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Ezra
Topic Author
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Joined: Fri Mar 31, 2000 8:21 am

Most Profitable Hub?

Sat Dec 01, 2001 12:36 pm


Hi,

Does anyone know which are the most profitable airline hubs in the United States?

Thank you,

Ezra.
 
Ezra
Topic Author
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RE: Most Profitable Hub?

Sun Dec 02, 2001 1:11 am


Anyone?
 
SESGDL
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RE: Most Profitable Hub?

Sun Dec 02, 2001 1:16 am

I'm sure Delta's Atlanta hub WAS quite profitable(before the attacks that is). Also, American's Miami hub has to be up there as well. I don't really know any others, so I'm not going to speculate.
 
MAH4546
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RE: Most Profitable Hub?

Sun Dec 02, 2001 1:53 am

American's Miami hub is one of the most profitable US hubs. Those Latin American services (only airline to fly between US and Paraguay, only airline to fly daily between US and Bolivia) make a killing. They are in many ways just like the very profitable African services that make a killing for European carriers like Air France and former Sabena. Iberia's small Miami hub is also a big moneymaker. In the age of codesharing and alliances, Iberia continues to fly it's own planes out of Miami, with plans to expand the service in the future (not the near future, of course). Finding a US hub that is profitable is rare. I've heard Alaska's Seattle and UAL's SFO hubs are good moneymakers.
a.
 
Ezra
Topic Author
Posts: 509
Joined: Fri Mar 31, 2000 8:21 am

RE: Most Profitable Hub?

Sun Dec 02, 2001 3:09 am


Yeah, I was kind of thinking that MIA and SFO would probably be bigger moneymakers than ATL, even though they're smaller hubs. It seems like Delta connects a lot of low fare traffic through ATL. What about LAX -- is it a profitable hub (or former hub, or focus city, whatever) for UA, AA, and DL?

Thanks!

Ezra.
 
N1993R
Posts: 155
Joined: Sat Nov 10, 2001 3:42 pm

RE: Most Profitable Hub?

Sun Dec 02, 2001 3:15 am

SFO is NOT a profitable hub. It is actually a DRAIN on the UA network. Yes, it is a profitable STATION, but running it as a hub is a big reason why UA is in financial trouble.

A hub can be defined as a waypoint between an origin and a destination. A significant chunk of UA's SFO traffic is NOT connecting traffic, but rather O&D for the Bay Area. As a result, the O&D traffic (which by nature is higher yield than hub-and-spoke traffic since it requires travel on only a single flight segment as opposed to multiple ones) takes up a significant chunk of the available capacity to/from the airport. This capacity has a finite upper limit, based upon the geography and logistics at SFO airport.

It is a proven fact that the North-South traffic along the West Coast is best served by point-to-point service, which rules SFO out as an effective hub for this kind of operation. The concentration of population in just a handful of significant population centers (SoCal, Bay Area, Portland, Seattle) renders traditional hub-and-spoke between these centers unneccessary. Obviously, secondary centers need to be fed by regionals out of these major population centers, but UA's regional service is franchised out anyway.

That leaves SFO as a hub solely for international or transcontinental services. Internationally, it serves as an ideal gateway due to its proximity to the Pacific and its relatively central location along a North-South axis. SFO will always be a succesful hub for this purpose.

However, transcontinentally the same proximity to the Pacific works against it. To be optimally effective, it would require to be fed from the other population centers of the West Coast and then serve as a springboard across the country. However, with so few major population centers out there, all of them can serve in the same capacity - and they do for the most part. They each have a catchment area (including proximal regional traffic) that is more than capable of providing enough traffic for dedicated operations.

As a result, every connecting passenger through SFO is actually taking away a potentially higher yield local passenger. Since there is a finite ceiling on capacity at SFO, continued growth as a domestic hub will DILUTE this yield even more.
 
trickijedi
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RE: Most Profitable Hub?

Sun Dec 02, 2001 3:47 am

I think it's United's hub in Chicago. It's one of the reasons Richard Daley, the mayor of Chicago is proposing to build and extended more runways at O'Hare. He has huge expansion plans for O'Hare and I think that United's success in Chicago is a big part of that.
Its better to be on the ground wishing you were in the air than be in the air wishing you were on the ground. Fly safe!
 
Ezra
Topic Author
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RE: Most Profitable Hub?

Sun Dec 02, 2001 4:00 am

N1993R,

Thanks for the hard analysis -- obviously you know your stuff!

Question: Comparing the metrics between LAX and SFO, if an airline like Delta wanted to take advantage of its strong cash position and acquire a lot of Asian routes (presumably from United), would it be better off establishing its gateway city in LA or SF?

I understand that neither of these cities makes a good domestic hub, and I think Delta would do just fine connecting its western trafic through SLC or DFW, if they ever get around to growing those hubs. However, is LA or SF better positioned to be the west coast gateway? Your argument that connecting international pax through SFO actually dilutes earnings is salient. However, LAX seems to have a lot more competition. Where does the buck fall? Maybe it's better to connect international pax through LAX (like Delta does at ATL) and concentrate on O&D at SFO, with only a minimal emphasis on international connecting pax (like Delta does at JFK).


Any thoughts?

Thanks!

Ezra
 
ILS
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RE: Most Profitable Hub?

Sun Dec 02, 2001 4:01 am

DL-ATL
AA-DFW
CO-IAH
UA-DEN
 
762er
Posts: 522
Joined: Thu Feb 08, 2001 8:18 am

N1993R

Sun Dec 02, 2001 4:08 am

Then why does UA maintain SFO as a major hub? From what you say, it sounds like SFO would serve United better as a "focus" city, like LAX. Large O&D cities, like SFO, are typically what airlines dream of for hubs. I understand that connecting passengers fill up seats that could have been used by O&D passengers, but UA can control, to a certain extent, who flies on their airplanes (O&Der or connectors) by the fares they charge. UA offers so much direct service out of SFO because O&D passengers typically pay more for the nonstop point-to-point service. United wants to please their frequent-flier-O&D travelers. When high-fare 0&D pax aren't filling up airplanes, of course they're going to sell the seats that remain at lower fares to connecting passengers. When O&D traffic is as high as it is in SFO, you've got to provide the direct routes. That's what the businesses want and they're the primary customers. I guess I'm failing to see what you're suggesting. Also, I was just wondering who you work for as an aviation consultant? That would definitely be job I would like to pursue.
 
MAH4546
Posts: 26254
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RE: Most Profitable Hub?

Sun Dec 02, 2001 4:25 am

ILS, your list makes no sense. MIA is AA's most profitable hub, thanks to the Latin American traffic and bigger O&D. As for CO, I would think EWR is the most profitable. Still, most profitable does not mean "profitable".
a.
 
N1993R
Posts: 155
Joined: Sat Nov 10, 2001 3:42 pm

RE: Most Profitable Hub?

Sun Dec 02, 2001 4:39 am

It might surprise people to note that two of the most *succesful* hubs in terms of profitability per passenger are US Airways in CLT and Delta in CVG. Both of these hubs have over 70% of all traffic CONNECTING through town, but their O&D yields can remain high due to a total lack of low fare competition. The catchment area for local traffic in both is moderately sized which allows better management of connecting traffic through the hub.

I don't believe the concept of a west-coast *hub* can ever work in the post-Southwest era. Intra-west coast routes will always remain point-to-point routes and the major catchment areas can each support their transcontinental services. Feeder operations can run either into these catchment areas or into western mid-con hubs like SLC or DEN to feed operations to the East. Transpacific operations similarly can feed into the catchment areas from secondary markets.

So what should UA do about SFO? Well, there is very little that they CAN do. They committed to SFO when they bought Pan Am's routes way back in 1985 and they haven't really had a choice since then. Remember, everything we discuss here is theoretical and has minimal practical value because of the millions of other factors involved in the real world. UA simply cannot abandon one city for another and expect to make money overnight.
 
deltaflyertoo
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RE: Most Profitable Hub?

Sun Dec 02, 2001 4:58 am

Another consistent problem for UAL at SFO is the weather. Specifically the fog. All year round SFO gets those fog days that just brings everything to a halt. For the other airlines, this isn't as big of an issue as it is for UAL when a large percentage of its fleet gets grounded on a flow control throughout the country due to SFO. Add ORD and DEN in during the summers and it can't be a mess.
 
BA
Posts: 10514
Joined: Fri May 19, 2000 11:06 am

RE: Most Profitable Hub?

Sun Dec 02, 2001 12:04 pm

DEN is definately up there.

United is planning to add about 20 or so additional flights early next year from DEN.

Here's the whole article:

http://www.denverpost.com/Stories/0,1002,33%257E235045,00.html

Not sure if its UA's most profitable hub, but it is definately up there.

Regards.
"Generosity is giving more than you can, and pride is taking less than you need." - Khalil Gibran
 
AM744
Posts: 1472
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RE: Most Profitable Hub?

Sun Dec 02, 2001 1:39 pm

Maybe FedEx's Memphis, TN
 
da man
Posts: 836
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RE: Most Profitable Hub?

Mon Dec 03, 2001 3:54 am

I don't know who uses all of these hubs, but here are the ones on my list:
HOU: Southwest Airlines
DFW: American Airlines
LAX
ATL: Delta Air Lines
JFK
 Smile/happy/getting dizzy
War Eagle!
 
Theiler
Posts: 576
Joined: Sat Nov 03, 2001 8:39 am

RE: Most Profitable Hub?

Mon Dec 03, 2001 4:17 am

Like AM744 said, FedEx in Mephis....
 
IrishFlyer
Posts: 105
Joined: Tue Nov 06, 2001 10:15 am

Stl?

Mon Dec 03, 2001 4:32 am

Wouldnt STL be profitable?

~IrishFlyer~
 
sfointern
Posts: 1104
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RE: Most Profitable Hub?

Mon Dec 03, 2001 11:18 am

Sean,

UA was committed to SFO way before its purchase of Pan Am's pacific ops. SFO has always been United's western station--if you remember, United was the first to start a transcon route, SFO-JFK.

Its commitment was only reinforced through its "internationalization" of SFO ops.

And while more connecting traffic dilutes yields, that doesn't mean the hub loses profitability. In bad economic conditions (such as for the past year and a half or so), it does... but don't confound those factors. Each marginal flight just has less profit. It's the law of diminishing returns.

SFO remains the largest station generator of revenue in the UAL system.

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