Hub airport location in air cargo system

Many of air cargo companies adapt the hub-and-spokes system where economies of scale exist in the transportation cost. In this paper, we analyze how the change of the transportation cost affects single hub location of air cargo in the United States using the generalized Weber problem. We formulate economies of scale using nonlinear cost function of distances and demands. We confirm economies of scale in both distances and demands from the parameters estimated by the actual transportation cost, and the elasticity of distances has decreased greatly while the elasticity of demands hardly changes. The location of hub airport will move to the east coast which contains many large demand points as the economies of scale in distance become larger.