IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v70y2014icp177-189.html
   My bibliography  Save this article

What hurts the dominant airlines at hub airports?

Author

Listed:
  • Fageda, Xavier

Abstract

This paper estimates a frequency equation to explain the determinants of network airline service levels at their hub airports. Drawing on European data for 2002–2013, we find that network airlines reduce frequencies when the share of low-cost airlines increases both on the route and at the hub airport. On the contrary, frequency choices of network airlines are not affected by competition from low-cost airlines operating in nearby secondary airports. We also find some evidence that mergers in Europe may result in a re-organization of the route structure in favor of the hubs of the larger airline.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:transe:v:70:y:2014:i:c:p:177-189
    DOI: 10.1016/j.tre.2014.07.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554514001239
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2014.07.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Borenstein, Severin & Netz, Janet, 1999. "Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 611-640, July.
    2. Richard K. Green, 2007. "Airports and Economic Development," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(1), pages 91-112, March.
    3. 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.
    4. Jan K. Brueckner, 2003. "Airline Traffic and Urban Economic Development," Urban Studies, Urban Studies Journal Limited, vol. 40(8), pages 1455-1469, July.
    5. Bettini, Humberto F.A.J. & Oliveira, Alessandro V.M., 2008. "Airline capacity setting after re-regulation: The Brazilian case in the early 2000s," Journal of Air Transport Management, Elsevier, vol. 14(6), pages 289-292.
    6. Xavier Fageda, 2006. "Measuring Conduct and Cost Parameters in the Spanish Airline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(4), pages 379-399, June.
    7. Hofer, Christian & Windle, Robert J. & Dresner, Martin E., 2008. "Price premiums and low cost carrier competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(5), pages 864-882, September.
    8. Austan Goolsbee & Chad Syverson, 2008. "How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1611-1633.
    9. Pai, Vivek, 2010. "On the factors that affect airline flight frequency and aircraft size," Journal of Air Transport Management, Elsevier, vol. 16(4), pages 169-177.
    10. Oliveira, Alessandro V.M. & Huse, Cristian, 2009. "Localized competitive advantage and price reactions to entry: Full-service vs. low-cost airlines in recently liberalized emerging markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(2), pages 307-320, 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. Richard, Oliver, 2003. "Flight frequency and mergers in airline markets," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 907-922, June.
    13. Windle, Robert & Dresner, Martin, 1999. "Competitive responses to low cost carrier entry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 35(1), pages 59-75, March.
    14. 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.
    15. James A. Brander & Anming Zhang, 1990. "Market Conduct in the Airline Industry: An Empirical Investigation," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 567-583, Winter.
    16. 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.
    17. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc.
    18. Germà Bel & Xavier Fageda, 2008. "Getting there fast: globalization, intercontinental flights and location of headquarters," Journal of Economic Geography, Oxford University Press, vol. 8(4), pages 471-495, July.
    19. Brueckner, Jan K. & Luo, Dan, 2014. "Measuring strategic firm interaction in product-quality choices: The case of airline flight frequency," Economics of Transportation, Elsevier, vol. 3(1), pages 102-115.
    20. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
    21. Youdi Schipper & Piet Rietveld & Peter Nijkamp, 2002. "European Airline Reform: An Empirical Welfare Analysis," Journal of Transport Economics and Policy, University of Bath, vol. 36(2), pages 189-209, May.
    22. Castillo-Manzano, José I. & López-Valpuesta, Lourdes & Pedregal, Diego J., 2012. "What role will hubs play in the LCC point-to-point connections era? The Spanish experience," Journal of Transport Geography, Elsevier, vol. 24(C), pages 262-270.
    23. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2013. "Airline consolidation and the distribution of traffic between primary and secondary hubs," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 951-963.
    24. 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.
    25. Salvanes, Kjell G. & Steen, Frode & Sorgard, Lars, 2005. "Hotelling in the air? Flight departures in Norway," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 193-213, March.
    26. Pels, Eric & Njegovan, Nenad & Behrens, Christiaan, 2009. "Low-cost airlines and airport competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(2), pages 335-344, March.
    27. José I. Castillo-Manzano & Lourdes López-Valpuesta & Diego J. Pedregal, 2012. "How Can the Effects of the Introduction of a New Airline on a National Airline Network be Measured? A Time Series Approach for the Ryanair Case in Spain," Journal of Transport Economics and Policy, University of Bath, vol. 46(2), pages 263-279, May.
    28. Thorsten Fischer & David R. Kamerschen, 2003. "Price-Cost Margins in the US Airline Industry using a Conjectural Variation Approach," Journal of Transport Economics and Policy, University of Bath, vol. 37(2), pages 227-259, May.
    29. Evans, William N & Kessides, Ioannis N, 1993. "Localized Market Power in the U.S. Airline Industry," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 66-75, February.
    30. Steven A. Morrison, 2001. "Actual, Adjacent, and Potential Competition Estimating the Full Effect of Southwest Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 239-256, May.
    31. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    32. Redondi, Renato & Malighetti, Paolo & Paleari, Stefano, 2012. "De-hubbing of airports and their recovery patterns," Journal of Air Transport Management, Elsevier, vol. 18(1), pages 1-4.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fageda, Xavier & Jiménez, Juan Luis & Perdiguero, Jordi & Marrero, Kevin, 2017. "Does market exit of a network airline affect airline prices and frequencies on tourist routes?," Tourism Management, Elsevier, vol. 61(C), pages 465-471.
    2. 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.
    3. Bettini, Humberto F.A.J. & Silveira, José Maria F.J. & Oliveira, Alessandro V.M., 2018. "Estimating strategic responses to the march of a low cost carrier to primary airports," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 109(C), pages 190-204.
    4. Bernardo, Valeria & Fageda, Xavier, 2020. "Impacts of competition on connecting travelers: Evidence from the transatlantic aviation market," Transport Policy, Elsevier, vol. 96(C), pages 141-151.
    5. Ivana Tománková, . "Determinants of Route Presence in the EU Airline Industry," Prague Economic Papers, University of Economics, Prague, vol. 0, pages 1-13.
    6. Calzada, Joan & Fageda, Xavier & Safronov, Roman, 2022. "How do global airline alliances affect flight frequency? Evidence from Russia," Journal of Air Transport Management, Elsevier, vol. 98(C).
    7. Ivana Tománková, 2017. "Determinants of Route Presence in the EU Airline Industry," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(1), pages 90-102.
    8. Fageda, Xavier & Fioravanti, Reinaldo & Ricover, Andy & Café, Eduardo & Ansaldo, Mariano, 2023. "Econometric analysis of the determinants of air cargo services supply in Latin America and the Caribbean," Transport Policy, Elsevier, vol. 135(C), pages 33-44.
    9. Bernardo, Valeria & Fageda, Xavier, 2017. "The effects of the Morocco-European Union open skies agreement: A difference-in-differences analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 98(C), pages 24-41.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joan Calzada & Xavier Fageda, 2012. "Discounts and Public Service Obligations in the Airline Market: Lessons from Spain," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 291-312, June.
    2. Fageda, Xavier & Jiménez, Juan Luis & Perdiguero, Jordi & Marrero, Kevin, 2017. "Does market exit of a network airline affect airline prices and frequencies on tourist routes?," Tourism Management, Elsevier, vol. 61(C), pages 465-471.
    3. Ofelia Betancor & Juan Luis Jiménez, 2011. "When trains go faster than planes: the strategic reaction of airlines in Spain," ERSA conference papers ersa11p295, European Regional Science Association.
    4. Fageda, Xavier & Jiménez, Juan Luis & Valido, Jorge, 2016. "Does an increase in subsidies lead to changes in air fares? Empirical evidence from Spain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 235-242.
    5. Zou, Bo & Hansen, Mark, 2014. "Flight delay impact on airfare and flight frequency: A comprehensive assessment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 69(C), pages 54-74.
    6. Oliveira, Marcus V.R. & Oliveira, Alessandro V.M., 2018. "What drives effective competition in the airline industry? An empirical model of city-pair market concentration," Transport Policy, Elsevier, vol. 63(C), pages 165-175.
    7. 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.
    8. Hideki Murakami, 2010. "Time Effect of Low-Cost Carrier Entry and Social Welfare in US Large Air Markets," Discussion Papers 2010-31, Kobe University, Graduate School of Business Administration.
    9. Zhang, Yahua & Sampaio, Breno & Fu, Xiaowen & Huang, Zhibin, 2018. "Pricing dynamics between airline groups with dual-brand services," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 46-59.
    10. Bernardo, Valeria & Fageda, Xavier, 2020. "Impacts of competition on connecting travelers: Evidence from the transatlantic aviation market," Transport Policy, Elsevier, vol. 96(C), pages 141-151.
    11. Fu, Xiaowen & Jin, Huan & Liu, Shaoxuan & Oum, Tae H. & Yan, Jia, 2019. "Exploring network effects of point-to-point networks: An investigation of the spatial patterns of Southwest Airlines’ network," Transport Policy, Elsevier, vol. 76(C), pages 36-45.
    12. Hideki Murakami, 2009. "Low-Cost Entry, Inter-Firm Rivalry, and Welfare Implications in US Large Air Markets," Discussion Papers 2009-25, Kobe University, Graduate School of Business Administration.
    13. 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.
    14. Fageda, Xavier & Jiménez, Juan Luis & Valido, Jorge, 2017. "An empirical evaluation of the effects of European public policies on island airfares," Transportation Research Part A: Policy and Practice, Elsevier, vol. 106(C), pages 288-299.
    15. 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.
    16. Gayle, Philip G. & Wu, Chi-Yin, 2013. "A re-examination of incumbents’ response to the threat of entry: Evidence from the airline industry," Economics of Transportation, Elsevier, vol. 2(4), pages 119-130.
    17. Pels, Eric, 2021. "Optimality of the hub-spoke system: A review of the literature, and directions for future research," Transport Policy, Elsevier, vol. 104(C), pages 1-10.
    18. Zhang, Qiong & Yang, Hangjun & Wang, Qiang & Zhang, Anming, 2014. "Market power and its determinants in the Chinese airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 1-13.
    19. Brueckner, Jan K. & Lee, Darin & Singer, Ethan S., 2013. "Airline competition and domestic US airfares: A comprehensivereappraisal," Economics of Transportation, Elsevier, vol. 2(1), pages 1-17.
    20. Asahi, Ryota & Murakami, Hideki, 2017. "Effects of Southwest Airlines' entry and airport dominance," Journal of Air Transport Management, Elsevier, vol. 64(PA), pages 86-90.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:70:y:2014:i:c:p:177-189. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.