Thursday, December 13, 2018

Measuring Airline Networks: Comprehensive Indicators

Chantal Roucolle (ENAC - Ecole Nationale de l'Aviation Civile); Tatiana Seregina (ENAC - Ecole Nationale de l'Aviation Civile, Toulouse Business School - ESC Toulouse); Miguel Urdanoz (Toulouse Business School - Toulouse Business School) are Measuring Airline Networks: Comprehensive Indicators.

ABSTRACT: The literature on airlines presents few studies analyzing the airlines network evolution and its impact on prices, costs or profitability. We believe that this gap is due to the difficulty of capturing the network complexity in a simple manner. This paper proposes new simple and continuous indicators to measure the airlines network structure. The methodology to build them is based on graph theory and principal component analysis. We apply this approach to the US domestic market for 2005-2015, and obtain three network indicators. The first one measures how close the network is to a hub-and-spoke structure. The second indicator measures the airline's ability to provide alternative routes. The third indicator captures the network size. We analyze how the carriers' network evolution can be described by those indicators. We show that low-cost carriers (LCCs) and legacy carriers' network choices differ for the second indicator, while our results exhibit no difference in strategies for the other two indicators. We also show that economic conditions affect differently the three indicators and the magnitude of the impact depends on the airline type. Highlights: ● Combine graph theory and principal component analysis ● Obtain three indicators to characterize airline network structure for US domestic market ● Compare these indicators for low-cost and legacy carriers ● Estimate evolution in the indicators over time ● Analyze the impact of the main US mergers on the network structure

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