UVA Professor Federico Ciliberto, UVA PhD Candidate Emily E. Cook, and UVA alumnus and current UNC Professor Jonathan W. Williams recently published “Network Structure and Consolidation in the U.S. Airline Industry, 1990-2015” in the Review of Industrial Organization. The authors study the effect of consolidation on airline network connectivity using three measures of centrality from graph theory: Degree; Closeness; and Betweenness. Degree is the fraction of all possible links that are actually served by at least one airline out of an airport; Closeness is the inverse of the average distance (i.e., number of links) from an airport to every other airport; and Betweenness is the frequency with which an airport is found to be on the shortest path between two other airports.
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, the authors 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. Forty years after its deregulation, the airline industry continues to be the focus of research, antitrust cases, and public policy debates. In this paper the authors contribute to the evolving debate by examining how mergers and alliances have shaped the entire industry’s U.S. network.
The figure above, which captures trends in the network measures from 1990 to 2015, shows the year fixed effects and associated confidence intervals from separate OLS regressions of standardized Degree, Closeness, and Betweenness on a constant along with year, month, and airport fixed effects.