ABSTRACT
Forecasting is the most critical area of airline management. An airline forecasts demand in order to plan the supply of services required to meet that demand. Broadly speaking, tactical or operational decisions stem from short-term traffic forecasts covering the next 6-18 months or so, and are included in the airline’s operating plan and budget for the current and the coming financial year. Aircraft scheduling decisions, maintenance planning, advertising and sales campaigns, the opening of new sales offices are among the many decisions which ultimately are dependent on these shorter-term forecasts. There are in addition a range of strategic decisions, many related to an airline’s corporate plan and objectives, which stem from long-term forecasts. Decisions on aircraft procurement, the opening-up of new routes or markets, the training of new flight crews, investment in new maintenance facilities and similar strategic decisions all stem from longer-term forecasts of up to five years or longer. Almost every tactical or strategic decision taken within an airline stems ultimately from a forecast. At the same time, forecasting is the area in which mistakes are most frequently made and the one about which there is least certainty. There is no absolute truth in forecasting, no optimum method that can guarantee accuracy. Instead, airline forecasters use any one of a range of forecasting techniques, of varying mathematical complexity, each of which has advantages and disadvantages, none of which can ensure consistent accuracy. Yet forecasts have to be made since so many decisions flow from them.
