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The effect of de-hubbing on airfares

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  • Tan, Kerry M.
  • Samuel, Andrew

Abstract

This paper studies the price effect of de-hubbing, which occurs when an airline ceases hub operations at an airport. We develop a simple theoretical model to study the impact of de-hubbing on prices and quantities of direct flights at the hub airport. Using an event study of seven cases of de-hubbing between 1993 and 2009, we analyze how average airfares change following de-hubbing. Consistent with the theoretical implications, the empirical results suggest that airfares decrease when there is a low-cost carrier presence at the de-hubbed airport, whereas airfares increase when the de-hubbed airport is not serviced by a low-cost carrier.

Suggested Citation

  • Tan, Kerry M. & Samuel, Andrew, 2016. "The effect of de-hubbing on airfares," Journal of Air Transport Management, Elsevier, vol. 50(C), pages 45-52.
    • Handle: RePEc:eee:jaitra:v:50:y:2016:i:c:p:45-52
    DOI: 10.1016/j.jairtraman.2015.10.002
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    3. Morlotti, Chiara & Redondi, Renato, 2023. "The impact of COVID-19 on airlines’ price curves," Journal of Air Transport Management, Elsevier, vol. 107(C).
    4. Cattaneo, Mattia & Malighetti, Paolo & Percoco, Marco, 2018. "The impact of intercontinental air accessibility on local economies: Evidence from the de-hubbing of malpensa airport," Transport Policy, Elsevier, vol. 61(C), pages 96-105.
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    6. Chen, Jihui, 2024. "The pricing and quality effects of network structure choice: Evidence from American airlines’ international route cancellations," Journal of Air Transport Management, Elsevier, vol. 114(C).

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