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Airport Congestion and Airline Network Structure

Author Info

Listed author(s):
  • Fageda, Xavier, 1975-
  • Flores-Fillol, Ricardo

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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File URL: http://hdl.handle.net/2072/211753
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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
Handle: RePEc:urv:wpaper:2072/211753
Contact details of provider: Postal:
Avda. de la Universitat,1 - 43204 Reus (Tarragona)

Phone: 977 75 98 00
Fax: 977 75 98 10
Web page: http://www.urv.cat
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More information through EDIRC

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;

Find related papers by JEL classification:

  • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
  • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
  • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. 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.
  2. Brueckner, Jan K., 2005. "Internalization of airport congestion: A network analysis," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 599-614, September.
  3. 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.
  4. 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 327-370, March.
  5. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(3), pages 161-177, May.
  6. Santos, Georgina & Robin, Maël, 2010. "Determinants of delays at European airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 392-403, March.
  7. Flores-Fillol, Ricardo, 2010. "Congested hubs," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 358-370, March.
  8. Forbes, Silke J., 2008. "The effect of air traffic delays on airline prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1218-1232, September.
  9. Bilotkach Volodymyr, 2009. "A Framework for Modeling "Real-Life" Airline Networks," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-16, September.
  10. 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.
  11. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
  12. Jan K. Brueckner, 2004. "Network Structure and Airline Scheduling," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 291-312, 06.
  13. 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.
  14. Daniel, Joseph I. & Harback, Katherine Thomas, 2008. "(When) Do hub airlines internalize their self-imposed congestion delays?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 583-612, March.
  15. 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.
  16. 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.
  17. 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.
  18. Flores-Fillol, Ricardo, 2009. "Airline competition and network structure," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 966-983, December.
  19. Ater, Itai, 2012. "Internalization of congestion at US hub airports," Journal of Urban Economics, Elsevier, vol. 72(2), pages 196-209.
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