Airline Empires - Airline and Aviation Articles, Airline Simulation - New Methods to Forecast Passenger Demand. Part 1

New Methods to Forecast Passenger Demand. Part 1

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In an era when airlines are losing hundreds of millions of dollars each quarter, airline managers are continually looking for better ways to increase the efficiency of their operations. Obtaining increases in efficiencies requires an understanding of where resources need to be deployed, in what manner they should be deployed, and at what price. Paramount to understanding these factors is having a way to accurately forecast not only what the market will do in the future, but what will happen if current factors change.

For example, it would be of great interest to an airline to have an understanding of what would happen to the profitability on its route if it were to increase aircraft size or decrease the flight frequency. The ability to forecast detrimental effects, such as entrance of low cost competition on a route or a decrease in on-time performance, would be tremendously helpful in minimizing those detrimental effects and identifying and prescribing effective techniques to counter them.

An accurate method to predict how specific airline markets will react to a change in market profitability factors has yet to be published. There are several forecasting techniques statisticians have been using for years that can be applied to airline market forecasting; however, they suffer from a lack of the required accuracy in order to make the forecasts valid. This lack of validity has prevented airline managers from receiving vital information concerning how specific markets will react to certain factors, and severely limits their ability to maximize revenues throughout the system. This project will investigate the emerging market forecasting technology and assess its validity in predicting market reactions to a change in one or several factors.

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