Hub premiums in European civil aviation

We investigate the practice of carriers that charge higher fares for flights leaving from their hub. We analyze this phenomenon by relating fares to distance, using the main leg of intercontinental flights for scaling purposes. Our results indicate that the practice of a mark up on flights originating from or going to hubs is not typical for the US situation. At least some European carriers charge significant premiums for direct flights from their hubs. We find that at least part of these premiums can be attributed to market power. Policy measures should be aimed at reduction of market power and consumer protection. Furthermore, the existence of hub premiums should be taken into account in regional hub policies. © 2001 Elsevier Science Ltd. All rights reserved.