Hub and Spoke Networks
After deregulation, the airlines quickly moved to a hub-and-spoke system, whereby an airline selected some airport, the hub, as the destination point for flights from a number of origination cities, the spokes. Because the size of the planes used varied according to the travel on that spoke, and since hubs allowed passenger travel to be consolidated in “transfer stations”, capacity utilization increased, allowing fare reduction. The hub-and-spoke model survives among the legacy carriers, but the low-cost carriers (LCCs), now 30 percent of the market, typically fly point to point. The network hubs model offers consumers more convenience for routes, but point-to-point routes have proven less costly for airlines to implement. Over time, the legacy carriers and the LCCs will likely use some combination of point to point and network hubs to capture both economies of scope and pricing advantages.
Read more about this topic: Airline Deregulation
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