The Effect of Airport Hub Dominance on AverageAirfares: A Systematic Review

Abstract

The effect of airport hub dominance on the average airfares, a central topic in airline pricing analysis, has evoked much research on it. The effect is also called hub premiums. This paper examines this effect by conducting systematic review and analysis on the existing literature on hub premiums. The procedures of the systematic review include setting up the inclusion criteria, searching for relevant literature, and extracting information from literature. The results establish the presence of hub premiums in the US airline market. Even in other overseas airline markets, such as the Chinese and European airline markets, there is evidence for positive hub premiums. In addition, this paper finds that the presence of low-cost carriers has negative effect on airfares, thus lowering the existing hub premiums. This paper contributes to the limited number of systematic reviews regarding hub premiums in the existing literature. It provides important evidence in understanding the structure and competition of the US airline industry.