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Network Developments in Aviation

The deregulation of aviation markets led to restructuring of airline networks. Hub-andspoke networks became the dominant network in countries (regions) where aviation markets were deregulated. These developments were primarily cost driven. Because of increasing returns with density, a hub-and-spoke network allows the large carriers to benefit from substantial cost savings compared to a fully connected network. Airlines with other strategies (low-cost carriers) operate different types of networks. In a lot of markets, the number of carriers has not increased or may even have decreased as a result of the deregulation. Again, this may be contributed to cost factors. Despite concerns over reduced competition, average fares have decreased in the US and Europe.