Airlines on the North Atlantic run at a loss, and increased fares would not make them profitable unless capacity were sharply reduced. That might require innovations in the type of service provided, which must be settled between governments.
This paper explores the possibility that the fortress hub is a consequence of the nature of airline hub-spoke rivalry. Entry into a competitor’s local market may reduce the entrant’s profit in his own market. As a result, there is a deterrent to entry if the negative effects are strong enough. The paper also examines the impacts of local competition on consumer surplus and total social surplus.
As a practical criterion it is suggested that a balance between private and public passenger transport might be planned with the object of minimising the total of all journey times. The data needed to implement such a criterion are described and a hypothetical example is give using data relating to Leicester. The method of diverting passengers from private to public transport is not revealed.
