Point-to-Point Airline Network Design for a New Market Entrant with a Model of Passengers' Multiple Path Choice Behavior

We propose a novel airline network design problem, the point-to-point airline network design problem under cooperation and competition with multiple paths (PPANP-CC-MP). The model represents the optimal network design for a new entrant airline in a market where an existing airline's network is already established, with passenger path choices distributed according to a multinomial logit (MNL) framework. A key contribution of this research is the formulation of the PPANP-CC-MP as a mixed 0–1 integer programming problem that endogenously captures passengers' multiple-path choice behavior under varying levels of inter-airline cooperation.Numerical analyses demonstrate that higher cooperation (i.e., lower competition) encourages the entrant to utilize the existing airline’s network for inter-airline connections. Furthermore, the existing airline's network scale significantly influences entrant revenue structure. It is also seen that the existing airline's networks, when optimized for monopoly conditions, are vulnerable to competitive entry. In contrast, networks constructed by adding routes that generate large revenues under monopolistic conditions demonstrate greater robustness in retaining higher revenue after the entry of a competitor.These findings offer critical strategic insights into the trade-off between efficiency and robustness from the existing airline's perspective.