Network and hub analysis

Airline networks constantly evolve as airlines strive to compete effectively and grow efficiently in the dynamic air transport market. Key network growth strategies include the increase of frequencies, expansion into new markets, and development of hubs. Each of these strategies enables airlines to capture greater market share and serve a broader traffic base.

Frequency growth

Frequency is a key driver of network growth, particularly in the competition for business travelers. Daily service is crucial to gaining a foothold in a market. Established airlines can generate incremental market share by increasing frequencies because offering additional opportunities to fly makes an airline's network more attractive to schedule-conscious business travelers. Increased frequency also boosts connectivity within hub networks, thereby multiplying the number of city pairs that can be linked. For example, over the past decade, increasing frequencies in existing markets has driven 60 percent of domestic market growth in China.

Frequency growth has begun to slow in some maturing networks as markets reach saturation, where nearly every available time slot is covered by nonstop flight options. In these networks, there is a modest trend toward increasing the number of available seats in particular markets by substituting a larger member of an airplane family for a smaller one. For example, airlines around the world are using larger 737-800 airplanes where 737-700 or 737-400 airplanes had served, as they leverage the versatility and efficiency of these fleets across stage lengths and make types. Airlines are also boosting the seat count of existing airplanes by installing new-technology seats that require less room and so allow additional seat rows. Over the past 20 years, the average capacity of single-aisle airplanes has increased by about 20 seats, to approximately 160 seats per airplane. We project that trend will continue during the next decade as airlines optimize airplane configurations for unit cost efficiency and demand for seats, while also preserving flexibility for cyclical demand and competitive dynamics.

Growth met by increased frequencies and nonstops

Average airplane converging on 160 seats

Growth strategies

Expansion into new markets has the greatest impact on network growth. Adding new destinations to an airline's network provides access to new revenue streams and often accelerates economic development in the newly connected markets. The development of new domestic and regional routes in emerging aviation markets stimulates economic growth within the region as a result of the commerce that increased passenger traffic generates. The delivery of new, more efficient long-range airplanes in an array of sizes is enabling airlines to match airplane capacity to market demand much more precisely, which in turn, makes it possible to serve new long-distance city pairs that were not economical in the past. In fact, more than 21 new nonstop routes, including Tokyo-to-Dusseldorf, London-to-Austin, San Francisco-to-Chengdu, and Beijing-to-Boston, have been launched in the past 3 years alone, using the 787.

These growth strategies play a role in the development of hub-based and point-to-point networks. Airlines borrow freely from both models in the continual effort to optimize schedules for maximum revenue and operational efficiency. Airlines with global networks are strengthening schedule connections to maximize traffic and revenue as the trend toward smoothing traffic peaks at hubs, which took hold during the past decade, softens. Airlines, such as the Gulf carriers that take advantage of sixth-freedom connecting power, continue to expand their hubs and networks. Similarly, point-to-point airlines are connecting more city pairs in their networks with nonstop links to maximize airplane utilization and increase both point-to-point and connection traffic moving through their systems.

787 opening new markets around the world

Networks are best for serving small markets

Maximize passengers in networks*

Point-to-point service*

Structural and competitive challenges

In addition, airlines continuously react to structural and competitive challenges. Short-haul networks in some regions, including China and Europe, face pressure from high-speed rail alternatives, which sometimes requires rebalancing of capacity and redeployment of the fleet to support market expansion in sectors with longer routes. Networks also constantly adapt to pressures from the expansion of competitor networks and from mergers, acquisitions, or alliance partnerships among competing airlines. The most successful airlines blend frequency growth and network expansion to develop and compete profitably.

Strategic planning

To succeed, network strategies must be accompanied by effective fleet plans. Historically high airplane manufacturer backlogs, for single-aisle and widebody airplanes alike, make proactive planning essential to long-term competitive advantage. Airlines link their network strategies to their long-term requirements for airplane replacement and fleet growth to create the most efficient, capable, and flexible fleet. The global leased fleet has now surpassed 40 percent of the total fleet as airlines seek to increase fleet flexibility, obtain near-term growth capacity, and balance their capital expenditures.

The dynamics of the marketplace keep airline networks in a constant state of flux as they adjust to economic conditions, new capabilities of the latest generation of airplanes, and the evolving air transport industry. Airlines will rely increasingly on proactive strategic planning that links network development goals with airplane procurement requirements to realize long-term competitive advantage and achieve optimal network development potential.