IDEAS home Printed from https://ideas.repec.org/a/eee/retrec/v13y2005i1p49-73.html
   My bibliography  Save this article

The Evolution of Networks with Changes in Industry Structure and Strategy: Connectivity, Hub-and-Spoke and Alliances

Author

Listed:
  • Gillen, David

Abstract

This chapter examines the evolution of the structure of airline networks as dominant strategies in the industry have changed. The network strategy is an integral component of the airline strategy, and network structure will be a function of demand side externalities and uncertainty, as well as supply side network economies. Network economies have predominantly been on the demand side, but in airline networks they are viewed as being for the most part on the supply side. The paper first describes the natural move to hub-and spoke (HS) systems after deregulation and the consequences of this network configuration. Network structure choice is not just a cost issue; a network can confer revenue advantages as well. We show these advantages in a discussion of low-cost carrier strategies. Next, the paper examines the current state of the airline industry and the evolution from HS to networks of connectivity. We report on the [opposing] forces that lead to such a result. The network structure ranges from fully connected, to HS to alliance (fully contracted) to middle of the road strategies, which include connectivity, and "rolling hubs." The forces leading to the choice of each strategy are discussed as well as the future sustainable strategies of the airline industry.

Suggested Citation

  • Gillen, David, 2005. "The Evolution of Networks with Changes in Industry Structure and Strategy: Connectivity, Hub-and-Spoke and Alliances," Research in Transportation Economics, Elsevier, vol. 13(1), pages 49-73, January.
    • Handle: RePEc:eee:retrec:v:13:y:2005:i:1:p:49-73
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0739-8859(05)13003-0
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Park, Jong-Hun, 1997. "The effects of airline alliances on markets and economic welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(3), pages 181-195, September.
    2. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521800952, January.
    3. Ken Hendricks & Michele Piccione & Guofu Tan, 1995. "The Economics of Hubs: The Case of Monopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 83-99.
    4. Jong-Hun Park & Anming Zhang, 2000. "An Empirical Analysis of Global Airline Alliances: Cases in North Atlantic Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 16(4), pages 367-384, June.
    5. Jan K. Brueckner & Yimin Zhang, 2001. "A Model of Scheduling in Airline Networks: How a Hub-and-Spoke System Affects Flight Frequency, Fares and Welfare," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 195-222, May.
    6. Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 2000. "A note on the optimality of airline networks," Economics Letters, Elsevier, vol. 69(3), pages 429-434, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. O'Connell, John F. & Avellana, Raquel Martinez & Warnock-Smith, David & Efthymiou, Marina, 2020. "Evaluating drivers of profitability for airlines in Latin America: A case study of Copa Airlines," Journal of Air Transport Management, Elsevier, vol. 84(C).
    2. Kevin Cullinane & Yuhong Wang, 2012. "The hierarchical configuration of the container port industry: an application of multiple linkage analysis," Maritime Policy & Management, Taylor & Francis Journals, vol. 39(2), pages 169-187, March.
    3. Kottas, Angelos T. & Madas, Michael A., 2018. "Comparative efficiency analysis of major international airlines using Data Envelopment Analysis: Exploring effects of alliance membership and other operational efficiency determinants," Journal of Air Transport Management, Elsevier, vol. 70(C), pages 1-17.
    4. Gaggero, Alberto A. & Piazza, Giovanni, 2021. "Multilayer networks and route entry into the airline industry: Evidence from the U.S. domestic market," Research in Transportation Economics, Elsevier, vol. 90(C).
    5. Phimphorn Sowawattanakul & Winai Wongsurawat, 2013. "Domestic airline networks and passenger demand in Thailand after deregulation," International Journal of Aviation Management, Inderscience Enterprises Ltd, vol. 2(1/2), pages 35-53.
    6. David West & Scott Dellana, 2016. "Linking service structural design to service profitability: a U.S. airline industry study," Operations Management Research, Springer, vol. 9(1), pages 22-34, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kawasaki, Akio, 2008. "Network effects, heterogeneous time value and network formation in the airline market," Regional Science and Urban Economics, Elsevier, vol. 38(4), pages 388-403, July.
    2. Zou, Li & Chen, Xueqian, 2017. "The effect of code-sharing alliances on airline profitability," Journal of Air Transport Management, Elsevier, vol. 58(C), pages 50-57.
    3. Gillen, David & Morrison, William G., 2005. "Regulation, competition and network evolution in aviation," Journal of Air Transport Management, Elsevier, vol. 11(3), pages 161-174.
    4. Pels, Eric, 2021. "Optimality of the hub-spoke system: A review of the literature, and directions for future research," Transport Policy, Elsevier, vol. 104(C), pages 1-10.
    5. Jan K. Brueckner, 2004. "Network Structure and Airline Scheduling," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 291-312, June.
    6. Yetiskul, Emine & Matsushima, Kakuya & Kobayashi, Kiyoshi, 2005. "Airline Network Structure with Thick Market Externality," Research in Transportation Economics, Elsevier, vol. 13(1), pages 143-163, January.
    7. Florent Venayre & Thierry Blayac, 2007. "L'organisation du marché européen des services de transport aérien face à la suppression annoncée des exemptions," Post-Print halshs-00645382, HAL.
    8. Du, Yan & McMullen, B. Starr & Kerkvliet, Joe R., 2008. "The economic impact of the ATA/Southwest Airlines code-share agreement," Research in Transportation Economics, Elsevier, vol. 24(1), pages 51-60.
    9. Pels, Eric, 2021. "Product differentiation and network optimality," Transport Policy, Elsevier, vol. 110(C), pages 415-429.
    10. Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 503-545, October.
    11. W. Whalen, 2007. "A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(1), pages 39-61, February.
    12. Gayle Philip G. & Thomas Tyson, 2015. "Product Quality Effects of International Airline Alliances, Antitrust Immunity, and Domestic Mergers," Review of Network Economics, De Gruyter, vol. 14(1), pages 45-74, March.
    13. Wang, Chunan & Wang, Xiaoyu, 2019. "Airport congestion delays and airline networks," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 328-349.
    14. Brueckner, Jan K. & Proost, Stef, 2010. "Carve-outs under airline antitrust immunity," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 657-668, November.
    15. Quartieri, Federico, 2017. "Are vessel sharing agreements pro-competitive?," Economics of Transportation, Elsevier, vol. 11, pages 33-48.
    16. Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1475-1498, December.
    17. Gudmundsson, Sveinn Vidar & Lechner, Christian, 2006. "Multilateral airline alliances: Balancing strategic constraints and opportunities," Journal of Air Transport Management, Elsevier, vol. 12(3), pages 153-158.
    18. Sergio Jara-Díaz & Antonio Gschwender & Meisy Ortega, 2014. "The impact of a financial constraint on the spatial structure of public transport services," Transportation, Springer, vol. 41(1), pages 21-36, January.
    19. Achim I. Czerny, 2008. "Code-sharing, price discrimination and welfare losses," WHU Working Paper Series - Economics Group 08-05, WHU - Otto Beisheim School of Management.
    20. Bilotkach, Volodymyr & Hüschelrath, Kai, 2019. "Balancing competition and cooperation: Evidence from transatlantic airline markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 120(C), pages 1-16.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:retrec:v:13:y:2005:i:1:p:49-73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/620614/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.