A note on the competitive advantage of large hub-and-spoke networks

This note explores the extent to which airlines operating large hub-and-spo ke networks secure a competitive advantage. More specifically, this paper e xplores the intricate relationship which arises among productive efficienci es and profitability when the size of the hub-and-spoke network expands. To this end, Brueckner and Spiller (1991, International Journal of Industrial Organization 9, 323-342) airline economics model is generalized by allowin g the size of the hub-and-spoke network to vary. The central result shows t hat, although the model exhibits decreasing returns to firm/network size (R TNS), nonetheless there is a competitive advantage to increasing the size o f a network. (C) 1999 Elsevier Science Ltd. All rights reserved. JEL classi fication. L13; L43; L93.