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Airline Consolidation and the Distribution of Traffic between Primary and Secondary Hubs

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  • Bilotkach, Volodymyr
  • Fageda, Xavier, 1975-
  • Flores-Fillol, Ricardo

Abstract

Several airline consolidation events have recently been completed both in Europe and in the United States. The model we develop considers two airlines operating hub-and-spoke networks, using different hubs to connect the same spoke airports. We assume the airlines to be vertically differentiated, which allows us to distinguish between primary and secondary hubs. We conclude that this differentiation in air services becomes more accentuated after consolidation, with an increased number of flights being channeled through the primary hub. However, congestion can act as a brake on the concentration of flight frequency in the primary hub following consolidation. Our empirical application involves an analysis of Delta s network following its merger with Northwest. We find evidence consistent with an increase in the importance of Delta s primary hubs at the expense of its secondary airports. We also find some evidence suggesting that the carrier chooses to divert traffic away from those hub airports that were more prone to delays prior to the merger, in particular New York s JFK airport. Keywords: primary hub; secondary hub; airport congestion; airline consolidation; airline networks JEL Classi fication Numbers: D43; L13; L40; L93; R4

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Bibliographic Info

Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/211632.

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Date of creation: 2012
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Handle: RePEc:urv:wpaper:2072/211632

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Keywords: Aeroports -- Direcció i administració; Aviació comercial; Línies aèries; Oligopolis; Trusts industrials; 338 - Situació econòmica. Política econòmica. Gestió; control i planificació de l'economia. Producció. Serveis. Turisme. Preus;

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References

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Cited by:
  1. Bilotkach, Volodymyr & Lakew, Paulos Ashebir, 2014. "On sources of market power in the airline industry: Panel data evidence from the US airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 59(C), pages 288-305.
  2. Xavier Fageda, 2014. "“What hurts the dominant airlines at hub airports?”," IREA Working Papers 201414, University of Barcelona, Research Institute of Applied Economics, revised May 2014.

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