Review of Industrial Organization

, Volume 54, Issue 1, pp 3–36 | Cite as

Network Structure and Consolidation in the U.S. Airline Industry, 1990–2015

  • Federico CilibertoEmail author
  • Emily E. Cook
  • Jonathan W. Williams


We study the effect of consolidation on airline network connectivity using three measures of centrality from graph theory: Degree; Closeness; and Betweenness. Changes in these measures from 1990 to 2015 imply: (i) the average airport services a greater proportion of possible routes; (ii) the average origin airport is fewer stops away from any given destination; and (iii) the average hub is less often along the shortest route between two other airports. Yet, we find the trend toward greater connectivity in the national network structure is largely unaffected by consolidation—in the form of mergers and codeshare agreements—during this period.


Network Airlines Consolidation Mergers Codeshare agreements Airports 



Federico Ciliberto acknowledges the Quantitative Collaborative at the University of Virginia for financial support.


  1. Aguirregabiria, V., & Ho, C. Y. (2010). A dynamic game of airline network competition: Hub-and-spoke networks and entry deterrence. International Journal of Industrial Organization, 28(4), 377–382.Google Scholar
  2. Aguirregabiria, V., & Ho, C. Y. (2012). A dynamic oligopoly game of the US airline industry: Estimation and policy experiments. Journal of Econometrics, 168(1), 156–173.Google Scholar
  3. Armantier, O., Richard, O. (2005). Evidence on pricing from the Continental Airlines code-share agreement. Economic analysis group discussion paper, Vol. 3. Volume 5 of Economic Analysis Group discussion paper. US Department of Justice, Antitrust DivisionGoogle Scholar
  4. Armantier, O., & Richard, O. (2008). Domestic airline alliances and consumer welfare. The RAND Journal of Economics, 39(3), 875–904.Google Scholar
  5. Bala, V., & Goyal, S. (2000). A noncooperative model of network formation. Econometrica, 68(5), 1181–1229.Google Scholar
  6. Bamberger, G. E., Carlton, D. W., & Neumann, L. R. (2004). An empirical investigation of the competitive effects of domestic airline alliances. Journal of Law and Economics, 47(1), 195–222.Google Scholar
  7. Berry, S. (1990). Airport presence as product differentiation. The American Economic Review, 80(2), 394–399.Google Scholar
  8. Berry, S. (1992). Estimation of a model of entry in the airline industry. Econometrica, 60(4), 889–917.Google Scholar
  9. Borenstein, S. (1989). Hubs and high fares: Dominance and market power in the U.S. airline industry. The RAND Journal of Economics, 20(3), 344–365.Google Scholar
  10. Borenstein, S. (1990). Airline mergers, airport dominance, and market power. The American Economic Review, 80(2), 400–404.Google Scholar
  11. Borenstein, S. (1992). The evolution of U.S. airline competition. Journal of Economic Perspectives, 6(2), 45–73.Google Scholar
  12. Breuckner, J., & Spiller, P. (1991). Competition and mergers in airline networks. International Journal of Industrial Organization, 9(3), 323–342.Google Scholar
  13. Carlton, D., Israel, M., Macswain, I., Orlov, E. (2018). Are legacy airline mergers pro- or anti-competitive? Evidence from recent U.S. airline mergers. International Journal of Industrial Organization. (Forthcoming).Google Scholar
  14. Ciliberto, F., & Tamer, E. (2009). Market structure and multiple equilibria in airline markets. Econometrica, 77(6), 1791–1828.Google Scholar
  15. Ciliberto, F., & Williams, J. W. (2010). Limited access to airport facilities and market power in the airline industry. The Journal of Law and Economics, 53(3), 467–495.Google Scholar
  16. Ciliberto, F., & Williams, J. W. (2014). Does multimarket contact facilitate tacit collusion? Inference on conduct parameters in the airline industry. The RAND Journal of Economics, 45(4), 764–791.Google Scholar
  17. Delta News Hub. (2008). Delta and Northwest merge, creating premier global airline.
  18. Gayle, B. P. G. (2013). On the efficiency of codeshare contracts between airlines: Is double marginalization eliminated? American Economic Journal: Microeconomics, 5(4), 244–273.Google Scholar
  19. Gayle, P. G. (2007). Airline code-share alliances and their competitive effects. The Journal of Law and Economics, 50(4), 781–819.Google Scholar
  20. Gayle, P. G. (2008). An empirical analysis of the competitive effects of the Delta/Continental/Northwest code-share alliance. The Journal of Law and Economics, 51(4), 743–766.Google Scholar
  21. Gilo, D., & Simonelli, F. (2015). The price-increasing effects of domestic code-sharing agreements for non-stop airline routes. Journal of Competition Law and Economics, 11(1), 69–83.Google Scholar
  22. Grund, T. U. (2015). nwcommands. Network analysis in Stata.
  23. Hendricks, K., Piccione, M., & Tan, G. (1997). Entry and exit in hub-spoke networks. The RAND Journal of Economics, 28(2), 291–303.Google Scholar
  24. Hendricks, K., Piccione, M., & Tan, G. (1999). Equilibria in networks. Econometrica, 67(6), 1407–1434.Google Scholar
  25. Hergott, M. J. (1997). Airport concentration and market power: An events study approach. Review of Industrial Organization, 12(5–6), 793–800.Google Scholar
  26. Ito, H., & Lee, D. (2007). Domestic code sharing, alliances, and airfares in the U.S. airline industry. The Journal of Law and Economics, 50(2), 355–380.Google Scholar
  27. Jackson, M. O. (2008). Social and economic networks. Princeton, NJ: Princeton University Press.Google Scholar
  28. Jackson, M. O., & Rogers, B. W. (2007). Meeting strangers and friends of friends: How random are social networks? The American Economic Review, 97(3), 890–915.Google Scholar
  29. Jackson, M. O., & Wolinsky, A. (1996). A strategic model of social and economic networks. Journal of Economic Theory, 71(1), 44–74.Google Scholar
  30. Kim, E. H., & Singal, V. (1993). Mergers and market power: Evidence from the airline industry. The American Economic Review, 83(3), 549–569.Google Scholar
  31. Kolaczyk, E. D. (2009). Statistical analysis of network data: Methods and models. New York: Springer.Google Scholar
  32. Kwoka, J. E, Jr. (2013). Does merger control work? A retrospective on U.S. enforcement actions and merger outcomes. Antitrust Law Journal, 78(3), 619–650.Google Scholar
  33. Kwoka, J., & Shumilkina, E. (2010). The price effect of eliminating potential competition: Evidence from an airline merger. The Journal of Industrial Economics, 58(4), 767–793.Google Scholar
  34. Luo, D. (2014). The price effects of the Delta/Northwest airline merger. Review of Industrial Organization, 44(1), 27–48.Google Scholar
  35. Mayer, A., & Puller, S. L. (2008). The old boy (and girl) network: Social network formation on university campuses. Journal of Public Economics, 92(1–2), 329–347.Google Scholar
  36. Morrison, S. A. (1996). Airline mergers: A longer view. Journal of Transport Economics and Policy, 30(3), 237–250.Google Scholar
  37. Mossel, E., Sly, A., & Tamuz, O. (2015). Strategic learning and the topology of social networks. Econometrica, 83, 1755–1794. Google Scholar
  38. Opsahl, T., Agneessens, F., & Skvoretz, J. (2010). Node centrality in weighted networks: Generalizing degree and shortest paths. Social Networks, 32(3), 245–251.Google Scholar
  39. Peters, C. (2006). Evaluating the performance of merger simulation: Evidence from the U.S. airline industry. The Journal of Law and Economics, 49(2), 627–649.Google Scholar
  40. Richard, O. (2003). Flight frequency and mergers in airline markets. International Journal of Industrial Organization, 21(6), 907–922.Google Scholar
  41. Schoenberger, R. (2010). End of TWA hurt hub in St. Louis as American Airlines focused on bigger airports.
  42. White, L. J. (1979). Economies of scale and the question of “Natural Monopoly” in the airline industry. Journal of Air Law and Commerce, 44(3), 545–574.Google Scholar
  43. Yuan, Z. (2016). Network competition in the airline industry: A framework for empirical policy analysis.Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Federico Ciliberto
    • 1
    • 3
    • 4
    Email author
  • Emily E. Cook
    • 1
  • Jonathan W. Williams
    • 2
  1. 1.Department of EconomicsUniversity of VirginiaCharlottesvilleUSA
  2. 2.Department of EconomicsUniversity of North CarolinaChapel HillUSA
  3. 3.The Center for Economic and Policy ResearchLondonUnited Kingdom
  4. 4.DIWBerlinGermany

Personalised recommendations