THE EFFECTS OF FORTRESS HUBS ON AIRLINE FARES AND SERVICE : THE EARLY RETURNS

Abstract

The dominance of single carriers at some airports (fortress hubs) is one of the outcomes of a deregulated airline market. The dominance of individual carriers may be associated with anti-competitive behavior. The traditional measure of the quantity of air service is the number of flights; mergers which result in a dominant carrier at a hub generally reduce the number of flights after the merger. However, a more relevant measure of the quantity of service is the number of connections. This paper examines the impact on a number of points served/connections at three airports which became dominated by a single carrier after mergers: Detroit, Minneapolis and St. Louis. The impacts differ among small, medium and large cities, but all three airports experienced increases in number points served following the merger. The paper also examines the impact on fares for one hub (St. Louis). The higher post-merger concentration has been accompanied by increased average fares, both restricted (discount) and unrestricted fares.

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