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An airline wants to build a model for forecasting demand for flights. Among other independent variables,...

An airline wants to build a model for forecasting demand for flights. Among other independent variables, it believes that Month is important in determining demand. Given that this is a categorical variable, how many corresponding indicator variables do they have to include in their regression model?

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Answer #1

There are many indicators possible based on the specific requirement for the forecasting model for flights.

Some of the common indicator variables which can be used in the regression model for the firecasting demands for flight are fuel price, past trends, on-board flight sales and load factor, etc.

these are most frequently used indicator varianbles which are used in the regression model for forecasting demand for flights. So, they need to include at least 5 indicator variables in their regression model.

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