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Network Structure and Airline Scheduling

  • Jan K. Brueckner

This paper provides a simple analysis of the effects of network structure on the scheduling, traffic, and aircraft size choices of a monopoly airline. The analysis shows that switching to a hub-and-spoke network leads to increases in both flight frequency and aircraft size, while stimulating local traffic in and out of the hub. In addition, HS networks are shown to be preferred by the airline when travel demand is low, when flights are expensive to operate, and when passengers place a high value on flight frequency but are not excessively inconvenienced by the extra travel time required for a connecting trip. The welfare analysis shows that the flight frequency, traffic volumes, and aircraft size chosen by the monopolist are all inefficiently low under both network types. Moreover, in the most plausible case, the monopolist's network choice exhibits an inefficient bias toward the HS network, apparently reflecting an excessive desire to economize on the number of flights. Copyright Blackwell Publishing Ltd. 2004.

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Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 52 (2004)
Issue (Month): 2 (06)
Pages: 291-312

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Handle: RePEc:bla:jindec:v:52:y:2004:i:2:p:291-312
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  1. 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.
  2. Tae Hoon Oum & Anming Zhang & Yimin Zhang, 1995. "Airline Network Rivalry," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 836-57, November.
  3. Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 1997. "Substitution and complementarity in aviation: airports vs airlines," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(4), pages 275-286, December.
  4. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  5. Zhang, Anming & Wei, Xin, 1993. "Competition in airline networks : The case of constant elasticity demands," Economics Letters, Elsevier, vol. 42(2-3), pages 253-259.
  6. Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1475-1498, December.
  7. Jan K. Brueckner & Nichola J. Dyer & Pablo T. Spiller, 1992. "Fare Determination in Airline Hub-and-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 309-333, Autumn.
  8. Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 323-342, September.
  9. Youdi Schipper & Piet Rietveld & Peter Nijkamp, 1998. "Deregulation and Schedule Competition in Simple Airline Networks," ERSA conference papers ersa98p205, European Regional Science Association.
  10. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter.
  11. Panzar, John C, 1979. "Equilibrium and Welfare in Unregulated Airline Markets," American Economic Review, American Economic Association, vol. 69(2), pages 92-95, May.
  12. Bittlingmayer, George, 1990. "Efficiency and entry in a simple airline network," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 245-257, June.
  13. Hendricks, Ken & Piccione, Michele & Tan, Guofu, 1995. "The Economics of Hubs: The Case of Monopoly," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 83-99, January.
  14. Ken Hendricks & Michele Piccione & Guofu Tan, 1997. "Entry and Exit in Hub-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 291-303, Summer.
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