On the location of new routes to a destination for airline expansion

Abstract

We address the problem of finding new routes from a region with multiple airports to a destination for an expanding airline. The company competes with other airlines that also offer routes from some airports in the region to the destination. It is assumed that passengers maximise the utility of choosing a particular combination of departure airport and airline. This utility depends on distance to airports and attributes of both airports and airlines. We propose a spatial interaction model for passenger choice and develop an integer linear programming model to determine the routes which maximise the revenue of the expanding airline. An illustrative example is presented and conclusions are drawn from a sensitivity analysis with respect to new routes airfares. [Received 29 September 2015; Revised 10 February 2016; Revised 18 April 2016; Accepted 27 April 2016]