markets and a tendency for large aircraft to be replaced by smaller ones in small markets with this system. Leigh (1990) reported that the hub and spoke networks provide carriers with an opportunity to exercise market power over competitors and to form barriers to the entry of new competitors.
Lumsden,áDallari, and Ruggeriá(1999) also stated that the hub and spoke system has been applied to the airline industry and this system has been shown to be successful in situations with several origins and destinations. To improve the efficiency of the hub and spoke system it was proposed that there be a re-allocation of transportation resources and direct connections between pairs of nodes in the distribution network. Zhang (1996) stated that the hub and spoke system may result in a lack of local competition due the rivalry with cost complementaries and economics of traffic density that are found n this network. In the hub and spoke network, entry into a competitor's local market can reduce profit for the entry carrier. Local competition in this system may reduce or increase total social surplus depending on increased returns to traffic density; if there are weak increasing returns, local competition increases total surplus and if increased returns are strong, local competition reduces total surplus.
Brueckner and Zhang (2001) stated that the hub and spoke model of scheduling in airline networks can affect flight frequency, fares and welfare.á Bryan and O'Kelly (1999) and O'Kelly and Bryan (2002) reported that the hub and spoke system can result in a reduction of average unit costs by bundling flows and channeling them between hubs in transportation services.
Barnett, et al.á(1992) conducted a study to determine if the hub and spoke system has actually resulted in misery for air travelers. A random sample of 500 airport-to-airport pairings was used for detailed analysis of schedules. The degree of nonstop jet service b...