Strategic airline network design problem in a duopolistic market.

This paper addresses a competitive airline hub-and-spoke network design problem in a duopolistic market with sequential airline entry. Two airlines, a leader and a follower, enter the market sequentially to make decisions about their own flight networks. Each must consider their opponent's reactions and respond to each other's decisions in making their own, leading to interactive competition between them. A bi-level model is proposed to formulate the behaviors and decisions of the two airlines. In addition, an interactive solution procedure based on a genetic algorithm (GA) is developed to repeatedly solve the upper and lower level models. Finally, we generate a numerical example based on the regional air market in Taiwan and China. The results provide useful insights and highlight the importance of considering interactive competition for airlines when designing their flight networks. [ABSTRACT FROM AUTHOR]