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Airline Network Competition with New Brand Subsidiaries

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  • Ming Hsin Lin

Abstract

This paper investigates airline network competition where two (identical) hub carriers aim to establish new subsidiaries offering differentiated non-stop services on their rim-routes. Each of them may retain a hub or shift to a mix (or point-to-point) network cooperating with its subsidiary. We find that each chooses a mix (hub) network when passengers' product differentiation is large (small). We also find that one carrier chooses a hub and the other chooses a mix network when the differentiation is intermediate. Our welfare analysis shows that each network pair competition worsens welfare compared with a monopoly hub or mix network. © 2015 LSE and the University of Bath

Suggested Citation

  • Ming Hsin Lin, 2015. "Airline Network Competition with New Brand Subsidiaries," Journal of Transport Economics and Policy, University of Bath, vol. 49(1), pages 58-78, January.
    • Handle: RePEc:tpe:jtecpo:v:49:y:2015:i:1:p:58-78
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    Citations

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    Cited by:

    1. 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.
    2. Wang, Chunan & Jiang, Changmin & Zhang, Anming, 2021. "Effects of Airline Entry on High-Speed Rail," Transportation Research Part B: Methodological, Elsevier, vol. 154(C), pages 242-265.
    3. Zhang, Shengrun & Fuellhart, Kurt & Yang, Wendong & Tang, Xiaowei & Witlox, Frank, 2019. "Factors shaping non-stop airline services in the transatlantic air transport market: 2015–2017," Journal of Transport Geography, Elsevier, vol. 80(C).
    4. Jiang, Mei & Jiang, Changmin & Xiao, Yi-bin & Wang, Chunan, 2021. "Air-HSR cooperation: Impacts on service frequency and environment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 150(C).
    5. Wang, Chunan & Wang, Xiaoyu, 2019. "Why do airlines prefer multi-hub networks?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 124(C), pages 56-74.
    6. Wang, Wei & Sun, Huijun & Wu, Jianjun, 2020. "How does the decision of high-speed rail operator affect social welfare? Considering competition between high-speed rail and air transport," Transport Policy, Elsevier, vol. 88(C), pages 1-15.
    7. Liao, Weijun & Wang, Chunan, 2021. "Airline emissions charges and airline networks," Journal of Air Transport Management, Elsevier, vol. 92(C).
    8. Jiang, Changmin & Wang, Chunan, 2021. "High-speed rail pricing: Implications for social welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    9. Pels, Eric, 2021. "Product differentiation and network optimality," Transport Policy, Elsevier, vol. 110(C), pages 415-429.
    10. Lin, Ming Hsin, 2021. "Airport pricing and capacity: Schedule versus congestion delays," Research in Transportation Economics, Elsevier, vol. 90(C).
    11. Lin, Ming Hsin & Zhang, Yimin, 2017. "Hub-airport congestion pricing and capacity investment," Transportation Research Part B: Methodological, Elsevier, vol. 101(C), pages 89-106.
    12. Fageda, Xavier & Flores-Fillol, Ricardo & Lin, Ming Hsin, 2020. "Vertical differentiation and airline alliances: The effect of antitrust immunity," Regional Science and Urban Economics, Elsevier, vol. 81(C).
    13. Wang, Chunan & Jiang, Changmin, 2022. "How do pandemics affect intercity air travel? Implications for traffic and environment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 166(C), pages 330-353.

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