Airline Hubs: A Study of Determining Factors and Effects

Introduction The Airline Deregulation Act (ADA) of 1978 caused many changes in the industry. For the first time in 40 years, new airlines were permitted to enter the industry, and all airlines could choose the routes they would serve and the fares they would charge. Airlines were also free to exit the industry (go bankrupt), if they made poor choices in these matters. Naturally, this has led to many changes in the way airlines operate. Many aspects of airline behavior, particularly fares, service quality, and safety, have been subjected to intense study and debate. The development of hub-and-spoke networks is one of the most important innovations in the industry since deregulation, and it has affected all of these aspects. Yet comparatively little research has been done on this phenomena. A hub-and-spoke network, as the analogy to a wheel implies, is a route system in which flights from many "spoke" cities fly into a central "hub" city. A key element of this system is that the flights from the spokes all arrive at the hub at about the same time so that passengers can make timely connections to their final destinations. An airline must have access to enough gates and takeoff and landing slots at its hub airports in order to handle the peak level of activity. An example of a hub-and-spoke network can be seen in figure 1, which shows the location of the hub and spoke cities used in this study. From Pittsburgh, USAir offers service to