Generalized Weber Model for Hub Location of Air Cargo

Abstract Many of air cargo companies adapt the hub-and-spokes system where economies of scale exist in the transportation cost. In this paper, we formulate economies of scale using nonlinear cost function of distances and demands, and analyze how the change of the transportation cost affects single hub location of air cargo using the generalized Weber problem on the regular demand points of one and two-dimensional region and the actual location of airport in East Asia. The optimal location will move to the largest demand points as the economies of scale in distances become larger or the economies of scale in demands become smaller. We confirm economies of scale in both distances and demands from the parameters estimated by the actual transportation cost in East Asia and find the optimal hub location of air cargo.