Five years ago, network management was little more than a theory to most European airlines. Many had heard of hub-and-spoke systems and network optimization, ideas developed in the United States following deregulation there, but few had begun to incorporate them into everyday practice. Deregulation and competition in Europe have changed all that. The most sophisticated airlines now use network management to sustain profitable growth, while some of the worst performers have employed it to turn their fortunes around.

But it would be wrong to assume that all European carriers have become seasoned network managers. Some have not even started. The question for them is whether they will be able to make up the lost ground, or whether their more up-to-the-minute rivals have won an unassailable lead.

The principle underlying network management is that profits are maximized when an airline optimizes its total network, rather than individual routes. By configuring a system that combines direct point-to-point traffic with connection traffic, airlines can raise the number of origin-destination (OD) pairs they serve, increase the density and profitability of intercontinental flights, and diversify their client base. From a marketing perspective, this means they can cater not only for their home market, but...