Technology, Business Models and Network Structure in the Airline Industry

Network airlines have increasingly focused their operations on hub airports through the exploitation of connecting tra¢ c. This has allowed them to take advantage of economies of tra¢ c density, the existence of which is beyond dispute in the airline indus- try. Less attention has been devoted to airlines.decisions on thin point-to-point routes, which can be served using di¤erent aircraft technologies and di¤erent business models. This paper examines, both theoretically and empirically, the impact on airlines.networks of the two major innovations in the airline industry of the last two decades: regional jet technology, and the low-cost business model. We show that, under certain circumstances, direct services on thin point-to-point routes can be viable, and that as a result airlines may be interested in diverting passengers away from the hub