Skip to main content

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


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.

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2
Fig. 3


  1. For example, US Airways had a strong presence in the East coast, while United had a strong presence in the West coast.

  2. America West and Continental had a code-sharing agreement from 1994 to 2002. The agreement was signed as part of the restructuring plan for America West, while it was under Chapter 11 protection from 1991 to 1994. Northwest and Alaska had a codesharing agreement in the early 1990s as well. Both agreements were limited in scope. For research on these early agreements, see Bamberger et al. (2004) and Ito and Lee (2007).

  3. These are the mergers for which each merging party made up more than 1% domestic scheduled-service passenger revenues prior to merging.

  4. Alaska completed its acquisition of Virgin American at the end of 2016.

  5. For more a detailed theoretical treatment of competition and network effects in the airline industry, see Breuckner and Spiller (1991) and Hendricks et al. (1997, 1999).

  6. A related literature is largely concerned with characterizing properties of equilibrium networks either when a single agent (usually a firm) controls an entire network, or when individual nodes choose when to form links with other nodes (see Jackson and Wolinsky 1996; Bala and Goyal 2000; Hendricks et al. 1999). Another set of literature studies the effects of an existing network structure on agent decision-making. For example, Mossel et al. (2015) and citations within their paper study how network structure affects information flow.

  7. In our analysis we will have a time dimension, which is here omitted for sake of simplicity.

  8. We repeated our analysis treating MSAs as network nodes, rather than airports, by aggregating the network across airports within a metropolitan area. We treat the airports in Washington DC, New York City, Chicago, Dallas, and Houston each as a single node. We find that this has no qualitative effect and a negligible quantitative effect on our results and conclusions. However, we expect if the analysis went beyond just the network structure and examined consumer welfare more directly, there could be interesting differences depending on the substitutability of airports within a MSA.

  9. The definition counts each pair of airports twice to account for paths in both directions. If we re-write the formula to count each airport pair once in both the numerator and denominator, we get the same result.

  10. We use the U.S. Department of Commerce’s 2012 data to identify Metropolitan Statistical Areas in the U.S.

  11. We use the network analysis program that has been prepared by Grund (2015).

  12. See Borenstein (1992) for a comparison of the hubs of the airline industry in the early 1990s, and the ones that the network measures here presented identify.

  13. In the Betweenness regression we have included only airports for which Betweenness is non-zero.

  14. In our regression analysis of the effect of mergers, we leave out the merger of Trans World and American, because it will be impossible to distinguish the effect of this merger from the effect of the September 11th attacks, as the two events occurred within the same year.

  15. Per Table 1, we include approximately 42% of the airports when we analyze the Betweenness measure.

  16. Note that we exclude the merger of Transworld and American in 2001, because the merger and the terrorist attacks on September 11, 2001 both affected the industry in that year.

  17. We drop the month of the merger, as it is not clear whether this month belongs to the pre- or post- period.

  18. U.S. Bureau of Economic Analysis, Gross Domestic Product [GDP] , retrieved from FRED, Federal Reserve Bank of St. Louis;, June 11, 2017. \(JetFuelPrice_t\) is the U.S. Gulf Coast Kerosene-Type Jet Fuel price in dollars per gallon from the U.S. Energy Information Administration, retrieved from

  19. This is in the same spirit as Morrison (1996), who looks at the effects of mergers 8 and 9 years after they were completed.

  20. So far in our analysis, we have seen Degree and Closeness trend together. This is intuitive, but is not necessarily always the case because—given a fixed number of nodes—average Closeness will reflect both the number and layout of links in a network, while average Degree is affected only by the number of links.


  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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 Division

  • Armantier, O., & Richard, O. (2008). Domestic airline alliances and consumer welfare. The RAND Journal of Economics, 39(3), 875–904.

    Article  Google Scholar 

  • Bala, V., & Goyal, S. (2000). A noncooperative model of network formation. Econometrica, 68(5), 1181–1229.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Berry, S. (1990). Airport presence as product differentiation. The American Economic Review, 80(2), 394–399.

    Google Scholar 

  • Berry, S. (1992). Estimation of a model of entry in the airline industry. Econometrica, 60(4), 889–917.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Borenstein, S. (1990). Airline mergers, airport dominance, and market power. The American Economic Review, 80(2), 400–404.

    Google Scholar 

  • Borenstein, S. (1992). The evolution of U.S. airline competition. Journal of Economic Perspectives, 6(2), 45–73.

    Article  Google Scholar 

  • Breuckner, J., & Spiller, P. (1991). Competition and mergers in airline networks. International Journal of Industrial Organization, 9(3), 323–342.

    Article  Google Scholar 

  • 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).

  • Ciliberto, F., & Tamer, E. (2009). Market structure and multiple equilibria in airline markets. Econometrica, 77(6), 1791–1828.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Delta News Hub. (2008). Delta and Northwest merge, creating premier global airline.

  • 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 

  • Gayle, P. G. (2007). Airline code-share alliances and their competitive effects. The Journal of Law and Economics, 50(4), 781–819.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Grund, T. U. (2015). nwcommands. Network analysis in Stata.

  • Hendricks, K., Piccione, M., & Tan, G. (1997). Entry and exit in hub-spoke networks. The RAND Journal of Economics, 28(2), 291–303.

    Article  Google Scholar 

  • Hendricks, K., Piccione, M., & Tan, G. (1999). Equilibria in networks. Econometrica, 67(6), 1407–1434.

    Article  Google Scholar 

  • Hergott, M. J. (1997). Airport concentration and market power: An events study approach. Review of Industrial Organization, 12(5–6), 793–800.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Jackson, M. O. (2008). Social and economic networks. Princeton, NJ: Princeton University Press.

    Book  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Jackson, M. O., & Wolinsky, A. (1996). A strategic model of social and economic networks. Journal of Economic Theory, 71(1), 44–74.

    Article  Google Scholar 

  • 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 

  • Kolaczyk, E. D. (2009). Statistical analysis of network data: Methods and models. New York: Springer.

    Book  Google Scholar 

  • 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 

  • 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.

    Article  Google Scholar 

  • Luo, D. (2014). The price effects of the Delta/Northwest airline merger. Review of Industrial Organization, 44(1), 27–48.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Morrison, S. A. (1996). Airline mergers: A longer view. Journal of Transport Economics and Policy, 30(3), 237–250.

    Google Scholar 

  • Mossel, E., Sly, A., & Tamuz, O. (2015). Strategic learning and the topology of social networks. Econometrica, 83, 1755–1794.

    Article  Google Scholar 

  • Opsahl, T., Agneessens, F., & Skvoretz, J. (2010). Node centrality in weighted networks: Generalizing degree and shortest paths. Social Networks, 32(3), 245–251.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Richard, O. (2003). Flight frequency and mergers in airline markets. International Journal of Industrial Organization, 21(6), 907–922.

    Article  Google Scholar 

  • Schoenberger, R. (2010). End of TWA hurt hub in St. Louis as American Airlines focused on bigger airports.

  • 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 

  • Yuan, Z. (2016). Network competition in the airline industry: A framework for empirical policy analysis.

Download references


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

Author information

Authors and Affiliations


Corresponding author

Correspondence to Federico Ciliberto.



See Tables 12, 13, 14, 15, 16 and 17.

Table 12 Top 20 airports by standardized Closeness, by year
Table 13 Average merger effects: Degree
Table 14 Average merger effects: Closeness
Table 15 Average merger effects: Betweenness * 1[AlwaysBetween = 1]
Table 16 Average merger effects: IsBetween
Table 17 Average codeshare effects: all outcomes

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Ciliberto, F., Cook, E.E. & Williams, J.W. Network Structure and Consolidation in the U.S. Airline Industry, 1990–2015. Rev Ind Organ 54, 3–36 (2019).

Download citation

  • Published:

  • Issue Date:

  • DOI:


  • Network
  • Airlines
  • Consolidation
  • Mergers
  • Codeshare agreements
  • Airports