Abstract This paper proposes an air transport market model dealing with airline network design strategy using service frequency and aircraft size. The main purpose of the research was to reveal the relation between the runway capacity constraint at the hub airport and airline behavior. We extend the existing bi-level market model by allowing choice of aircraft size and service frequency. We apply the model to the case of runway capacity expansion at Haneda Airport. The results suggest that aircraft a downsizing strategy is not always adopted when the runway capacity is expanded. Furthermore, runway capacity expansion improves the benefit of passengers who travel between urban areas but not the benefit of local passengers. Finally, a runway capacity expansion tends to improve the affected airlines’ profitability.