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Topic: Hub To Hub Versus Point To Point
Username: dkramer7
Posted 2013-09-01 15:50:05 and read 6758 times.

Hi all

In the early 2000's the difference in thought between Airbus and Boeing seemed clear: Boeing thought the future of air travel was point to point, hence they invested in the 787. Airbus on the other hand thought the future was hub to hub, hence they invested in the A380.

To what extent has each been correct or incorrect?

My feeling is that because airbus launched the A350 the point to point market was larger than they thought, but what are your thoughts?

Topic: RE: Hub To Hub Versus Point To Point
Username: Stitch
Posted 2013-09-01 16:42:52 and read 6633 times.

I am of the strong opinion that neither Airbus nor Boeing seriously felt that one or the other was the "one true future".  

The A380 is optimized for "trunk routes" that have very heavy traffic between them, but most of those cities are a "hub" for only one of the operators so "hub to point" is a more accurate description of almost all A380 services.

As for the 787, they're being used on the same hub-to-point style of routes that the A380 is and more operators (UA, NH and JL) are using it hub-to-hub, if only domestic hubs, then are A380 operators (I believe CZ is the only one flying the A380 between domestic hubs).  

I do not believe it will be efficiency alone that allows the 787 to open new point-to-point routes, but that the lower trip costs combined with the greater capacity could raise the potential RoI on a new route to make it viable. For example, NH could have started SEA-NRT services a decade ago with the 767-300ER, but they may have needed a very high load factor to make it work. The 787-8's greater efficiency means the route is economically viable with a lower load-factor than the 767-300ER, but the greater capacity means at higher load factors your total revenues are higher. So the 787-8 can make money year-round and when demand is high, can make more money than a 767-300ER (much as the larger size of the A330-200 made economically viable routes the 767-300ER could not).

As for the A350, the fundamental reason Airbus launched it was because the A330 would not be competitive long-term against the 787 just as the A340 proved to not be competitive long-term against the 777. So Airbus was at risk of losing a fair bit of marketshare in the widebody commercial airline market and the A350 addresses that.

[Edited 2013-09-01 17:44:48]

Topic: RE: Hub To Hub Versus Point To Point
Username: lightsaber
Posted 2013-09-01 17:27:37 and read 6516 times.

I too am of that opinion. And 'point to point' (P2P) is in reality hub to spoke 90%+ of the time. Both new what was happening as Stitch noted.

Airbus saw under-capacity for trunk routes. If they had met their engineering development timeline and production ramp, I think they would have done better (much higher unit rates).

Where entering a time of Mega-hubs. Take AUH and DOH. They'll buy both. The A380 for the trunk routes and the 788/789 for 'long thin.' New routes providing the ROI Stich noted. Partially, some of those new 788 routes will work as an A380 will handle tranfer passengers to the impacted terminus.

I've been one of several here on a.net cheering on both the 787 and A380 as they will compliment each other. The A350 will work in that role too. (Obviously, EK has bought enough...) Between those airframes and the NEO/MAX/C-series, I see quite an expansion of the hubs ready to expand.

We'll have a fascinating decade in aviation ahead of us.

Lightsaber

Topic: RE: Hub To Hub Versus Point To Point
Username: frmrCapCadet
Posted 2013-09-01 17:35:36 and read 6490 times.

I think it will take four hundred 787s/350s flying before we can assess the P2P/Hub question. Even then it will only move on the continuum somewhat closer to the P2P end (my view). In Seattle, for instance, we connect non-stop only to four airports in Europe - AMS, London, Frankfort, and Paris. I could see a city in Spain and Italy (maybe Istanbul or Cairo too) being added. Will this affect the current four flights? Maybe. And perhaps the improved economics will result in the 787/350 doing some hubs. Although the big change will be increasing destinations that are only one stop. As I get old I am more hassle adverse, and would much prefer to avoid airports which a hassle prone.

Topic: RE: Hub To Hub Versus Point To Point
Username: Coronado
Posted 2013-09-01 18:45:06 and read 6317 times.

Unfortunately hub to hub will be the future if jet fuel remains at over USD120/barrel. Find any current route served by a 767-300 profitably and there is the natural route to put in a 787-8 to try and make a bit more profit. When half of an airline revenues go just to cover fuel, I don't see a SJC-NRT or a BOS-NRT lasting more than a few months. Any hiccup in the world economies, or the world political situation or a SARS type outbreak, will have the more fuel efficient planes redeployed on the existing stronger hub to hub or hub to spoke routes in substitution of older models. Current fuel prices make experimentation for the sake of experimentation and having the luxury of waiting 1 or 2 years to see if a new P2P or a new long range route become successful dangerous for management and boards. Let's face it the effective ''real'' cost per barrel for jet fuel on a 787-8 due to its greater fuel efficiency is USD105.00 barrel compared to USD120.00 barrel if running a 767-300, you can become instantly more profitable by this type of direct replacement.
I would love to see a MSP-HKG n/s on a Delta 787-8 or 9 in another 7 years or so, but I guess I have become a pessimist, and will expect to be funneling through LAX or SEA.

Topic: RE: Hub To Hub Versus Point To Point
Username: vin2basketball
Posted 2013-09-01 20:04:32 and read 6147 times.

Quoting lightsaber (Reply 2):
I've been one of several here on a.net cheering on both the 787 and A380 as they will compliment each other. The A350 will work in that role too. (Obviously, EK has bought enough...) Between those airframes and the NEO/MAX/C-series, I see quite an expansion of the hubs ready to expand.

We'll have a fascinating decade in aviation ahead of us.

Don't forget the 777X

Now the one countervailing factor that I think is interesting is that the 787 might be the tool that allows Europe's carriers to profitably co-exist with EK/QR/EY/TK, by allowing them to profitably serve the core of business/high yield travelers that prefer non-stops, while surrendering some of the lower yielding VFR/leisure stuff to fill EK's army of A380s. See the Asian carriers have the intra-Asia stuff and (in many cases) strong domestic markets to fall back on to boost profitability, US/North American carriers are too far West to be really affected by the MEB3 + TK except to Central Asia/the Subcontinent, even the Oceanian carriers (namely QF) have a powerful domestic market and growing ties to Asia to draw upon. But short haul in Europe is a bloodbath, and the trans-Atlantic space is ripe for a shake up via LCCs (think B6 and WN first) using A320neo/737MAX family aircraft to open up trans-Atlantic in the latter half of the decade. So Europe's airlines really need Europe-Africa. Europe-Middle East, and Europe-Asia to remain profit centers.

Topic: RE: Hub To Hub Versus Point To Point
Username: NAV20
Posted 2013-09-01 21:10:49 and read 5990 times.

Quoting dkramer7 (Thread starter):
To what extent has each been correct or incorrect?

Bearing in mind that we're talking about a period of well over ten years, dkramer7, surely both firms were 'correct' in their time?

Airbus badly needed to develop the A380 as a counter to the 747, which was dominating city-to-city long-haul at the start of the period. Boeing, with that market sector already 'covered,' could afford to take advantage of the advent of more powerful engines (plus weight-saving composite technology) to develop 'bigger twins' and create a whole new market sector, 'long thin routes.'

The current situation is that Airbus are developing the A350 to 'fill the gap' between the B787 and the B777 - and all the signs are that they're largely succeeding, judging by the orders they're getting for the two larger A350 models. Hence Boeing's current priority is to up-grade the B777 in order to 'keep their lead' as far as possible.

There is one interesting aspect of the present situation - the fact that the smaller A358 is not selling at all well. One is tempted to conclude that Airbus 'made a mistake' in starting with the A359, thus giving the 788 'a clear run' for the present time. On the other hand, though, Boeing will no doubt be very concerned as to whether, with the A359 already flying, and by all accounts meeting or exceeding expected performance, they can get the 'new' B777 to market in time to counter the impact of the A350-1000, which will presumably only require a 'simple stretch.'

It's all just straightforward (and fair) competition, seems to me? Each firm will continue to have their fair share of successes, which will keep the whole industry pretty 'well-balanced' and efficient?

Topic: RE: Hub To Hub Versus Point To Point
Username: lightsaber
Posted 2013-09-01 21:27:09 and read 5932 times.

Quoting vin2basketball (Reply 5):
Don't forget the 777X

Now the one countervailing factor that I think is interesting is that the 787 might be the tool that allows Europe's carriers to profitably co-exist with EK/QR/EY/TK, by allowing them to profitably serve the core of business/high yield travelers that prefer non-stops, while surrendering some of the lower yielding VFR/leisure stuff to fill EK's army of A380s.

On both points we can agree.

I just hope to see enough European hub expansion that they have not only the new 787/A350 routes, but also higher frequency feed to help make the routes viable. The weakness of the mid-east carriers (EK/QR/EY/TK) is hub bypass. To pry open that weakness will take hub expansion.

Lightsaber

Topic: RE: Hub To Hub Versus Point To Point
Username: MaverickM11
Posted 2013-09-01 21:37:28 and read 5901 times.

It's really been a combination of both--the trend is toward fewer hubs, more points. As we've seen in the most competitive markets such as the US and EU, the trend is toward fewer, stronger hubs, ie dropping things like MEM/STL and adding to ATL/DFW. In this trend I suppose Boeing is closer to being "right" as stronger hubs, to more points, is the sweet spot for the big twins, while the 380/748 have clearly been left behind as niche aircraft that don't serve a particularly large market or trend.

Topic: RE: Hub To Hub Versus Point To Point
Username: vin2basketball
Posted 2013-09-01 21:47:57 and read 5876 times.

Quoting lightsaber (Reply 7):
On both points we can agree.

I just hope to see enough European hub expansion that they have not only the new 787/A350 routes, but also higher frequency feed to help make the routes viable. The weakness of the mid-east carriers (EK/QR/EY/TK) is hub bypass. To pry open that weakness will take hub expansion.

Lightsaber

I think the key there is going to be turboprops

1) an ATR new turboprop which will start at 90 seats and stretch up to around 110 seats can be used on high frequency short haul, with CASM competitive with LCC narrowbody jets up to 250-300 NM before the hourly cost increases kick in
2) If/When Bombardier gets its head on straight, they'll launch a Q400X turboprop seating 90 with speed up to around 430 mph (with the new GE engines), which can be used economically on routes up to around 550nm, which is all you need feed-wise in Europe. Even though Bombardier has said they're focusing on the CSeries atm, the Q400 line's future is secure with the Russian deal and I think they'll eventually launch Q400X with an EIS in the 2019 ish timeframe

But that's 3-4 years down the line

Topic: RE: Hub To Hub Versus Point To Point
Username: Aither
Posted 2013-09-02 01:27:21 and read 5654 times.

New long haul routes are still hub-hub or hub-"point" (a hub is a point too....). Neither the 787 or A350 will change that. The savings of these aircraft barely compensate the increase of fuel price. So the trip costs at best remain more or less constant. I would rather say that more efficient aircraft will allow the airlines to continue to operate their current routes and add some as the traffic is growing.

Quoting vin2basketball (Reply 5):
Now the one countervailing factor that I think is interesting is that the 787 might be the tool that allows Europe's carriers to profitably co-exist with EK/QR/EY/TK, by allowing them to profitably serve the core of business/high yield travelers that prefer non-stops, while surrendering some of the lower yielding VFR/leisure stuff to fill EK's army of A380s.

That reminds me network carriers saying business travellers would not fly regional routes with LCC carriers. We know the result. There are also several disastrous examples of airlines focusing on high yield pax only.

Business pax make the profits but economy pax make the aircraft fly. As important they make the openings of the routes possibles. Less economy pax mean a much smaller network. A smaller network means less routes, less frequencies. Less operations mean a smaller airline. A smaller airlines means an airline less attractive for business travellers.
Size, market shares are important. What were large airlines in the past are now at risk to fail into the category of secondary carriers. The fate of this kind of carriers is often bankruptcy.

Topic: RE: Hub To Hub Versus Point To Point
Username: KarelXWB
Posted 2013-09-02 14:33:18 and read 2613 times.

Quoting Stitch (Reply 1):
I am of the strong opinion that neither Airbus nor Boeing seriously felt that one or the other was the "one true future".
Quoting lightsaber (Reply 2):
I too am of that opinion.

I agree.

Quoting NAV20 (Reply 6):
There is one interesting aspect of the present situation - the fact that the smaller A358 is not selling at all well. One is tempted to conclude that Airbus 'made a mistake' in starting with the A359, thus giving the 788 'a clear run' for the present time. On the other hand, though, Boeing will no doubt be very concerned as to whether, with the A359 already flying, and by all accounts meeting or exceeding expected performance, they can get the 'new' B777 to market in time to counter the impact of the A350-1000, which will presumably only require a 'simple stretch.'

Airbus sold over 800 copies of the A330 since the launch of the 787 (almost the entirely 787 backlog) and thus has a large market share in the current 250-300 seat market. So starting with the A350-800 would not have been a good idea.

I also don't think Airbus should be too concerned about the 787-8, because the larger 787-9 (with better economics) will eventually kill it (as happened before with the 767-200). In the long term, the 787-9 / 787-10 / A350-900 / A350-1000 / 777-9 are going to be the sweet spot(s).

Quoting NAV20 (Reply 6):
It's all just straightforward (and fair) competition, seems to me? Each firm will continue to have their fair share of successes, which will keep the whole industry pretty 'well-balanced' and efficient?

It is very simple, Boeing and Airbus have a duopoly in the wide-body market and they will keep it that way for a very long time. Russia and China might try to break it, but not in the next 20 years IMO.

[Edited 2013-09-02 14:40:54]

Topic: RE: Hub To Hub Versus Point To Point
Username: enilria
Posted 2013-09-02 16:44:32 and read 2184 times.

There are few point to point routes that need widebodies. Most that are go to places like MCO and Hawaii. The 787 is not for those types of routes. It is for hub to spoke routes that are thin like ARN-ATL. The A380 was thought to be for hub to hub routes like ATL-AMS, but the Mideast carriers really changed the paradigm. For the most part frequency wins so a nonstop 787 beats a connecting A380 to A380 and 2 787 frequencies usually beats the other airline with only 1 A380, but there are many other things involved like hub strength.

Topic: RE: Hub To Hub Versus Point To Point
Username: Stitch
Posted 2013-09-02 17:02:49 and read 2135 times.

Quoting enilria (Reply 12):
For the most part frequency wins so a nonstop 787 beats a connecting A380 to A380 and 2 787 frequencies usually beats the other airline with only 1 A380, but there are many other things involved like hub strength.

Frequency is important for some routes (LON-NYC is probably the biggest), but in many cases the stage length, slot availability and curfews/quotas for night operations at one or both ends impact how often you can operate a flight between two city pairs.

LHR-SIN, for example, has both stage-length limitations and curfew/quota/slot limitations (at the LHR end). SQ operated a daily 777-300ER and a 3x(?) weekly 777-300ER, but eventually found that replacing both with a single daily A380-800 was more effective - the extra capacity of the A380-800 was useful during the days when two 777-300ERs had been operated and the better operating economics allowed the A380 to continue to operate profitably during the days when only one 777-300ER was operating (as those extra seats became extra revenue potential).

Many large hubs (SYD, NRT, FRA, etc.) have such curfews / quotas and this affects frequency, as well, and favors less flights with larger planes.

[Edited 2013-09-02 17:04:01]

Topic: RE: Hub To Hub Versus Point To Point
Username: Mir
Posted 2013-09-02 18:24:34 and read 2019 times.

Quoting MaverickM11 (Reply 8):
It's really been a combination of both--the trend is toward fewer hubs, more points. As we've seen in the most competitive markets such as the US and EU, the trend is toward fewer, stronger hubs, ie dropping things like MEM/STL and adding to ATL/DFW. In this trend I suppose Boeing is closer to being "right" as stronger hubs, to more points, is the sweet spot for the big twins, while the 380/748 have clearly been left behind as niche aircraft that don't serve a particularly large market or trend.

Although having fewer hubs, and the resulting need to put more traffic through those hubs, does favor larger aircraft on routes from hubs to large markets.

-Mir

Topic: RE: Hub To Hub Versus Point To Point
Username: Roberts975
Posted 2013-09-02 18:56:38 and read 1966 times.

Seems to me that most recent attempts to fly TATL from a mega-hub like JFK to "secondary" markets like OTP, VLC, BUD, TXL etc have been less than successful. This argues for the traffic generated by connections on one or both sides of the route.


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