The Impact of Hub Dominance and Airport Access on Entry in the U.S. Airline Industry

In this paper, we examine the effects of hub dominance and airport barriers to entry not on yields but on carrier entry. Facilitating entry, especially by low cost carriers, has been found to be crucial in promoting low fares at airports. Dresner, Windle, and Yao found that reducing airport congestion can facilitate new entry onto routes. This paper builds on the work of Dresner, Windle, and Yao in four important ways. First, it separates out the effects on entry of airport congestion and hub dominance on new entry. It may be that hub dominance, rather than airport congestion, is the more crucial variable in deterring entry. Second, this paper uses specific measures for gate leasing policies to examine the effect of this potentially important variable on entry. The U.S. GAO, for example, has cited the existence of exclusive use gates at airports as being a potential deterrent to entry. Third, this paper uses airports, rather than routes, as tha data points in the analysis, with the aim to determine which airport-centered policies and practices (e.g., exclusive use gates, airport dominance by a hubbing carrier) are most important in deterring entry. Finally, this paper examines the effects of the airport barrier and hub dominance variables on entries by various types of carriers. Since low-cost carriers have been found to have the greatest impact on lowering yields, it is important to determine how the potential barriers affect this particular group of carriers.