Marc Gelhausen

Domination of hub-and-spoke systems: A Critical Assessment

We have analysed the traffic growth at airports worldwide between the years 2000 and 2014. Furthermore, we have analysed the traffic growth by seven world regions, focusing on traffic growth and traffic distribution between airports. Overall, traffic growth has decreased considerably, especially since 2007. This ties in with weak economic development worldwide, but especially in highly developed regions such as North America and Europe. As a result, traffic growth has also been very different between regions: while highly developed world regions grow only slowly or are even decreasing, emerging regions such as Asia and the Middle East are growing strongly. However, these are regions whose economies have also developed quite dynamically in recent years. Nevertheless, the largest market remained North America in 2014, but Asia replaced Europe as the second-largest market in terms of number of takeoffs in 2014. Traffic concentration at airports remains on a very high level globally: the value of the Gini-coefficient for 2014 is 0.812 and it only increased marginally from 2000. There are some differences in traffic concentration between different world regions; however, these differences are relatively small: Gini-values ranged from 0.734 for South America to 0.847 for North America. While concentration in highly developed regions remained more or less the same between 2000 and 2014, concentration tended to increase for emerging regions such as the Middle East and Asia. Furthermore, airline structure tends to influence traffic concentration: the higher the share of airline alliance traffic, the higher the traffic concentration of a region. On the other hand, LCC and regional airlines tend to dampen concentration, since they are more focused on point-to-point traffic. During the period from 2000 to 2014, airline alliances and LCC massively gained traffic shares, while independent FSNC, regional and charter carriers either stagnated or decreased their traffic shares. Therefore, liberalization has fostered two very different airline business models: FSNC with their hub-and-spoke system on the one hand, and LCC with mainly point-to-point traffic on the other hand. Airline alliances accounted for more than half of the global traffic in 2014, while LCC had a share of about 20 per cent of global takeoffs. Furthermore, LCC increasingly try to arrange some degree of hubbing (self-help hubbing), and they are serving a greater number of larger and hub airports. This trend is fostered by FSNC establishing their own more or less independent LCC subsidiary, such as Germanwings/Eurowings (Lufthansa), Vueling (International Airlines Group) and Transavia (Air France/KLM). Hub airports are prone to congestion and capacity constraints, but this is not a particular hub airport problem, as large airports with attractive catchment areas close to dense agglomerations are generally more affected than smaller airports that are remotely located. In these cases, airport expansion plans are difficult to implement and take a lot of time, since the surrounding population is typically opposed to such plans because of further noise and pollution emissions, especially in economically highly developed countries with a high level of participation. Furthermore, it is unlikely that a shift away from hubbing resolves airport capacity problems in the long term, since a pure point-to-point network needs more flights to connect a given network.