Optimal Airline Networks, Flight Volumes, and the Number of Crafts for New Low-Cost Carrier in Japan

Abstract

Recently, numerous low-cost carriers (LCCs) have been established and have become popular as a new style of airline service. In Japan, Peach Aviation began business as an LCC in 2012. However, while it is true that some airline companies are suffering from a slump in business, Peach Aviation has succeeded because it set up a hub airport at Kansai International Airport and runs many cash-cow routes. To establish a new LCC, consideration of airline networks is most important for success. Therefore, in this study, we propose a mathematical model to optimize the airline network, flight volume, and number of aircrafts for maximizing a new LCC’s profit supposing a hub-spoke style network, and solve the model as a mathematical programming problem. First, we investigate the case of a single-hub network, and subsequently consider a two-hub network. It was determined that, when both Narita and Kansai International Airports are chosen as hub airports, a new LCC’s profit is maximized.