Forecasting the Passenger Traffic Movement in Lufthansa Airlines: a Supply Chain Perspective

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Journal of Services Research
Volume 10 Number 2 October 2010 - March 2011

FORECASTING THE PASSENGER TRAFFIC MOVEMENT IN LUFTHANSA AIRLINES: A SUPPLY CHAIN PERSPECTIVE

Aniruddh Kr Singh Faculty of Management Studies University of Delhi, India. Debadyuti Das Associate Professor, Faculty of Management Studies University of Delhi, India.

The Journal of IIMT

FORECASTING THE PASSENGER TRAFFIC MOVEMENT IN LUFTHANSA AIRLINES: A SUPPLY CHAIN PERSPECTIVE Aniruddh Kr Singh Debadyuti Das

The present paper attempts to find out the forecasted passenger traffic movement of Lufthansa Airlines on quarterly basis at a global level by employing four forecasting methods namely moving average, exponential smoothing, Holt's model and Winter's model with the help of published data pertaining to passenger traffic movement of Lufthansa Airlines. The study has also found out the forecasting errors of all the four methods through Absolute error (AE), Mean squared error (MSE), Mean absolute deviation (MAD) and Mean absolute percentage error (MAPE). The study also carried out the comparative analyses of the above forecasting methods in the light of the available data. The findings reveal that the forecasting errors are the least in case of Winter's model. Further the forecasted values suggested by Winter's model more closely resemble the observed data of passenger traffic movement of Lufthansa Airlines. This provides a valuable insight to the top management as regards formulation of suitable strategies for addressing the varying demand of passenger traffic movement. Few strategies in respect of both demand side and supply side options have been suggested with a view to improving the overall supply chain profit of Lufthansa Airlines.

INTRODUCTION irlines industry across the globe is currently undergoing recession due to severe financial crisis faced by the major economies of the world. As per the estimates of International Air Transport Association (IATA), globally air travel has declined by 2.9% and 1.3% during September and October, 2008 respectively compared to the same months in the previous year. Segment-wise passenger traffic estimates provided by IATA further reveal that the Asia Pacific Carriers and North American Carriers registered a decline in passenger traffic flow by 6.1% and 0.9% respectively in October, 2008 compared to the same month in the previous year. African Carriers recorded the largest decline in traffic flow by 12.9% in October, 2008 Journal of Services Research, Volume 10, Number 2 (October 2010 - March 2011) ©2010 by Institute for International Management and Technology. All Rights Reserved.

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64 Forecasting the Passenger compared to the same month in the previous year. The remaining segments namely European, Latin American and Middle Eastern Airlines experienced a moderate growth in its traffic flow to the tune of 1.8%, 4.5% and 3.5% respectively in October, 2008 (IATA International traffic statistics, 2008a, 2008b). However, the financial crisis sweeping across the globe does not appear to have much negative impact on Lufthansa Airlines in respect of its passenger traffic flow till September, 2008 as revealed from the data provided in table 2a. A cursory observation into the table 2 further demonstrates that the passenger traffic flow in Lufthansa Airlines has been following a very systematic pattern since October, 2006 to September, 2008. There has been hardly any departure from the pattern observed in passenger traffic movement during the above period. Despite difficult market conditions, Lufthansa passenger Airlines was able to achieve a sales growth of 4.2% and 0.7% in September and October, 2008 respectively. It registered an increase in its passenger traffic flow in three major markets namely America (North/South), Asia/ Pacific, and Middle East & Africa both during September and October, 2008. American segment recorded a growth rate of 6.9% and 1% during September and October, 2008...
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