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The Impact of COVID-19 on Airfares—A Machine Learning Counterfactual Analysis

Author

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  • Florian Wozny

    (Institute of Air Transport and Airport Research, German Aerospace Center (DLR e.V.), 51147 Cologne, Germany)

Abstract

This paper studies the performance of machine learning predictions for the counterfactual analysis of air transport. It is motivated by the dynamic and universally regulated international air transport market, where ex post policy evaluations usually lack counterfactual control scenarios. As an empirical example, this paper studies the impact of the COVID-19 pandemic on airfares in 2020 as the difference between predicted and actual airfares. Airfares are important from a policy makers’ perspective, as air transport is crucial for mobility. From a methodological point of view, airfares are also of particular interest given their dynamic character, which makes them challenging for prediction. This paper adopts a novel multi-step prediction technique with walk-forward validation to increase the transparency of the model’s predictive quality. For the analysis, the universe of worldwide airline bookings is combined with detailed airline information. The results show that machine learning with walk-forward validation is powerful for the counterfactual analysis of airfares.

Suggested Citation

  • Florian Wozny, 2022. "The Impact of COVID-19 on Airfares—A Machine Learning Counterfactual Analysis," Econometrics, MDPI, vol. 10(1), pages 1-10, February.
    • Handle: RePEc:gam:jecnmx:v:10:y:2022:i:1:p:8-:d:750366
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    References listed on IDEAS

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    1. Dueñas, Marco & Ortiz, Víctor & Riccaboni, Massimo & Serti, Francesco, 2021. "Assessing the Impact of COVID-19 on Trade: a Machine Learning Counterfactual Analysis," Working papers 79, Red Investigadores de Economía.
    2. Marco Due~nas & Federico Nutarelli & V'ictor Ortiz & Massimo Riccaboni & Francesco Serti, 2021. "Assessing the Heterogeneous Impact of Economy-Wide Shocks: A Machine Learning Approach Applied to Colombian Firms," Papers 2104.04570, arXiv.org, revised Nov 2024.
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    Cited by:

    1. Borsati, Mattia & Fageda, Xavier, 2024. "Airline price responses in the face of demand shocks: European lessons from the COVID-19 pandemic," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 186(C).

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