Airlines and Hub-and-Spoke

Airlines and Hub-and-Spoke

The most important developments in the American airline industry over the past generation have not come about through technological advances – although certainly there have been some important technical break-throughs such as more efficient wing de-icers that make flying in cold weather much safer than it once was – but through advances in the ways in which airline companies are organized. This paper examines the effects of some of those changes in what we might call the social structure of airlines, including the rise of the importance of a hub-and-spoke system throughout the industry, the effects of mergers between airline companies, and the consequences of code sharing for those companies. While there have been some advantages for the airline passenger in these changes in the ways in which airline companies are structured, in general these changes have served to benefit the companies and their stockholders at the expense of ordinary consumers.

Not so very long ago, the conventional wisdom for organizing air travel (and thus the conventional for how companies distributed their planes) was that one limited the number of miles that planes had to fly out of their way, concentrating on shuttling planes back and forward from one (hopefully popular) destination to another so as not to waste expensive fuel. This model – which certainly makes a great deal of intuitive sense – has been scrapped by a number of airline companies for a hub-and-spoke system. In a hub-and-spoke system, most passengers fly from their original destination to the “hub” or home airport of their carrier, then change planes at that hub to another flight that takes them to their final destination. This was a business design that would have been disallowed before the deregulation of the industry in the late 1970s (http://en.wikipedia.org/wiki/Piedmont_Airlines).

The hub-and-spoke system was designed to increase the profits of airline companies, who under the previou…

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