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The Structure of Airline Equilibrium Networks

In: Recent Advances in Spatial Equilibrium Modelling

Author

Listed:
  • Joseph Berechman

    (Tel Aviv University)

  • Oz Shy

    (The University of Michigan)

Abstract

In this paper, we explore why airline firms restructure their route network as a hub-and-spoke instead of a fully connected network. The difference between the two networks is that under a fully connected network all passengers are serviced by direct flights between origins-destinations city pairs, whereas under a hub-and-spoke network all city pairs are linked via a hub. We show that when a monopoly airline firm finds it profitable to operate a hub-and-spoke, it will increase frequency of service, compared to the case of a fully-connected type network. Our analysis differs from existing studies in two major respects: (i) We employ ‘frequency of flights’ as the measure of airline’s output instead of the commonly used measures like number of passengers or available-seat-km. (ii) Whereas previous studies have shown similar results based on airline’s cost function analysis in this paper we focus on demand conditions which cause the airline firm to restructure its network as a hub-and-spoke.

Suggested Citation

  • Joseph Berechman & Oz Shy, 1996. "The Structure of Airline Equilibrium Networks," Advances in Spatial Science, in: Jeroen C. J. M. Bergh & Peter Nijkamp & Piet Rietveld (ed.), Recent Advances in Spatial Equilibrium Modelling, chapter 7, pages 138-155, Springer.
    • Handle: RePEc:spr:adspcp:978-3-642-80080-1_7
    DOI: 10.1007/978-3-642-80080-1_7
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    Citations

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    Cited by:

    1. Babić, Danica & Begović, Boris & Levajković, Tijana, 2023. "Probabilistic model for the impact of fear of flying on airline network structures," Journal of Air Transport Management, Elsevier, vol. 109(C).
    2. M. Nenem & E. Ozkan-Gunay, 2012. "Determining Hub Efficiency in Europe, the Middle East, and North Africa: The Impact of Geographical Positioning," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 2(2), pages 37-53, December.
    3. Jingjing Hao & Ling Zhang & Xiaofeng Ji & Xiaolong Wu & Lan Liu, 2020. "Investigating the Accessibility between Civil Airports and Tourist Locations in Tourist Cities in Yunnan Province, China," Sustainability, MDPI, vol. 12(10), pages 1-22, May.
    4. 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.
    5. Sismanidou, Athina & Tarradellas, Joan & Bel, Germà & Fageda, Xavier, 2013. "Estimating potential long-haul air passenger traffic in national networks containing two or more dominant cities," Journal of Transport Geography, Elsevier, vol. 26(C), pages 108-116.
    6. Flores-Fillol, Ricardo, 2009. "Airline competition and network structure," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 966-983, December.
    7. Sayed Ajaz Hussain & Serkan Bahceci, 2008. "Network Structure and Design in the Deregulated U.S. Airline Industry: an Argument for Re-Regulation?," Working Papers tecipa-325, University of Toronto, Department of Economics.
    8. Ohashi, Hiroshi & Kim, Tae-Seung & Oum, Tae Hoon & Yu, Chunyan, 2005. "Choice of air cargo transshipment airport: an application to air cargo traffic to/from Northeast Asia," Journal of Air Transport Management, Elsevier, vol. 11(3), pages 149-159.
    9. Babić, Danica & Kalić, Milica, 2018. "Modeling the selection of airline network structure in a competitive environment," Journal of Air Transport Management, Elsevier, vol. 66(C), pages 42-52.
    10. Akio Kawasaki, 2012. "Hub location with scheduling effects in a monopoly airline market," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(3), pages 805-819, December.

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