Do jet fuel price movements help forecast airline fares and the demand for air travel?

ABSTRACT

The paper studies the predictive content of jet fuel prices for the U.S. aviation industry through in-sample and out-of-sample forecasting exercises. Our results suggest the possibility of limited improvements in the predictions of airline fares, and little evidence of predictability from jet fuel prices to measures of air travel demand.

KEYWORDS:

• Jet fuel
• out-of-sample forecasting
• Airline industry

JEL CLASSIFICATION:

• Q41
• C32

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ See Kilian (2009), and Kilian and Zhou (2017) for the construction of and rationale for this index.