The traveling public in Malawi has a choice of road, rail, lake and air mode to get to their destination. The volume of passenger traffic handled by various transport modes is given in table 7.1.

Year	Transport Mode ('000)
	Rail	Lake	Road	Air	TOTAL
1969	740	114	15,261	(45)	16,160
1970	841	109	16,616	(61)	17,627
1971	862	142	18,889	(77)	19,970
1972	990	106	20,838	(87)	22,021
1973	946	138	23,262	(80)
1974	1,079	143	24,621	(40)
1975	1,211	148	26,033	(30)
1976	954	132	25,752	(29)
1977	964	132	24,969	(36)
1978	1,084	111	25,879	(41)
1979	1,136	105	25,849	(53)
1980	1,267	105	26,823	(50)
1981	1,287	133	26,556	(45)
1982	1,531	170	9,021*	(58)
1983	1,553	198	10,415*	(50)
1984	1,622	188	11,504*	(75)
1985	1,851	201	12,028*	(66)
1986	1,691	200	14,347*	(69)
1987			15,187*
1988
1989
1990	1,622	179		334
1991	1,469	169		378
1992	901	199		351
1993	734	115		350
1994	444	162	53,314	370 (74)
1995	431	169	50,012	315 (65)
1996	339	191	43,146	321 (64)
1997	452	133	34,320	338 (59)
1998	349	115	35,671	343
1999	522	94	45,708	319 (65)
2000	560	91	58,506	311 (105)
2001	599	70	74,888	(76)

Table 7.1 Passenger Traffic Distribution by Transport Mode, Source: Ministry of Transport & Public Works
( ) Domestic, *UTM/Shire Bus Lines country service only 

Air Carrier

The operations of Air Malawi are primarily passenger. The revenue to keep the airline going must come from this source. The other revenues come from carrying mail, direct subsidies (public service revenues), excess baggage charges, and miscellaneous other sources.

The domestic market is small and as such Air Malawi has tried to go regional that has also allowed foreign carriers to come to Malawi. The impact of the regional travel needs to be evaluated. Table 7.1 shows the trend in air passenger travel.

Airline fares are generally much higher than buses and rail and even private cars.

Intrastate Carriers. In the past, intrastate air carriers were restricted to pro- viding service within one state and were regulated by an agency within that state. The largest intrastate air carrier is Pacific Southwest Airlines (PSA), which until recently operated only within California. With airline deregu- lation at the federal level, PSA and a number of other intrastate air carriers have become interstate carriers. In 1980, PSA was ranked seventeen among the twenty top-ranked V.S. scheduled air passenger carriers (see Table 13-3).

Cost Structure And Operating Characteristics

A high proportion of variable costs characterize the short-run cost structure of air carriers. This situation arises from the fact that air carriers do not own their way and often do not own their terminal facilities. Airways are owned, maintained, and operated by government. Furthermore, terminal facilities or airports are often owned, maintained, and operated by governments. Hence, air carriers avoid the fixed costs related to ownership of way and terminal facilities such as depreciation (or amortization), maintenance costs not 'related to use, and property taxes. Since they pay user charges for use of the airway system and airports, the way and terminal costs of air carriers are variable in nature. Other variable costs include, for example, those for labour, fuel, and aircraft maintenance related to use. The major fixed costs of air carriers are those related to ownership of aircraft.
Operating Expenses In reporting the operating expenses or total costs incurred by air carriers in providing service, the two major categories of expenses are flying operations expenses, representing 41.6 percent of total operating expenses, and general services and administration expenses, representing 42.2 percent of the total. Flying operations expenses such as labour and fuel represent expenses incurred directly in in-flight operation. General services and administrative expenses include passenger service (cabin attendants and passenger food), aircraft and traffic servicing (ground personnel, scheduling, flights, non passenger traffic, etc.), promotion and sales (advertising, reservations, etc.), and administrative and other expenses. Maintenance expenses and depreciation and amortization expenses of scheduled air carriers are only 10.3 percent and 5.9 percent respectively of total operating expenses.

Returns to Scale The figures of returns to scale need to be established to have a reference point for the future.

Operating Characteristics Air passenger carriers have a line-haul speed advantage over all other passenger carriers. However, the speed advantage of air carriers is offset to some extent by two basic problems, airport and highway congestion.
Elapsed Time. The elapsed time for a passenger trip is the total time that a passenger incurs in going from an origin point to a final destination point. This total time for a passenger trip will be the sum of the travel (or in-transit) time, waiting time, and walking time that the passenger incurs.

The comparative speed advantage of aircraft relative to that for surface vehicles tends to give air passenger carriers a decided advantage over surface carriers with respect to passenger travel time. However, a problem that offsets this advantage and thus increases air travel time is airport congestion. Airport congestion arises when airports operate at flight levels that approach their maximum capacity. As a consequence, aircraft stay in flight longer by having to circle the congested airport while waiting for landing instructions. Not only does airport congestion increase the travel time of an air passenger, but it also increases a passenger's waiting time. Specifically, aircraft at congested airports must wait longer on runways for takeoff instructions.

Other than increasing the runway and other terminal capacities of a congested airport, the suggested solutions for reducing airport congestion have either been peak-hour pricing or capacity quota solutions. Peak-hour pricing at airports involves charging aircraft higher fees for landing and taking off during peak travel time periods of the day such as mid-morning and late afternoon. To avoid higher landing and takeoff fees, it is expected that some aircraft will shift from peak to off-peak hours, or will shift to non- congested airports, thus reducing airport congestion.

One disadvantage of air passenger carriage is that it provides only airport-to-airport transportation service. Thus the air passenger must rely on other carriage in getting to and from airports. If highways to and from airports are congested, highway travel time for air passengers will be greater than during non-congested time periods. In response to the problem of highway congestion near airports, a number of cities have located their airports considerable distances from urban centers.

Because of airport congestion and the fact that air passengers must rely on other carriage in getting to and from airports, air carriers are more susceptible to competition from auto, bus, and rail modes in short-distance markets than in long-distance markets. In long-distance markets, the speed differential of air carriers is so great that it easily offsets any negative aspects of air carriage even when stop-offs at intermediate cities are considered.

Air Passenger Demand

As stated previously, air passenger carriers typically have an elapsed- time advantage over surface modes. However, they also typically have a fare disadvantage because their costs are higher than those incurred by surface modes. Thus if a passenger chooses the air mode rather than a surface mode for a particular trip, it follows that the passenger is a time preferrer i.e., he or she is willing to sacrifice money to save time.

A number of studies have investigated the price elasticity of demand for air passenger service. The price considered in these studies has been the fare or money price charged by air carriers. The studies generally indicate that the price elasticity of demand for air passenger service is elastic; i.e., passengers are sensitive to changes in airfares. Specifically, if the price elasticity of demand coefficient is elastic and negative (-1.30, for example), then a 1 percent increase in airfare is expected to result in more than a 1 percent decrease in the amount of air passenger service demanded. Other studies also indicate that price elasticity of demand for air passenger service will vary with distance and will become more elastic as the distance of the air trip increases.

Bus Carriers

Minibus operators dominate the bus industry. In cities, minibus operators provide nearly all for-hire bus services. The bus industry carries more passengers annually than other modes combined as shown in table 7.1.

In short-distance markets, bus carriers are generally competitive with rail and air passenger carriage with respect to the elapsed time of passenger trips; in long-distance markets, however, they are less competitive because of their lower speed. The reliability of bus service is adversely affected by weather conditions and highway congestion. Bus carriers have a comparative passenger advantage over rail and air in terms of convenience or accessibility. With the highway network, buses can serve many points not served by other for-hire modes. Bus passengers can be picked up and discharged at almost any point a passenger desires. Also, frequency of service (i.e., the number of buses, for example, that service a given area during a given time period) is often greater than the frequency of service for rail or air carriage serving a given area.

Cost Structure The short-run cost structure of bus carriers has a relatively high proportion of variable costs, mainly because of the lack of an investment in way. Since bus carriers share in the cost of highway construction and maintenance with other highway carriers by paying user taxes such as fuel taxes, their way costs are thus variable in nature. The largest component of operating (or variable) costs is labour costs. Labour includes drivers, repair and maintenance workers, terminal personnel, supervisors, and other management personnel. The major fixed costs of bus carriers are related to vehicles, passenger terminals, and maintenance and repair facilities. Constant returns to scale for the bus industry are reported i.e. constant long-run unit costs.

 Rail Carriers

The passenger rail industry has been experiencing problems as a result of which it was privatized. The gains made soon after privatization were dealt a severe blow when a number of railway bridges were washed away in the 2002 rain season and have since remained un repaired. The rail service has therefore been restricted to south of Shire River. Table 7.1 shows the passenger figures for the rail.

Automobile Carriage

A competitor of both bus and rail passenger carriers is the car. The car has become the dominant mode of in passenger transportation. The significant growth in car passenger carriage may be explained, in part, by the attributes of the car. For short-distance trips, the elapsed trip time of the car is competitive with that of all other modes. Any form of for-hire passenger carriage cannot equal the car’s reliability, convenience, and accessibility. Furthermore, the car provides access to many more destinations than other modes in that it has an extensive highway network over which to travel. The car's accessibility to distant destinations has been enhanced by the tremendous expansion and upgrading of highways. The growth of car’s travel has also been enhanced by design improvements in the car that have made long-distance auto trips faster and less tiring. However, higher costs for car trips, especially from increases in fuel prices, have contributed to a decline in car passenger-kilomatres.

Cost Structure The cost structure includes the purchase price, fuel, maintenance and repair, insurance, parking, tolls and car taxes.

Water Carriers

Passenger transportation service provided by Malawi Lake Service is not significant from a national perspective, but in a few areas it is an important means of passenger transportation. Water carrier passenger transportation is particularly important for Likoma Islands and areas along the lakeshore. Actual trend of figures using Lake Services are shown in figure 7.1.

Passenger Transportation Issues

Private car There are a growing number of people owning private cars. Apart from insurance and certificate of fitness, very little public control exists for private carriage. Safety regulations and controls are well known, and regularly violated and abused. There is practically no price control for vehicles or operating costs. Each individual is on his/her own as to safety and price. There is need to establish costs related to private car use. The private car has a substantial portion of the transportation problems such as congestion and pollution.

Air transportation Lately, there has a growing number of airlines either being bought or privatized by governments. This has most been to marginal profits or losses. Some of the issues are congestion of airways, location problems of airports and the role of the public in support of air transportation. Air passenger numbers have also been affected by terrorism that has affected the travel industry.

By-product effect Under certain circumstances, passenger transportation is by-product of freight transportation. Under other circumstances the transportation of goods is a by-product of the movement of people. Either way, a definite by-product effect is at work and causes policy problems. This creates cost allocation and subsequent pricing. The by-product effect also creates problems when a service is discontinued or inadequate.

Variability Factor Passenger transportation is characterized by extreme variability during the hours of the day, the days of the week, and the months of the year. Facilities and labour in passenger transportation service tend to be used very intensively during peak hours movement periods. The variability factor is particularly acute in urban transportation. The variability factor is also reflected in streets, highways, bridges, tunnels, and terminals.

Instantaneous and perishability factor The demand for passenger transportation also has the characteristic of being instantaneous and perishable. People want to get on a bus, train, plane, subway, taxi, or car, and go immediately. The complication this creates is that passenger service is not storable and is thus perishable.

Suitability factor A high degree of substitutability exists in passenger transportation. This can be seen in four types of competition: intermodal, intramodal, intraclass, and cost competition. Within limits, demand not served by one mode can quickly shift to another. Intermodal or modal-split relates to competition among different modes. Intramodal relates to competition among firms of the same mode.

Investment cost factor Passenger transportation can only be provided with large investments in vehicles, ways (highways, airways, streets railways), and terminals.

Economic considerations The economic considerations should address the following questions:

• What is the most desirable form of passenger transportation?
• What pattern of ownership and what degree of public support is desirable?
• What is a desirable pattern of control and support for airways?