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An aggregate demand model for air passenger traffic in the hub-and-spoke network

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  • Wei, Wenbin
  • Hansen, Mark

Abstract

In this paper, we build an aggregate demand model for air passenger traffic in a hub-and-spoke network. This model considers the roles of airline service variables such as service frequency, aircraft size, ticket price, flight distance, and number of spokes in the network. It also takes into account the influence of local passengers and social-economic and demographic conditions in the spoke and hub metropolitan areas. The hub airport capacity, which has a significant impact on service quality in the hub airport and in the whole hub-and-spoke network, is also taken into consideration. Our demand model reveals that airlines can attract more connecting passengers in a hub-and-spoke network by increasing service frequency than by increasing aircraft size in the same percentage. Our research confirms the importance of local service to connecting passengers, and finds that, interestingly, airlines' services in the first flight leg are more important to attract passengers than those in the second flight segment. Based on data in this study, we also find that a 1% reduction of ticket price will bring about 0.9% more connecting passengers, and a 1% increase of airport acceptance rate can bring about 0.35% more connecting passengers in the network, with all else equal. These findings are helpful for airlines to understand the effects of changing their services, and also useful for us to quantify the benefits of hub airport expansion projects. At the end of this paper, we give an example as an application to demonstrate how the developed demand model could be used to valuate passengers' direct benefit from airport capacity expansion.

Suggested Citation

  • Wei, Wenbin & Hansen, Mark, 2006. "An aggregate demand model for air passenger traffic in the hub-and-spoke network," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(10), pages 841-851, December.
  • Handle: RePEc:eee:transa:v:40:y:2006:i:10:p:841-851
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    References listed on IDEAS

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    1. Hansen, Mark M. & Gosling, Geoffrey D. & Margulici, Jean-David & Wei, Wen-Bin, 2001. "Influence of Capacity Constraints on Airline Fleet Mix," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt965114nc, Institute of Transportation Studies, UC Berkeley.
    2. Victor D. Norman & Siri Strandenes, 1994. "Deregulation of Scandinavian Airlines: A Case Study of the Oslo-Stockholm Route," NBER Chapters,in: Empirical Studies of Strategic Trade Policy, pages 85-100 National Bureau of Economic Research, Inc.
    3. Adler, Nicole, 2001. "Competition in a deregulated air transportation market," European Journal of Operational Research, Elsevier, vol. 129(2), pages 337-345, March.
    4. Hsu, Chaug-Ing & Wen, Yuh-Horng, 2003. "Determining flight frequencies on an airline network with demand-supply interactions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 39(6), pages 417-441, November.
    5. Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 2000. "Airport and Airline Competition for Passengers Departing from a Large Metropolitan Area," Journal of Urban Economics, Elsevier, vol. 48(1), pages 29-45, July.
    6. Hansen, Mark, 1990. "Airline competition in a hub-dominated environment: An application of noncooperative game theory," Transportation Research Part B: Methodological, Elsevier, vol. 24(1), pages 27-43, February.
    7. Fridström, Lasse & Thune-Larsen, Harald, 1989. "An econometric air travel demand model for the entire conventional domestic network: The case of Norway," Transportation Research Part B: Methodological, Elsevier, vol. 23(3), pages 213-223, June.
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    Cited by:

    1. Pagoni, Ioanna & Psaraki-Kalouptsidi, Voula, 2016. "The impact of carbon emission fees on passenger demand and air fares: A game theoretic approach," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 41-51.
    2. Fageda, Xavier, 2014. "What hurts the dominant airlines at hub airports?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 177-189.
    3. Yang, Chih-Wen, 2016. "Entry effect of low-cost carriers on airport-pairs demand model using market concentration approach," Journal of Air Transport Management, Elsevier, vol. 57(C), pages 291-297.
    4. Fageda, Xavier & Flores-Fillol, Ricardo, 2016. "How do airlines react to airport congestion? The role of networks," Regional Science and Urban Economics, Elsevier, vol. 56(C), pages 73-81.
    5. Wei, Wenbin, 2008. "A new approach to quantify the benefit to air travelers resulting from airport capacity expansion," Journal of Air Transport Management, Elsevier, vol. 14(1), pages 47-49.
    6. Givoni, Moshe & Rietveld, Piet, 2009. "Airline's choice of aircraft size - Explanations and implications," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(5), pages 500-510, June.
    7. repec:eee:touman:v:62:y:2017:i:c:p:54-64 is not listed on IDEAS
    8. Huber, Hans, 2010. "Planning for balanced growth in Chinese air traffic: A case for statistical mechanics," Journal of Air Transport Management, Elsevier, vol. 16(4), pages 178-184.
    9. Chi, Junwook & Baek, Jungho, 2012. "A dynamic demand analysis of the United States air-passenger service," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 755-761.
    10. Hsiao, Chieh-Yu & Hansen, Mark, 2011. "A passenger demand model for air transportation in a hub-and-spoke network," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(6), pages 1112-1125.
    11. Beuthe, Michel, 2009. "A comment on W. Wei and M. Hansen's benefit estimation in "An aggregate demand model for air passenger traffic in the hub-and-spoke network"," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(2), pages 230-234, February.
    12. Zhou, Xuemei & Huang, Huang & Jia, Xinchang & Jiang, Nan, 2014. "Integrated passenger terminal capacity analysis under the capacity constraints of surrounding road network," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 414(C), pages 194-203.
    13. Cidell, Julie, 2014. "Spoke airports, intentional and unintentional ground travel, and the air travel decision-making process," Transportation Research Part A: Policy and Practice, Elsevier, vol. 69(C), pages 113-123.

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