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Technology, Business Models and Network Structure in the Airline Industry

XREAP Working Paper No. 2010-14

54 Pages Posted: 22 Apr 2011  

Xavier Fageda

University of Barcelona - Department of Economic Policy

Ricardo Flores-Fillol

Universitat Rovira i Virgili (URV)

Date Written: December 1, 2010

Abstract

Network airlines have increasingly focused their operations on hub airports through the exploitation of connecting traffic. This has allowed them to take advantage of economies of traffic density, the existence of which is beyond dispute in the airline industry. Less attention has been devoted to airlines' decisions on thin point-to-point routes, which can be served using different aircraft technologies and different business models. This paper examines, both theoretically and empirically, the impact on airlines' networks of the two major innovations in the airline industry of the last two decades: regional jet technology, and the low-cost business model. We show that, under certain circumstances, direct services on thin point-to-point routes can be viable, and that as a result airlinesmay be interested in diverting passengers away from the hub.

Keywords: regional jet technology, low-cost business model, point-to-point network, hub-and-spoke network

JEL Classification: L13, L2, L93

Suggested Citation

Fageda, Xavier and Flores-Fillol, Ricardo, Technology, Business Models and Network Structure in the Airline Industry (December 1, 2010). XREAP Working Paper No. 2010-14. Available at SSRN: https://ssrn.com/abstract=1813728 or http://dx.doi.org/10.2139/ssrn.1813728

Xavier Fageda (Contact Author)

University of Barcelona - Department of Economic Policy ( email )

Av. Diagonal 690
08034 Barcelona
Spain
0034 934021947 (Phone)
0034 934024573 (Fax)

Ricardo Flores-Fillol

Universitat Rovira i Virgili (URV) ( email )

Dept. d'Economia (office 310), FCEE
Avinguda de la Universitat 1
Reus, Tarragona 43204
Spain
+34 977 75 98 51 (Phone)
+34 977 75 98 10 (Fax)

HOME PAGE: http://gandalf.fcee.urv.es/professors/RicardoFlores

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