Airlines-within-airlines strategies and existence of low-cost carriers

Ming Hsin Lin

Transportation Research Part E: Logistics and Transportation Review, 2012, vol. 48, issue 3, 637-651

Abstract: This paper investigates hub carriers’ airlines-within-airlines (AinA) strategies, intended to establish low-cost divisions offering nonstop flights on rim routes. An initial hub-spoke network is optimal if passenger differentiation between one-stop and nonstop services and via-hub time cost are small. If differentiation is substantial, a mixed one-stop and nonstop (point-to-point) network under AinA is optimal when via-hub time cost is small (large). Low-cost rivals on rim routes weaken AinA adoption and enhance welfare from a monopoly mixed network. In a perfect-substitute case, hub carriers may have excessive incentive to adopt AinA from a welfare viewpoint, especially, when low-cost rivals exist.

Keywords: Airline network; Airlines-within-airlines; Low-cost carriers; Schedule competition; Product differentiation (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (29)

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DOI: 10.1016/j.tre.2011.11.004

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