Forecast Accuracy: The Financial Benefits to a Small Airline

This paper assesses possible gains to be made from increasing forecast accuracy. It examines the financial return from improving passenger revenue forecasts for a small airline, both in theory assuming ‘optimal’ cash management and in practice using policies currently in operation in the firm. It concludes that the gains are unlikely to outweigh the costs, that greater returns are likely to be available through better cash management and that the nature of forecast errors must be considered along with their size.