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Airport Congestion and Airline Network Structure

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  • Fageda, Xavier, 1975-
  • Flores-Fillol, Ricardo
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    Abstract

    This paper provides a theoretical and empirical analysis of the relationship between airport congestion and airline network structure. We find that the development of hub-and-spoke (HS) networks may have detrimental effects on social welfare in presence of airport congestion. The theoretical analysis shows that, although airline pro ts are typically higher under HS networks, congestion could create incentives for airlines to adopt fully-connected (FC) networks. However, the welfare analysis leads to the conclusion that airlines may have an inefficient bias towards HS networks. In line with the theoretical analysis, our empirical results show that network airlines are weakly infl uenced by congestion in their choice of frequencies from/to their hub airports. Consistently with this result, we con firm that delays are higher in hub airports controlling for concentration and airport size. Keywords: airlines; airport congestion; fully-connected networks, hub-and-spoke net- works; network efficiency JEL Classifi cation Numbers: L13; L2; L93

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    Bibliographic Info

    Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/211753.

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    Date of creation: 2012
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    Handle: RePEc:urv:wpaper:2072/211753

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    Related research

    Keywords: Línies aèries; Aeroports -- Direcció i administració; Oligopolis; Empreses -- Direcció i administració; Aviació comercial; 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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    1. Rupp, Nicholas G., 2009. "Do carriers internalize congestion costs? Empirical evidence on the internalization question," Journal of Urban Economics, Elsevier, vol. 65(1), pages 24-37, January.
    2. Jan K. Brueckner, 2002. "Internalization of Airport Congestion: A Network Analysis," CESifo Working Paper Series 756, CESifo Group Munich.
    3. 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.
    4. Ater, Itai, 2012. "Internalization of congestion at US hub airports," Journal of Urban Economics, Elsevier, vol. 72(2), pages 196-209.
    5. Fageda, Xavier & Flores-Fillol, Ricardo, 2012. "Air services on thin routes: Regional versus low-cost airlines," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 702-714.
    6. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May.
    7. Flores-Fillol, Ricardo, 2010. "Congested hubs," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 358-370, March.
    8. Jan K. Brueckner, 2004. "Network Structure and Airline Scheduling," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 291-312, 06.
    9. Flores-Fillol, Ricardo, 2009. "Airline competition and network structure," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 966-983, December.
    10. Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-70, March.
    11. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2010. "Scheduled service versus personal transportation: The role of distance," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 60-72, January.
    12. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
    13. Gillen David, 2006. "Airline Business Models and Networks: Regulation, Competition and Evolution in Aviation Markets," Review of Network Economics, De Gruyter, vol. 5(4), pages 1-20, December.
    14. Fageda, Xavier & Flores-Fillol, Ricardo, 2012. "On the optimal distribution of traffic of network airlines," European Economic Review, Elsevier, vol. 56(6), pages 1164-1179.
    15. Brueckner, Jan K. & Van Dender, Kurt, 2008. "Atomistic congestion tolls at concentrated airports? Seeking a unified view in the internalization debate," Journal of Urban Economics, Elsevier, vol. 64(2), pages 288-295, September.
    16. Santos, Georgina & Robin, Maël, 2010. "Determinants of delays at European airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 392-403, March.
    17. Bilotkach Volodymyr, 2009. "A Framework for Modeling "Real-Life" Airline Networks," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-16, September.
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