Time-Series Statistical Model for Forecasting Revenue and Risk Management

Authors

  • Mihir Kelkar Lynbrook High School
  • Cosmin Borsa University of California, Santa Barbara
  • Dr. Lina Kim Mentor, University of California, Santa Barbara

DOI:

https://doi.org/10.47611/jsrhs.v10i3.2050

Keywords:

time-series, seasonality, autocovariance, differencing, revenue forecasting

Abstract

Following a Low-Cost Carrier (LCC) model, Southwest Airlines has consistently demonstrated growing annual revenues up until the start of the COVID-19 pandemic. Southwest’s quarterly revenue shows that there exists a strong seasonal component with the revenue in the first quarter of the fiscal year (September) significantly higher than other quarters. Using the quarterly revenue data we constructed a time-series model: a seasonal autoregressive integrated moving average (SARIMA) model to forecast Southwest’s revenue over 2020. We then performed a cost and solvency risk analysis using the company’s financial results from its annual reports to analyze Southwest’s financial performance due to COVID-19, and proposed business strategies to keep Southwest financially stable.

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References or Bibliography

Brockwell, Peter J., and Richard A. Davis. Introduction to time series and forecasting. Springer, 2016. Macrotrends LLC, “Southwest Airlines Revenue 2005-2020 Chart.” accessed June 28, 2021 https://www.macrotrends.net/stocks/charts/LUV/southwest/revenue

Bevans, Rebecca. “Akaike Information Criterion: When & How to Use It.” Scribbr, March 27, 2020. https://www.scribbr.com/statistics/akaike-information-criterion/.

M. B. Staff, “LUV Income Statement & Balance Sheet (Southwest Airlines),” MarketBeat, 26-Jul-2021. Available: https://www.marketbeat.com/stocks/NYSE/LUV/financials/. [Accessed: 26-Jul-2021].

A. Rappeport and N. Chokshi, “Crippled airline industry to get $25 Billion Bailout, part of it as loans,” The New York Times, 14-Apr-2020. [Online]. Available: https://www.nytimes.com/2020/04/14/business/coronavirus-airlines-bailout-treasury-department.html. [Accessed: 16-Aug-2021].

Published

11-07-2021

How to Cite

Kelkar, M., Borsa, C., & Kim, L. (2021). Time-Series Statistical Model for Forecasting Revenue and Risk Management. Journal of Student Research, 10(3). https://doi.org/10.47611/jsrhs.v10i3.2050

Issue

Vol. 10 No. 3 (2021)

Section

HS Research Projects

Copyright (c) 2021 Mihir Kelkar, Cosmin Borsa; Dr. Lina Kim

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