| Title | "Hub-and-Spoke Air Transportation Network Mergers" |
| Author(s) | Nicole Adler, Department of Industrial
Engineering and Management Sciences, Northwestern University and
School of Business, Hebrew University Karen Smilowitz, Department of Industrial Engineering and Management Sciences, Northwestern University |
| Abstract | Within air transport there has been a heavy emphasis
on the use of hub-and-spoke networks for both passenger and cargo
carriers. This network type enables airline carriers to aggregate
demand efficiently and minimize costs. O'Kelly (1987) was the first
to develop a quadratic model to capture this network type for analysis
of appropriate hub locations. Campbell (1994) 'linearised' the quadratic
element, but the substantial increase in decision variables mean
that no more than 30 nodes are amenable to analysis. Many search
heuristics have been developed in an attempt to solve larger scale
networks consisting of upwards of 100 nodes.
The aim of our work is to analyse potential mergers across continents given the current push of carriers in this direction. In order to solve the model in a game-theoretic format, we have developed O'Kelly's formulation to include a discrete choice model that captures passenger behavior through pricing. We will solve the non-linear model through disaggregation, resulting in a more amenable solution procedure. Some results will be presented demonstrating potential gains from mergers between American and European carriers. |
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