The effect of de-hubbing on airfares

Kerry M. Tan and Andrew Samuel

Journal of Air Transport Management, 2016, vol. 50, issue C, 45-52

Abstract: This paper studies the price effect of de-hubbing, which occurs when an airline ceases hub operations at an airport. We develop a simple theoretical model to study the impact of de-hubbing on prices and quantities of direct flights at the hub airport. Using an event study of seven cases of de-hubbing between 1993 and 2009, we analyze how average airfares change following de-hubbing. Consistent with the theoretical implications, the empirical results suggest that airfares decrease when there is a low-cost carrier presence at the de-hubbed airport, whereas airfares increase when the de-hubbed airport is not serviced by a low-cost carrier.

Keywords: De-hubbing; Legacy carriers; Low-cost carriers; Hub-and-spoke network; Airfares; Airline competition (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:50:y:2016:i:c:p:45-52

DOI: 10.1016/j.jairtraman.2015.10.002

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