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Yahua Zhang, Faqin Lin and Anming Zhang

For more than 50 years, the gravity model has performed well in empirical studies on international trade flows. Its strong economic theoretical foundations have been acknowledged in the last 20 years. Its applications in air transport research remain relatively sparse. A review of the air transport literature employing gravity models in the last ten years shows that most of the studies have not accounted for the advances in empirical estimation techniques developed in international economics. We apply the gravity model in China’s aviation market using the Poisson pseudo-maximum likelihood (PPML) approach with fixed effects. The results indicate an enormous positive effect of the continuous liberalisation in the air transport sector in promoting the demand for air travel. The emergence of high-speed rail (HSR) has been a serious threat to China’s airline industry and could result in a significant reduction in the number of air passengers when given controls for other factors.