Network concentration and airport congestion in a post de-regulation context: A case study of Brazil 2000-2010

This paper empirically investigates the main drivers of airline network concentration in an air transport market subject to rapid growth. We consider the Brazilian air transport industry of the 2000s, in which network concentration rapidly increased and was followed by a period of massive flight delays and cancelations, which resulted in the “big blackout” of 2006-2007. We develop an econometric model of network concentration, accounting for demand, cost and competition variables that may affect the propensity of carriers to concentrate flights and passenger connections on a few airports of a network. The main focus of the paper is on the relation between networks leading to the problems of the blackout episode. We investigate the dynamic pattern of the evolution of concentration before and after the abnormal period of operations and find that concentration began to rise at least six quarters before, and persisted at a high level until two quarters after the blackout - and then plunged steeply toward the end of the decade. We believe that our analysis contributes to an improved understanding of the behavior of air transport systems subject to network concentration and congestion. With respect to methodology, we suggest and employ the use of alternative measures of network concentration to check the robustness and validity of our results.