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Why do airlines prefer multi-hub networks?

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  • Wang, Chunan
  • Wang, Xiaoyu

Abstract

This paper investigates a monopoly airline’s incentive to adopt a multi-hub (2-hub) network from the perspective of horizontal product differentiation. We find that: when both extra travel time disutility of one-stop services and marginal congestion delay cost are low, the hub-and-spoke network is optimal for airline, while when disutility is very high, the point-to-point network is optimal. For the rest of parameter space, because of the exploitation of horizontal product differentiation in more markets, the 2-hub network is optimal within its bounds of disutility, while the point-to-point network is left to be optimal between the hub-and-spoke and 2-hub networks.

Suggested Citation

  • Wang, Chunan & Wang, Xiaoyu, 2019. "Why do airlines prefer multi-hub networks?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 124(C), pages 56-74.
    • Handle: RePEc:eee:transe:v:124:y:2019:i:c:p:56-74
    DOI: 10.1016/j.tre.2019.02.009
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