Forecasting monthly air passenger flows from Sweden : Evaluating forecast performance using the Airline model as benchmark

Abstract: In this paper two different models for forecasting the number of monthly departing passengers from Sweden to any international destination are developed and compared. The Swedish transport agency produces forecasts on a yearly basis, where net export is the only explanatory variable controlled for in the latest report. More profound studies have shown a relevance of controlling for variables such as unemployment rate, oil price and exchange rates. Due to the high seasonality within passenger flows, these forecasts are based on monthly or quarterly data. This paper shows that a seasonal autoregressive integrated moving average model with exogenous input outperforms the benchmark model forecast in seven out of nine months. Thus, controlling for oil price, the SEK/EUR exchange rate and the occurrence of Easter reduces the mean absolute percentage error of the forecasts from 3,27 to 2,83 % on Swedish data.