Appendix I to Chapter VI Calculations of the coefficients of correlation between indices of industrial production and numbers of air passenger kilometres performed ••••••••••••••••• 129 Appendix II to Chapter VI Estimate of the number of private automobile inter­ city passenger-kilometres performed in Brazil in 19 57 . • • • • • • • • • • • • • • • • • • 15 3 Appendix III to Chapter VI Calculation of the coefficient of correlation between Brazilian Gross National Product and the Index of Industrial Production •••••••••••••••• 157 Bibliography .. .. .. .. .. 163 CHAPTER I I N T R 0 D U C T I 0 N 1 INTRODUCTION CHAPTER I The objective of this thesis is to forecast the scheduled airline revenue passenger traffic which will be carried by Brazilian airlines during the period 1959 to 1965. In order to provide a firm base for this forecast the following analyses have been made: 1) an analysis of the economie position of Brazil. 2) a descriptive examination of the Brazilian transportation system. 3) an analysis of the economie position of the Brazilian airline industry. 4) an analysis and discussion of methods used in forecasting air passenger traffic. 5) an examination of past air traffic statistics. The analysis of the Brazilian economy has been undertaken in order to provide a basic knowledge of that country 1 s major economie characteristics and thus to provide knowledge of the current economie trends which are expected to affect the field of transportation. r 2 Any forecast of the future performance of an industry must naturally take into account the specifie conditions existing in that industry and therefore an analysis of the Brazilian airline industry is included in this thesis. The objective of this paper being to forecast airline passenger traffic, it is considered essential that an analysis and discussion of forecasting methods be included, in order that the particular forecasting method used here be viewed in a larger framework. Having taken into consideration and been guided by the conclusions drawn from these analyses, a traffic forecast has then been formulated. CHAPTER II AN ANALYSIS OF THE BRAZILIAN ECONOMY 3 AN ANALYSIS OF THE BRAZILIAN ECONOMY CHAPTER II Before embarking on a study of Brazil 1 s economy proper it would be well to give a very brief description of its main geographie, climatic and population charac­ teristics. GEOGRAPHY AND CLIMATE The United States of Brazil, with an area of 3,287,195 square miles (3,270,233 of land area and 16,962 of water), occupies about 47 percent of the South American continent and is one of the largest countries of the world. Its land area is only 7 percent less than that of the continental United States of America, including Alaska. Brazil 2 s greatest north-south and east-west dimensions at the points of their greatest extent are almost identical - 2,684 and 2,689 miles, respectively. Its boundaries extend for 14,370 miles, of which 4,603 miles is a coastline along the Atlantic Ocean. Brazil borde rs on a11 other countries of the continent exce pt Chile and Ecuador. The greatest part of Brazil is made up of highlands, whi ch have no great peaks. North of Salvador, Bahia, the rise from coast to the interior is graduai, but from Salvador south to Porto Alegre, Rio Grande do Sul , there is a sharp rise known as the Gre at Esca rpment, which so r esemble s a mountain r ange tha t one part o f it is called the Serra de Mar. 4 About 57 percent of the land is in plateaux, varying from approximately 650 to 3,000 feet in elevation; 40 percent consists of lowlands with an altitude of less than 650 feet and 3 percent exceeds approximately 3,000 feet in altitude, with the highest peak reaching 9,482 feet above sea level. Because of the great north-south extension (50° 16' 19" N. to 33° 45 1 09" s.) and the varying altitudes, there is a considerable range of climatic conditions. The only section lying in the Temperate Zone is the area to the south of the city of Sao Paulo, which is on the Tropic of Capricorn. However, the climate of large areas of central and northeastern Brazil is moderated by the altitude or by sea breezes. In the tropical and sub-tropical sections of the country the seasons are marked more by wet and dry periods than by changes in temperature. In them, summer is generally the wet season and winter the dry, but this is not uniformly true. Brazil is free from cyclones, hurricanes, and similar disturbances. · POPULATION The total population was 51,976,397 in the census of 1950, a rise of 26 percent from the 41,114,315 recorded in the census of 1940. The population is estimated officially to have increased to 62.7 million as of July 1, 1958. All but a small proportion of 5 the growth is the result of natural increase, as immigration into the country (not deducting for \ \ emigration) was only 114,085 in the years 1940-49, and 491,510 in 1950-57. The census recorded 98 percent of the population as Brazilian-born. The greater part of the population in the past was in the north-east section of the country but over the years the major concentration of the population has shifted southward. The population of the Rio de Janeiro-Sao Paulo area has been augmented considerably by migration within the country and a population movement to the westward is occurring. The constitution provides for the transfer of the Federal Capital from Rio de Janeiro to the central plateau; a new capital city, Brasilia is under construction and nearing completion in Goias, with the move to the new capital officially having taken place in April 1960. The emphasis on the development of Brasilia is furthering the development of the central region. GOVERNMENT ECONOMIC POLICY The policies followed by the Government since the 1930 1 s have encouraged the development of industry. Import controls and, since August 1957, a highly protective tariff have operated to protect domestic industry and, in some cases, to reserve the entire market for domestic production. The shortage of foreign exchange over much of the period and the 6 consequent reduction in imports of 11 non-essentials 11 acted as a further spur to the development of consumer goods industries. The exchange control system in effect since late 1953 grants relatively favourable treatment to raw materials and industrial equipment considered essential to the economy, by making foreign currency available for their purchase at a special, low exchange rate. President Juscelino Kubitschek, who was inaugurated on January 31, 1956~ announced production plans, with goals to be attained during his 5-year term of office. The emphasis is on power, transportation, and agriculture, and on industrial education, but production programs also were established for basic industrial products. To implement these plans, some federal agencies of a highly specialised character have been established. The Development Council, created in February 1956 to centralize and coordinate plans for economie development, functions principally through working groups of technicians appointed to analyze specifie problems and to make recommendations for appropriate action. The principal financing agency for the economie development program is the National Economie Development Bank, which was established in 1952 to handle financial operations of projects that were designed mainly for the rehabilitation and reequipment of transportation 7 facilities and for the development of power resources recommended by the Joint Brazil-United States Economie Development Commission. The bank originally derived funds principally from forced loans assessed as a percentage of income tax payments, but it now acts as the agent of the Government in handling receipts from special taxes and other funds to be used for specifie purposes, such as road construction and rural electri­ fication. The bank also handles the cruzeiro loan funds resulting from the sale of surplus United States agricultural products to Brazil. Manufacturing companies in Brazil are, for the most part, privately owned. Exceptions are the country 1 s largest steel plant, The National Steel Company at Volta Redonda; The National Alkali Company, which is not yet in full operation; and The National Motors Factory, established to manufacture aircraft motors and now utilized for the production of motor­ trucks and tractors. These are stock companies of mixed Government and private ownership, with Government stock control. The Cubatao refinery of the Government petroleum monopoly, Petrobras, is the centre of a group of associated plants producing petrochemicals. In the field of agriculture, the government has initiated programs to promote agricultural development which include the expansion of agricultural credit, financing and priee support for a number of crops, facilitation of imports of agricultural machinery, and 8 warehouse const~~ction. Special encouragement is given to wheat growing through the maintenance of high priee supports. Research work is carried on by both the Federal and State governments.
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