Dynamic modelling of fares and passenger numbers for major U.S. carriers

The purpose of this project was to develop econometric models that will enable us to describe and forecast the evolution of air fares and passenger numbers for the 7 largest U.S. carriers. The principal data source was the Department of Transport's DB1B database, which contains extensive information on airline tickets sold in the US. The modelling was first conducted on the basis of pure statistical models, and we later introduced variables with real economic data, such as the air carrier's financial situation and data on the U.S. economy and also information on the individual route characteristics. Among other results, the statistical models reveal a significant drop in fares, and often also passenger numbers, after the September 11 attacks as well as a visible difference between the behaviour of Southwest Airlines, the only low-cost airline under examination, and the other six major carriers. The selection and assessment of the models in this project has been fully automated, using original code developed by the authors in the econometric software package EViews6 and with Excel-VBA.