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A note on the competitive advantage of large hub-and-spoke networks

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  • Nero, Giovanni

Abstract

This note explores the extent to which airlines operating large hub-and-spoke networks secure a competitive advantage. More specifically, this paper explores the intricate relationship which arises among productive efficiencies and profitability when the size of the hub-and-spoke network expands. To this end, Brueckner and Spiller (1991, International Journal of Industrial Organization 9, 323-342) airline economics model is generalized by allowing the size of the hub-and-spoke network to vary. The central result shows that, although the model exhibits decreasing returns to firm/network size (RTNS), nonetheless there is a competitive advantage to increasing the size of a network.

Suggested Citation

  • Nero, Giovanni, 1999. "A note on the competitive advantage of large hub-and-spoke networks," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 35(4), pages 225-239, December.
    • Handle: RePEc:eee:transe:v:35:y:1999:i:4:p:225-239
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    Cited by:

    1. Roucolle, Chantal & Seregina, Tatiana & Urdanoz, Miguel, 2020. "Measuring the development of airline networks: Comprehensive indicators," Transportation Research Part A: Policy and Practice, Elsevier, vol. 133(C), pages 303-324.
    2. Luigi La Franca & Mario Catalano & Giuseppa Luzzio & Daniela Mortelliti, 2003. "The Contribution of Air Logistics to the Development of Sicilian Economy," ERSA conference papers ersa03p229, European Regional Science Association.
    3. Zhang, Shengrun & Derudder, Ben & Witlox, Frank, 2013. "The impact of hub hierarchy and market competition on airfare pricing in US hub-to-hub markets," Journal of Air Transport Management, Elsevier, vol. 32(C), pages 65-70.
    4. 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.
    5. , 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence from the US airline Industry," Working Papers 950, Queen Mary University of London, School of Economics and Finance.
    6. Agusdinata, Buyung & de Klein, Wouter, 2002. "The dynamics of airline alliances," Journal of Air Transport Management, Elsevier, vol. 8(4), pages 201-211.
    7. Xu, Xu & McGrory, Clare Anne & Wang, You-Gan & Wu, Jinran, 2021. "Influential factors on Chinese airlines’ profitability and forecasting methods," Journal of Air Transport Management, Elsevier, vol. 91(C).
    8. Loo, Becky P.Y. & Li, Linna & Psaraki, Voula & Pagoni, Ioanna, 2014. "CO2 emissions associated with hubbing activities in air transport: an international comparison," Journal of Transport Geography, Elsevier, vol. 34(C), pages 185-193.
    9. Chantal Roucolle & Tatiana Seregina & Miguel Urdanoz, 2017. "Measuring Airline Networks: Comprehensive Indicators," Post-Print hal-01822938, HAL.
    10. Lin, Cheng-Chang & Lee, Shwu-Chiou, 2010. "The competition game on hub network design," Transportation Research Part B: Methodological, Elsevier, vol. 44(4), pages 618-629, May.
    11. Oliveira, Alessandro V.M. & Lohmann, Gui & Costa, Tiago G., 2016. "Network concentration and airport congestion in a post de-regulation context: A case study of Brazil 2000–2010," Journal of Transport Geography, Elsevier, vol. 50(C), pages 33-44.
    12. Adler, Nicole & Hashai, Niron, 2005. "Effect of open skies in the Middle East region," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(10), pages 878-894, December.
    13. Burghouwt, Guillaume, 2014. "Long-haul specialization patterns in European multihub airline networks – An exploratory analysis," Journal of Air Transport Management, Elsevier, vol. 34(C), pages 30-41.
    14. Castillo-Manzano, José I. & López-Valpuesta, Lourdes & Pedregal, Diego J., 2012. "What role will hubs play in the LCC point-to-point connections era? The Spanish experience," Journal of Transport Geography, Elsevier, vol. 24(C), pages 262-270.
    15. Costa, Tiago F.G. & Lohmann, Gui & Oliveira, Alessandro V.M., 2010. "A model to identify airport hubs and their importance to tourism in Brazil," Research in Transportation Economics, Elsevier, vol. 26(1), pages 3-11.
    16. Adler, Nicole & Smilowitz, Karen, 2007. "Hub-and-spoke network alliances and mergers: Price-location competition in the airline industry," Transportation Research Part B: Methodological, Elsevier, vol. 41(4), pages 394-409, May.
    17. Juan Ma & Foad Mahdavi Pajouh & Balabhaskar Balasundaram & Vladimir Boginski, 2016. "The Minimum Spanning k -Core Problem with Bounded CVaR Under Probabilistic Edge Failures," INFORMS Journal on Computing, INFORMS, vol. 28(2), pages 295-307, May.
    18. Reynolds-Feighan, Aisling, 2001. "Traffic distribution in low-cost and full-service carrier networks in the US air transportation market," Journal of Air Transport Management, Elsevier, vol. 7(5), pages 265-275.
    19. Shuxia Li & Yuedan Zu & Huimin Fang & Liping Liu & Tijun Fan, 2021. "Design Optimization of a HAZMAT Multimodal Hub-and-Spoke Network with Detour," IJERPH, MDPI, vol. 18(23), pages 1-18, November.
    20. Derudder, Ben & Devriendt, Lomme & Witlox, Frank, 2010. "A spatial analysis of multiple airport cities," Journal of Transport Geography, Elsevier, vol. 18(3), pages 345-353.

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