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Did 'Hub & Spoke' Ops Hurt USA Legacy Airliners?  
User currently offlineLTBEWR From United States of America, joined Jan 2004, 12878 posts, RR: 12
Posted (9 years 1 month 1 week 13 hours ago) and read 2630 times:

Has 'Hub and Spoke' operations hurt the USA Legacy airliners? By this I mean the concentration of many routes of a given legacy airline via hubs rather than point to point direct/non-stop routes.
WN clearly doesn't operate in the 'hub and spoke' and they are about the only consintantly profitable airline in the USA. We see DL with a massive/fortress hub at ATL, and other important hubs at JFK and CVG. DL has recently withdrawn a lot of service via DFW. AA main hubs are DFW, ORD. UA has ORD, DEN as major hubs, with LAX a slightly lesser hub. CO is hubbed at EWR and IAH. NW has DTW and MSP. US used to be PIT and PHL, with LGA still a hub for them. It isn't uncommon if one is using a Legacy carrier that to go from the NYC area to LAX, one has to make a stop in ORD and in some cases transfer a/c.
What are your thoughts on the good and bad of 'hub and spoke' for legacy airliners today?

17 replies: All unread, jump to last
 
User currently offlineDIA From United States of America, joined Jan 2001, 3273 posts, RR: 28
Reply 1, posted (9 years 1 month 1 week 13 hours ago) and read 2617 times:

Some older legacy carriers, who are not with us anymore, were hurt because they did not have a beefy national network to feed all their international routes, which was their primary business. Other legacy carriers, on the other hand, started with a national network, then went international, thus rendering the aforementioned carriers unneeded, and/or unnecessary.

You have asked about a topic that has many a story to it. Many books have been written about this as well.



Ding! You are now free to keep supporting Frontier.
User currently offlineOzarkD9S From United States of America, joined Oct 2001, 4878 posts, RR: 22
Reply 2, posted (9 years 1 month 1 week 13 hours ago) and read 2617 times:

I think hub and spoke serves it's purpose, but was overdone, especially in the 80's. Seemed every city in the US with a million people or more and a couple of runways served as a hub at one point or another.

Hubs are great if you're looking for frequency of service or need to go from Bloomington to Boston or Birmingham to Billings.

As LCC's grew and began overflying hubs and bleeding traffic from hubs at lower prices, the economic realities began to change. ORD, ATL, DFW etc...places with large local traffic can support a hub and is still a great way to distribute traffic on low traffic city pairs. But superfulous hubs are falling by the wayside. Legacies are retrenching to their strongholds and making do with focus cities. The growth of LCC's has made marginal hubs a drain on resources.

Alliances have developed to the point where Legacies realize they don't need to serve every station in the US to have national coverage.



Next Up: STL-TPA-BWI-PWM-BWI-STL
User currently offlineCODC10 From United States of America, joined Jul 2000, 2355 posts, RR: 6
Reply 3, posted (9 years 1 month 1 week 12 hours ago) and read 2622 times:

The hub-and-spoke model is still a viable and profitable model, it's just that the airlines in the major-growth periods of the 1980s and 1990s became over-reliant on the idea, while bloated cost structures (which are better spread over a point-to-point system) were sustained by record revenues. The economic slowdown concurrent with 9/11 in the United States simply exposed a number of flaws in the model, while the point-to-point carriers were insulated (coincidentally) because of reasons mostly unrelated to route structure.

The hub-and-spoke model allows carriers to offer one-stop service between markets which could never justify a nonstop and brings extensive connection opportunities from a single originating point. Plus, purely for convenience, it brings travelers in the hub city a much wider range of nonstop options because these "spokes" are supported by inbound connecting traffic.

In fact, the hub system is just an evolution of the point-to-point model, in which previously PTP airlines concentrated services in cities where they had significant O&D, and expanded routes to include connections from city pairs that lacked nonstop service, and the model grew to its present form.

You fail to mention that profitable LCC like AirTran, Frontier, even JetBlue and Southwest (to a lesser extent; no banks) operate large scale hubs in ATL, DEN, JFK, and HOU/DAL/LAX/MDW/BWI/PHL...., respectively. This points to a conclusion that the problems with legacy carriers do not lie solely in their route structures. For some, like Continental or American, the strength of their largest hubs is a major reason why they are still afloat.

Additionally, you also fail to mention large hubs like DL at SLC (much bigger than DL ops at JFK), US at CLT (far greater than LGA), UA at IAD, CO at CLE (yes, it's still a hub), NW at MEM, and AA at MIA.

I'm not going to say 100% hub-and-spoke is the only way to go, but airlines must strike a balance to maximize profitability and reduce overcapacity.


User currently offlineAlb222 From United States of America, joined Jan 2005, 222 posts, RR: 0
Reply 4, posted (9 years 1 month 1 week 12 hours ago) and read 2615 times:

Hub and spoke as the national treasure of the airlines until the day of deregulation and here comes WN followed by B6, AirTran, F9 etc. Although they maintain hub and spoke to a lesser extent, WN is more P2P avoiding the hubs. Not all locales can support p2p flights.............the LCC's have been able to find the right mix of hub and spoke and p2p operations.
Problem is, the hub & spoke airlines do not utilize their aircraft enough and take too long to turn. WN turns in 20 minutes.....maximum usage, more flights, more money, lower costs.


User currently offlineCODC10 From United States of America, joined Jul 2000, 2355 posts, RR: 6
Reply 5, posted (9 years 1 month 1 week 9 hours ago) and read 2607 times:

Hub and spoke as the national treasure of the airlines until the day of deregulation and here comes WN followed by B6, AirTran, F9

The hub and spoke model was a essentially a product of deregulation. Although the concept was in its infancy before 1978, it really came of age in the period of growth in the years after regulation.

WN has a vast point-to-point network, but calling it a PTP carrier exclusively would be wrong.

The last three airlines you mention, B6, FL, and F9, operate very limited routes outside of their hub/focus cities.

A bigger problem with the hub-and-spoke model is the utilization of ground assets. Fully-banked hubs such as AA @ DFW prior to de-peaking would see periods of 100% capacity followed by stretches where the airport looked like a ghost town. You had to be staffed sufficiently for the periods in which 75-100 aircraft would be on the ground, but during the lulls between banks, you were paying the entire complement to basically sit around while only a handful of off-peak flights were handled. The only solutions to increase efficiency are to move flight banks closer together, and fill in the gaps with new flights (as Delta has done at ATL with the closing of the DFW hub), or to implement a "rolling hub" concept, where high frequencies are maintained but flights are timed differently so as to create a consistent flow of traffic rather than periods of high/low activity. This eliminates certain connection opportunities as well as increases average connection time, but it also gives the airline greater scheduling flexibility and a lower staffing requirement. Continental was an early instance of this method (@ EWR), and results in the years since have been favorable for this major O/D hub. It would be difficult to implement such an arrangement at Atlanta, however, since connecting pax are the lifeblood of the DL operation there.


User currently offlineNWAFA From United States of America, joined Dec 2003, 1893 posts, RR: 16
Reply 6, posted (9 years 1 month 1 week 9 hours ago) and read 2598 times:

Hub and spoke is a very useful tool to transfer and carry more people. Point to Point is good for certian routes (heavy business travelers). For people to say WN is a Point to Point carrier is not full fact.

In fact, they dont use the term hub, yet they bring people into PHX, OAK, ABQ, BWI, MDW and send them on..those are hubs folks.



THANK YOU FOR FLYING NORTHWEST AIRLINES, WE TRULY APPRECIATE YOUR BUSINESS!
User currently offlineCkfred From United States of America, joined Apr 2001, 5064 posts, RR: 1
Reply 7, posted (9 years 1 month 1 week 9 hours ago) and read 2595 times:

Even WN, which claims to be a P2P carrier, certainly has airports with large numbers of flight operations that are scheduled for purposes of connecting passengers.

Back in the 70s, DL coordinated its ATL operations to offer many connecting opportunities. At ORD, AA did the same. My family used to fly to SLC for vacation, and on any given flight, more than half of the passengers were connecting to or from various points in the East, including BOS, LGA, DCA, PHL, DTW, IND, and BDL.

Hubs offer a lot of opportunities to get from A to B, but it can get ridiculous when AA lists DTW to PHL via ORD, or HP lists LAX to SEA via PHX.


User currently offlineRamerinianair From United States of America, joined Nov 2003, 1486 posts, RR: 0
Reply 8, posted (9 years 1 month 1 week 8 hours ago) and read 2571 times:

NO! The LCCs "Selective" Point to point route network did!
SR



W N = my Worst Nightmare!!!!!
User currently offlineTWA902fly From United States of America, joined Dec 1999, 3100 posts, RR: 4
Reply 9, posted (9 years 1 month 1 week 8 hours ago) and read 2551 times:

I think it is pretty obvious that both types of systems need to exist in this country in order for not only airlines, but the economy and people-business to do well... examples

places like Los Angeles, Chicago, New York, Miami, are natural hubs just because of their locations and population sizes. Then there are smaller hub cities, Salt Lake City, Cincinnati, Memphis, Cleveland, which are in one sense or another regional hubs...

examples:

JFK-LAX will always be a nonstop route, whether or not any airline has a hub on either end, there is traffic to support it... however if you want to get from Bangor, Maine to Little Rock, Arkansas... you need a hub.. and airlines make this possible... In this case Delta BGR-CVG-LIT... otherwise it would someone would have a hard time getting from one to the other...

you can not say one is a failure and the other a success... both tend to be a success in their own ways, and we see more and more that the 'natural hubs' that i stated are the most profitable ones... Chicago for example... both O/D and as a result a lot of connecting traffic. Newark same thing...

Then the regional hubs i speak of... take Salt Lake City... if someone from the west wants to get to the east... you have Salt Lake, not a huge place, but bigger than the rest in the area... so you have connections like FCA-SLC-DCA... GEG-SLC-BOS etc...

youre not going to have nonstop service from Kalispell to Washington Reagan... or even moreso Kalispell to Fort Lauderdale...

TWA902



life wasn't worth the balance, or the crumpled paper it was written on
User currently offlineSESGDL From United States of America, joined Jan 2001, 3452 posts, RR: 10
Reply 10, posted (9 years 1 month 1 week 8 hours ago) and read 2542 times:

Quoting CODC10 (Reply 5):
It would be difficult to implement such an arrangement at Atlanta, however, since connecting pax are the lifeblood of the DL operation there.

Not true to an extent. Approximately 40% of traffic at ATL is O&D, meaning passengers are travelling either to or from ATL directly to or from another destination. Despite 1,170 daily flights by DL at ATL, the hub wouldn't work if ATL wasn't one of the ten largest US O&D markets, and if ATL weren't perfectly located for the possibility of a North-South, and East West hub.

Jeremy


User currently offlineAADC10 From United States of America, joined Nov 2004, 2015 posts, RR: 0
Reply 11, posted (9 years 1 month 1 week 8 hours ago) and read 2525 times:

In the early days of deregulation, the airlines that were not able to create strong hubs were the ones that disappeared. The US is now over hubbed, a result of having too many airlines. There is probably room for only two legacy carriers, providing international flights, first class, lounges, hub and spoke "business flights" and service to smaller towns. The two airlines could operate out of six to eight hubs nationally.

Of course, the LCCs use hubs too, as has been pointed out. Even WN routes passengers through a handful of its busiest airports. For most airlines, hub and spoke is a necessity. Of the airlines the serve more than a small region of the country, which ones do not have hubs?

The primary reason for hubs is business travel. It would be more efficient to have only one or two planes per day fly between city pairs, the larger the pairs getting larger planes. That would have the lowest cost. However, business travelers demand convenient flights, so airlines have to offer several flights per day between destinations and particularly to serve smaller cities, hubs are necessary to have multiple flights per day between locations that might not have enough traffic to fill even one plane.

Additionally, hub operations can be made large enough to consume most of an airport, creating a so called "fortress" hub, where the airline can dictate fares. US survived for all these years, despite being the most inefficient airline in the country with only a handful of widebody jets because it had a fortress hub at PHL and was able to stick anyone who wanted to fly there. It also had space at slot restricted airports, notably LGA and DCA, which was another reason.

The early days of commercial aviation faced a similar problem of a chaotic systems with too many airlines. To resolve this, the CAB illegally handed out mail contracts to selected airlines, strengthening a few airlines and killing off the rest. The airlines need to be allowed to consolidate or liquidate. There is reluctance to do this as hundreds of thousands will loose their jobs, flights will decrease and fares will rise.


User currently offlineChrisNH From United States of America, joined Jun 1999, 4011 posts, RR: 2
Reply 12, posted (9 years 1 month 1 week 7 hours ago) and read 2489 times:

Hub-and-spoke 'seemed like a good idea at the time,' Indeed, as has been pointed out, even the LCCs use hubs...so the concept (A) isn't dead and (B) isn't exclusively the domain of the legacy carriers. I think the misnomer is this: Hub-and-Spoke is now thought of as a failure. But in reality, it's not the concept but rather the implementation of it. Southwest at BWI or MDW or PHX or LAS would hardly be called a failure.

Chris in NH


User currently offlineBostonBeau From United States of America, joined Sep 2000, 462 posts, RR: 0
Reply 13, posted (9 years 1 month 1 week 7 hours ago) and read 2458 times:

When I first started traveling, on TWA from Boston, I could fly nontop to London, Paris, Rome, Lisbon, Los Angeles, San Francisco, Denver, Chicago, Cincinnati, Columbus, Dayton and probably more cities I have forgotten. During the last days of TWA, I could only have flown to St. Louis on TWA. Now, to my mind, why did TWA give up all those nonstop routes full of people, and force everyone to change planes in St. Louis? St. Louis might be fine if I wanted to connect to a smaller city in the West, but why would I choose TWA if I were going to one of the larger cities someone else has nonstop service to? I could have understood their adding flights to the hub, to provide connections to smaller cities or more frequencies, but they replaced long distance point to point flights with the hub flights.

User currently offlineDAYflyer From United States of America, joined Sep 2004, 3807 posts, RR: 3
Reply 14, posted (9 years 1 month 1 week 7 hours ago) and read 2415 times:

Perhaps to a degree they did hurt the legacy carriers. In my opinion, they became over-reliant on them and failed to implement enough point-to-point services. It seemed for some time if you lived anywhere but one of the hub cities, you almost never got non-stop service anywhere. This is where the LCC's stepped in and hurt the legacy cariiers. Cost containment was also an obvious issue for the legacy carriers with the insane union labor contracts.


One Nation Under God
User currently offlineRamerinianAir From United States of America, joined Nov 2003, 1486 posts, RR: 0
Reply 15, posted (9 years 1 month 1 week 6 hours ago) and read 2395 times:

It seems that the Hub and Spoke method won't work is you are only targeting hlaf of the country. As stated with TWA, travelers that are departing east of STL that need to go East can't be served. This applied for US before their UA codeshare. They had no hawaii service and targeted only about half of the traffic in America. They could only offer PHL, PIT and CLT connections- this is bad for east-west flights.
SR



W N = my Worst Nightmare!!!!!
User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 16, posted (9 years 1 month 1 week 5 hours ago) and read 2344 times:

Hub and Spoke is the only thing keeping them alive.

User currently offlineBNE From Australia, joined Mar 2000, 3169 posts, RR: 12
Reply 17, posted (9 years 1 month 6 days 17 hours ago) and read 2219 times:

Did 'Hub & Spoke' Ops Hurt USA Legacy Airliners?
No,
What needed to change was the way it was operated.
Airlines setting up a hub were able to give potential passengers a large number of choices of city pairs. The more flights and cities that were added the more choices available to customers.
In the past the Computer CRS was the way travel agents selected flights for customers. The CRS would show the available options between 2 potential city pairs, with the city pair with the quickest trip being shown first. Airlines realised that customers would choose flights based on the shortest journey, so airlines scheduled flights in banks, thus shortening the trip.

What happened since 2000 is that customers were choosing flights based on the air fare paid, and that most customers would select the cheapest price.
The banked hub structure created times of high demand so more resources were needed in times of the bank.
By depeaking the hub they were able to use resources more efficiently and this lowering costs allows the airlines to sell tickets cheaper allowing the hub to still have the large number of available city pairs.
The connection times for customers may be longer but as price is now the most important selection criteria when choosing a flight and so airlines are able to use there resources to better use.



Why fly non stop when you can connect
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