Time series forecasting with high stakes: A field study of the air cargo industry

TL;DR

This study develops a machine learning-based demand forecasting approach for the air cargo industry, combining statistical and deep learning models to improve accuracy over existing benchmarks, aiding strategic decisions.

Contribution

Introduces a novel mixture of experts framework integrating statistical and deep learning models for demand forecasting in volatile markets.

Findings

Outperforms industry benchmarks in cargo demand prediction

Provides reliable forecasts over a six-month horizon

Offers actionable insights for capacity allocation

Abstract

Time series forecasting in the air cargo industry presents unique challenges due to volatile market dynamics and the significant impact of accurate forecasts on generated revenue. This paper explores a comprehensive approach to demand forecasting at the origin-destination (O\&D) level, focusing on the development and implementation of machine learning models in decision-making for the air cargo industry. We leverage a mixture of experts framework, combining statistical and advanced deep learning models to provide reliable forecasts for cargo demand over a six-month horizon. The results demonstrate that our approach outperforms industry benchmarks, offering actionable insights for cargo capacity allocation and strategic decision-making in the air cargo industry. While this work is applied in the airline industry, the methodology is broadly applicable to any field where forecast-based decision-making in a volatile environment is crucial.