An Analysis of Fortress Hubs in Airline Networks

Posted: 25 Sep 1996

See all articles by Anming Zhang

Anming Zhang

University of British Columbia (UBC) - Sauder School of Business

Date Written: Undated

Abstract

This paper explores the possibility that the fortress hubs phenomenon is a consequence of the nature of airline hub-spoke network rivalry with the cost complementarities and economies of traffic density inherent to such networks. A negative network effect of local competition is identified: entry into a competitor's local markets may reduce the entry carrier's profit in its own hub-spoke network. As a result, even if a carrier could derive a positive profit from the invaded markets, it would not enter those markets if the negative network effect is sufficiently strong. In effect, it is shown that fortress hubbing can be each carrier's dominant strategy. The impacts of local competition on consumer surplus and total social surplus are also examined.

JEL Classification: L12, L13, L11, L93

Suggested Citation

Zhang, Anming, An Analysis of Fortress Hubs in Airline Networks (Undated). Sauder School of Business Working Paper. Available at SSRN: https://ssrn.com/abstract=4251

Anming Zhang (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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