1-Hub, 2-hub or fully connected network? A theoretical analysis of the optimality of airline network structure

Abstract

Multi-hub network structures are an increasingly important phenomenon in today’s airline networks. With current theoretical arguments for the single-hub solution leaving little room for the kind of multi-hub networks that exist nowadays, this paper sets up a formal model to explore the optimality of multi-hub networks, with or without competition. It is shown that a single-hub or a fully connected network may not be the optimal network configuration, while a 2-hub configuration may be favored under certain circumstances. In addition, the paper shows that competition can also affect an airline’s optimal choice of network: a 2-hub network can be preferable if a competitor enters the market.