This presentation introduces readers to airline industry's two most common networks. It also compares the features of the two and highlights scenarios when one may be more profitable than the other.

1. Prateek Garodia
INTRODUCTION TO AIRLINE
NETWORKS

2. Network Introduction
This presentation is an introduction to and a
comparison of the two of the most common
networks in the airline industry
Direct Network (aka Point-to-Point Network) and
Hub & Spoke Network
A network is required to manage all the
routes that an airline has opened to service its
customers
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3. Direct Network
A Direct Network is one where there is a
direct service from one airport to another
without a stop in a third airport
It is optimally used under the following
circumstances
Distance between two cities is small
Demand between two cities is high
Total number of cities served by the airline is small
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4. Direct Network Advantages
Schedule reliability (aka on time
performance) is high
The direct flight does not have an
interdependency on other flights
This minimizes the “domino effect” where one
delay can multiply into other delays elsewhere in
the network
Aircraft utilization is high
Flights from one airport do not have to feed into
downstream flights at the destination so schedule
can be optimized for maximum aircraft utilization
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5. Direct Network Disadvantages
Schedule frequency (number of flights per
day) is low
Due to the actual flight times, there are only so
many flights you can have in a day when going
from A to B
But when you schedule flights to stop at other
cities before going to B from A, then you can have
a lot more options
Number of routes required to cover all cities
as you introduce more cities in the network
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6. Direct Network – Route
Addition
When you start off with Direct Network, it
will grow as demonstrated below
If you fly only between 2 cities, you will need
only 1 route
A B
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7. Direct Network – Route
Addition
If you now fly between 3 cities, you will need 3
routes (1 existing route + 2 new routes)
A B
C
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8. Direct Network – Route
Addition
If you now fly between 4 cities, you will need
6 routes (3 existing routes + 3 new routes)
A B
D C
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9. Direct Network – Route
Addition
If you now fly between 5 cities, you will need
10 routes (6 existing routes + 4 new routes)
A B
E
D C
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10. Direct Network – Route
Addition
If you now fly between 6 cities, you will need
15 routes (10 existing routes + 5 new routes)
A B
E
F
D C
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11. Direct Network Disadvantages
As you can see the number of routes needed
to cover all the cities in Direct Network
increases very quickly
In this network, if there are n cities, there will
be ((n * (n-1)) / 2) routes
This will get very hard to manage very quickly
This will also be very expensive for the airline
as it will need a lot of aircrafts and personnel
to cover this
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12. Hub & Spoke Network
A hub is an airport that an airline uses as a
transfer point to get passengers to their
intended destination
Spokes are airports that usually do not have
major traffic for the airline
A hub & spoke network is one where traffic
from spoke cities are routed to their intended
destination via the hubs
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13. Hub & Spoke Network
It is optimally used under the following
circumstances
Distance between two cities is large
Demand between two cities is low
Total number of cities served by the airline is large
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14. Hub & Spoke Network
Advantages
Schedule frequency (number of flights per
day) is high
By creating routes through hubs, there can be
more flights scheduled for a route giving more
options to passengers
Due to the nature of how hub & spoke
networks work, addition of a new city does
not need too many routes for complete
coverage
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15. Hub & Spoke Network – Route
Addition
When you start off with hub & spoke
network, it will grow as demonstrated below
If you fly only between 2 cities, you will need
only 1 route
A B
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16. Hub & Spoke Network – Route
Addition
If you fly between 3 cities, you will need 2
routes (1 existing route + 1 new route)
B C
A
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17. Hub & Spoke Network – Route
Addition
If you fly between 4 cities, you will need 3
routes (2 existing routes + 1 new route)
B C
A
D
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18. Hub & Spoke Network – Route
Addition
If you fly between 5 cities, you will need 4
routes (3 existing routes + 1 new route)
B C
A
E
D
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19. Hub & Spoke Network – Route
Addition
If you fly between 6 cities, you will need 5
routes (4 existing routes + 1 new route)
B C
E A F
D
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20. Hub & Spoke Network
Advantages
As you can see, the number of routes
required with hub & spoke network are
greatly reduced
In this network, if there are n cities, there will
be (n-1) routes
This reduces costs for the airline as the
number of aircrafts and personnel required
are reduced
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21. Hub & Spoke Network
Disadvantages
Schedule reliability (aka on time
performance) is low
This type of a network suffers from
interdependencies on other flights
This leads to the “domino effect” where one delay
can multiply into other delays elsewhere in the
network
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22. Hub & Spoke Network
Disadvantages
Aircraft utilization is low
Flights from one airport usually have to feed into
downstream flights so schedules have to match so
there are no missed connections
This restriction leads to lower flight utilization
Additional delays arise when the traffic at the
hub city has exceeded its limits
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23. Improving on Hub & Spoke
Network
One way to deal with increased traffic is to try
to reduce traffic by increasing the fare
Another way is to start diagnosing the traffic
patterns to see which spoke cities do the
travelers go most to and from which spoke
city
It may be wise to create a direct route
between these cities to ease the traffic at the
hub city
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24. Improving on Hub & Spoke
Network
Lets take the example of our 6 city network
described earlier
B C
E A F
D
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25. Improving on Hub & Spoke
Network
As you can see, there is a significant amount
of traffic going from E to B via A. In this case,
it makes sense to create a separate route
from E to B. This will ease the traffic on A.
This does not mean that we close the existing
routes of E to A and B to A. They are still
required to go to A and other cities connected
from A.
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26. Improving on Hub & Spoke
Network
Here, a direct route has been added from E to
B B C
E A F
D
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27. Improving on Hub & Spoke
Network
Another way of dealing with congestion in
the hub may be to create another hub
This depends on a number of things
Is the infrastructure at the potential new hub
capable of handling the additional traffic?
Are there enough spoke cities whose traffic can be
diverted to this new hub without rendering the
existing hub unproductive?
How will the two hubs be connected?
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28. Summary - Network Comparison
Points Direct Network Hub & Spoke Network
Distance between two Small Large
cities
Demand between two High Low
cities
Number of cities served Small Large
Schedule frequency Low High
(number of flights per
day)
Schedule reliability (on High Low
time performance)
Cost to airlines as routes High Low
grow
Aircraft Utilization High Low
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29. References
Handbook of Airline Economics, Second
Edition, Executive Editor - Darryl Jenkins,
published by Aviation Week, ISBN 007-
982394-7,
http://www.amazon.com/Handbook-Airline-
Economics-Darryl-
Jenkins/dp/0079823947/ref=sr_1_1?s=books&
ie=UTF8&qid=1325406665&sr=1-1
http://en.wikipedia.org/wiki/Point-to-
point_transit
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30. References
Airline Network Design by Phillip J. Lederer &
Ramakrishnan S. Nambimadom,
http://www.simon.rochester.edu/fac/lederer/
SimonFacultyWeb/LedererPapers/AirlineNet
workDesign.pdf
http://en.wikipedia.org/wiki/Spoke-
hub_distribution_paradigm
http://en.wikipedia.org/wiki/Airline_hub
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