Five connections can be built with the same number of airports, and so can fifty-five. The difference lies in how the network is designed. So what does this powerful structure bring to passengers, airports and airlines, and what costs does it bring in return? In this lesson we examine, step by step, the effects of the hub-and-spoke network structure on airlines, airports and passengers, multi-hub networks and the concept of a seamless flight network, linear and grid network structures, and how economic regulations shape flight networks.

Note on the period: The regulatory information in this lesson belongs to the period in which the source was published; the current situation should be followed from the official sources of the relevant institutions.

What will you learn in this episode?

• To calculate the number of airport pairs obtained via a hub airport with the formula n(n−1)/2
• To explain the effects of the hub-and-spoke network structure on total travel time, frequency and on-time performance
• To explain the effects of the hub-and-spoke network structure on airlines in terms of economies of density and scope, market power and fragility
• To explain the positive and negative effects of the hub-and-spoke network structure on airports and passengers
• To explain the multi-hub network structure and the concept of a seamless flight network
• To compare linear and grid network structures and explain the effect of economic regulations on network structures

Summary of this episode

1. Few airports, many connections

Formula: If a hub airport is connected by direct flights to n spoke airports, the number of airport pairs obtained via the hub is n(n−1)/2.

Example: In a linear network setup, 10 airports form only 5 airport pairs. If the same 10 airports are connected to each other via a hub, the number of pairs rises to 10 × 9 / 2 = 45; when the 10 direct flights between the hub and the spoke airports are added, this number reaches 55.

Example: When there are 50 spoke airports, 50 × 49 / 2 = 1,225 pairs are obtained via the hub.

Why does it matter? Creating many pairs with few airports is an effective tool both for reducing expenses and for increasing revenues; this is the main motivation that leads airlines to this structure.

2. Effect on schedule-based components

Explanation: Networks connect points, each of which is a separate product; that is why network structure first determines which products will be produced.

Total travel time: Since the benefit expected from transport is a time benefit, the most important component of the product is the total travel time between the true origin and the true destination. In a hub-and-spoke network most flights are connecting; the option of a direct flight is offered only to those living in the hub's catchment area.

What lengthens the time? Waiting times at the hub are the most important factor affecting total time; in addition, each extra landing and takeoff lowers the average speed.

Frequency: As the number of waves increases, flight frequency increases; suitable frequency shortens total time by letting passengers find a flight close to the time they want. Together with price, frequency is one of the most important demand determinants and competitive tools.

On-time performance: As waves are compressed, the schedule becomes fragile against delays and on-time performance can fall.

3. Effects on airlines: cost-raising aspects

At first sight: The hub-and-spoke structure seems to raise costs:

• average flight length gets shorter,
• maintenance expenses increase,
• connecting flights require passengers and baggage to be loaded and unloaded at least twice,
• the passenger flow that concentrates at the hub in a short time makes labor very busy at certain hours and idle at others.

4. Effects on airlines: cost-reducing aspects

Explanation: The structure's cost-reducing effect is much larger than its cost-raising aspects.

Definition (traffic density): The value found by dividing the total passenger kilometers produced in the network by the number of airports served.

Definition (economies of density): The fall in unit cost as fixed costs are spread over more output when traffic density in the network increases. When many products are produced with few airports, and the load factor is also sufficient, density increases.

Aircraft choice: By carrying the passengers gathered at the hub with large wide-body aircraft on long routes and with narrow-body aircraft or regional jets on low-demand routes, both frequency and load factor can be maintained.

Utilization rates: The daily utilization rates of aircraft and flight crew increase.

Definition (economies of scope): The cost of producing more than one product under the same business, facility or brand being lower than producing them separately. This is the structure's most important cost advantage.

Example (from everyday life): Think of baking bread, buns and cakes in the same oven; staff, rent and electricity costs hardly change.

How do economies of scope arise in hub-and-spoke?

• The staff and equipment at a station are also used for new routes.
• An aircraft flying from a spoke to the hub carries passengers going to different points; that is, the same flight produces more than one product.
• Crews living around the hub make it easier to find standby staff, and gathering maintenance and catering facilities at the hub makes shared use of resources and aircraft swaps easier.
• One route's advertisement serves the whole brand.
• A large and wide network makes frequent flyer programs (FFP) more attractive.

Definition (economies of scale): The fall in unit cost as the amount of output increases.

Comparison (scale and scope): Economies of scale are the advantage of producing more of the same product; economies of scope are the advantage of producing different products together with the same resources. According to the source, large airlines' advantage comes more from economies of scope than from economies of scale.

5. Market power, revenue and fragility

Market power: Flying to many points from the hub at high frequency can create a barrier to market entry for other airlines.

Definition (fortress hub): A hub airport used mainly by a single airline because of many destinations and high frequency, where a barrier to market entry forms. Ticket prices can rise in these markets where competition decreases.

Revenue side: High frequency and a wide network can increase the amount passengers are willing to pay; as demand increases, economies of density also strengthen.

Fragility: The structure requires high on-time performance; capacity problems at busy hubs make the system fragile. Since the number of landings and takeoffs increases on connecting flights, safety risk can also increase.

6. Effects on airports

Definition (peak hour): The time window in which traffic reaches its highest point due to time concentration.

Negative aspects: Time concentration creates capacity problems on the runway, apron and terminal at peak hours; handling a lot of traffic in a short time requires expensive investments such as baggage sorting systems. Transfer passengers stay at the airport only briefly; that is why landside revenue and non-aeronautical revenue on the airside, such as duty-free sales and food and beverage, can decrease, and the number of people meeting and seeing off falls.

Positive aspects: Aeronautical revenue rises because the number of aircraft and passengers increases. Hub airports can make important contributions to the economic, social and cultural development of the region, to tourism, congresses, new investment and employment.

7. Effects on passengers

Positive aspects: More airport pairs and higher frequency let passengers travel from where they want to where they want in less time; passengers also benefit more from FFPs.

Negative aspects: If the hub turns into a fortress, prices may rise on direct flights starting from the hub, transfers may lengthen total time, and safety risk increases as the number of landings and takeoffs rises, because the risk in the approach, landing and takeoff phases is higher than in level flight.

8. Multi-hub and seamless flight networks

Definition (multi-hub network structure): Large and wide networks formed by connecting more than one hub airport.

Why is it hard? It is hard for a single airline to set this up with its own resources, and it is not possible if international regulations are not liberal enough. That is why the most effective tool for connecting hub-and-spoke networks in different regions is strategic airline partnerships, which help overcome regulations and combine resources.

Definition (seamless flight network; seamless network): Offering service on connecting flights as if the passenger were travelling with a single airline (on-line), even if they change aircraft more than once.

Its features:

• a single ticket and a single baggage check-in at the first point,
• suitable connection times,
• terminals close to each other,
• FFP rewards that can be combined,
• standard service quality on all flight legs.

9. Linear and grid network structures

Definition (linear network): A network structure in which aircraft departing from the base stop in turn at the airports in between to take on fuel or passengers until they reach the destination.

Why is it hardly used? Frequency is low, some airports are used only a few times a week, station and marketing costs are spread over less output, the number of crew overnights rises and labor productivity falls; as a result, unit cost rises.

Definition (grid network): A network structure in which all points are connected directly to each other and flights are point-to-point. It is usually preferred by airlines following a cost leadership strategy and by domestic airlines that do not use hub-and-spoke.

Advantages of the grid network: Aircraft and staff utilization rates are high, station costs are spread over more output, transfer costs disappear and total travel time is shortened thanks to direct flights.

Limit of the grid network: The number of airport pairs cannot be raised as much as in the hub-and-spoke structure; that is why it is hard to benefit from economies of scope.

Comparison (grid and hub-and-spoke): The grid network brings speed and simplicity, while the hub-and-spoke network brings scope and a wealth of connections. Airlines following a differentiation strategy aim to offer a seamless network experience with global distribution systems and FFPs, while those using grid networks highlight a direct and simple service. Both approaches respond to different passenger needs.

10. The effect of economic regulations on networks

Market access and entry: Since these regulations directly determine which product will be produced, they are an important determinant of network structure. If regulations are strict, the airline cannot add the airport pairs it wants to its network and cannot fully benefit from the connection potential of the hub-and-spoke structure; this affects grid networks in a similar way.

Capacity regulations: They affect frequency, and thus the number of waves and the schedule structure.

Traffic rights: Making connecting flights via a single airline in international markets requires a free 6th freedom of the air or the ability to combine the 3rd and 4th freedoms.

Ownership and control: As long as substantial ownership and effective control rules are strict, it is not possible for an airline to use a hub airport in another country.

Historical result: That is why hub-and-spoke networks were first used in the USA in the early 1980s, after domestic deregulation, and developed first in liberalized markets.

In short

The hub-and-spoke network structure provides economies of density and scope by creating many airport pairs with few airports, and increases frequency and connection options; in return, it has costs such as transfer costs, capacity problems and fragility. The grid network offers a direct and simple service but is limited in scope. The degree of liberalization of economic regulations largely determines which structure can be used and to what extent.

Key concepts

• The n(n−1)/2 formula: The formula that gives the number of airport pairs obtained via the hub among n spoke airports directly connected to a hub airport.
• Total travel time (true origin–true destination): The time between the true origin and the true destination of the journey; the most important component of the airline product.
• Traffic density: The value found by dividing the total passenger kilometers produced in the network by the number of airports served.
• Economies of density: The fall in unit cost as fixed costs are spread over more output when traffic density in the network increases.
• Economies of scope: Producing more than one product under the same business, facility or brand costing less than producing them separately.
• Economies of scale: The fall in unit cost as the amount of output increases.
• Fortress hub: A hub airport used mainly by a single airline because of many destinations and high frequency, where a barrier to market entry forms.
• Frequent flyer program (FFP): A program that gives points and rewards based on flights to increase passenger loyalty.
• Peak hour: The time window in which traffic reaches its highest point due to time concentration.
• Multi-hub network structure: A large and wide network formed by connecting more than one hub airport.
• Seamless flight network (seamless network): Offering service on connecting flights as if it were received from a single airline.
• Linear network structure: A network structure, hardly used today, in which aircraft stop in turn at the airports in between until the destination.
• Grid network structure: A network structure in which all points are connected directly to each other and flights are point-to-point.

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Sources used:
Gerede, E. (2016). Havayolu işletmelerinin ağ yapıları. E. Gerede ve A. E. Demirci (Ed.), Havayolu Yönetimi (5. Ünite) içinde. Eskişehir: Anadolu Üniversitesi Yayınları.

📚 Academic Use Note: This content is a supporting learning resource prepared with reference to a published course text; it does not replace textbooks, lecture notes or your instructor's teaching. The sources to be used for exams and assessments are your course's official curriculum and the sources recommended by your instructor. The simplifications and interpretations in the narration are for teaching purposes; TT Institute Academy cannot be held responsible for any consequences arising from possible errors, omissions or outdated information. The regulatory information in this lesson belongs to the period in which the source was published.

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