Optimized Design Of Hub-and-spoke Route Network In A Competitive Environment

The airline network is the foundation of airlines.Only based on airline network,a series of decisions and activities such as airline flight plans and revenue management could be carried out in an orderly way for airlines.The hub is the key point in the airline network.Therefore,considering the context of drastic changes in passenger demand and increasingly fierce market competition in the air transport market,the new hub location and network optimization is directly related to the function of airline network functions and the overall benefits of airlines.Based on the research of domestic and international of competitive hub location,air passengers choice behavior,and hub location and optimization design of hub-and-spoke airline network,this paper aims to optimal the airline network by proposing a model to maximize the airlines profit.The “combined effect”,setting cost of new hubs along with “stochastic threshold constraints” are considered in the model simultaneously.Specifically,considering the “travel cost” of passengers,a utility function for travel of passengers by plane have been established to reflect passengers’ choice behavior of transit routes offered by airlines firstly based on the theory of random utility and maximized passenger utility from the point of view of passengers.In addition,passenger “travel cost” is quantified by passenger delay cost,passenger transfer increment cost and passenger travel direct currency cost – “Airline tickets”.Secondly,from the perspective of the airlines,new hub locations and the selection of transit routes have been conducted for the airlines that operate the hub-and-spoke airline network.Last,vatrious sizes examples that the airlines operating datum needed in the model have been generated randomly by using Excel function and VBA code,then solved by using VBA code and LINGO 11.0.The validity of the model was verified by testing.And the sensitivity analysis of parameters about air passengers and airlines was performed respectively.The research result is that:(1)The sensitivity of transit passengers to delay time,flight arrival delay time and transit waiting time is not significant.However,the airlines could increase the opportunity for passengers to choose and then raise the profits of airlines under the same other conditions with shortening the delay time of passenger plan,flight arrival delay time and transit waiting time.(2)The operation of hub-and-spoke airline network is more suitable for the market that has a larger proportion of leisure travelers.(3)In the competitive market environment,with large transfer discounts provided by the airlines,even if more passengers captured,there will still result in revenue loss.While airlines revenues could benefit from the operation practices that according to the characteristics of the time value of passengers to provide them with different transit discounts.(4)Setting the “stochastic threshold constraints” will be advantageous to airlines to ensure market share and benefits.When the airline’s new location hub is also a competitive airline hub.,the larger the demand growth rate,the more favorable it will be to aggregate,and the greater the profit from competing airlines.(5)Increasing the speed of flight could benifit to lowering passenger costs and improving utility,which results in an increase in profits brought by the airline’s new location hub.(6)The maximum profitability of airlines from competing airlines is not increasing with the increase of the number of new location hubs.This study makes up for the shortcomings of the previous hub-and-spoke airline network design,and provides a more scientific and reasonable proof for the airlines to conduct the new hub location and network optimization design.