alexrg
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Smaller Hub Cities?

Wed Jan 18, 2017 11:58 pm

Looking back through history, you'll see a number of smaller cities acting as hubs for major air carriers. For example, AA had RDU, STL, and BNA (the last 2 inherited from TWA), USAirways had PIT, Northwest had MEM, and United had CLE. All of these cities have since been dehubbed. In general, the big three US airlines' hubs are all located in bigger cities, with the notable exception of AS, which has made major hubs/focus cities out of both SAN and SJC. What made these smaller hub cities unprofitable (despite them having been around for a long time), and why is AS seeming to be investing in building hubs in smaller cities as well?
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Vctony
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 12:28 am

The smaller hub cities were unprofitable because they didn't have enough origin / destination traffic.

SAN and SJC are located in decently large metropolitan areas and the majority of passengers that AS serves on flights from those airports either originates or ends their trip at SAN or SJC.

It's the same as the WN model. Yes several passengers connect at WN's large stations but the majority of passengers on the flights begin and end their travel between the city pairs WN flies.
 
VetteDude
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 12:54 am

Well, the CLE hub went from being one of, if not the most profitable Continental hub (with a huge investment planned for 2009 which was put on hold when the recession began), to being a "money losing hub for the past decade" in the words of the great Jeff Smisek. So, basically they were unprofitable because the company said so; its easy to shift traffic throughout a system to get whatever result your want (and CLE had some of the highest fares in the country when it was a CO/UA fortress), and the result airlines want is overcrowded mega hubs. Speaking for CLE though, the hub got axed quickly because United needed to cut RJ45 flying, and they had to do it quick.
 
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knope2001
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 12:59 am

Two big issues worked against smaller-city hubs:

1. The most profitable traffic is local O+D from the hub, especially when you can command high hub-market fares. Smaller cities have less O+D traffic. Plus as LCC's penetrated smaller cities had a harder time supporting both the hub and LCC service. When your hub airline could no longer charge $450 business fares to ATL because ValuJet/AirTran came to town, the hub became less profitable.

2. The second most profitable traffic is from the high-fare connections you get from the feeder cities in your web of control. Think United charging $400 to fly from Des Moines to Pittsburgh because United owned the DSM business market, or Northwest charging $500 from Madison to Boston because NW owned Madison. Sure, you could fly other airlines DSM-PIT or MSN-BOS, but schedules, FF loyalty and corporate contracts meant some people chose UA or NW even when others were cheaper, or when everybody was charging the high business fare most everybody chose UA or NW. With consolidation these hub hinterlands overlapped. It's not so much that the hub cities themselves were of no value, but when two hubs could serve these most-profitable connections one became unneeded. Had Delta bought USAirways Charlotte would have been toast, not because Charlotte isn't important, growing, etc, but Delta had a far bigger and better way to serve the high-fare connecting traffic from places like Greensboro, Knoxville, Richmond, etc. So though it's easy to say "fewer airlines need fewer hubs" it's a little more involved than that.
 
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compensateme
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 1:45 am

VetteDude wrote:
Well, the CLE hub went from being one of, if not the most profitable Continental hub (with a huge investment planned for 2009 which was put on hold when the recession began), to being a "money losing hub for the past decade" in the words of the great Jeff Smisek. So, basically they were unprofitable because the company said so; its easy to shift traffic throughout a system to get whatever result your want (and CLE had some of the highest fares in the country when it was a CO/UA fortress), and the result airlines want is overcrowded mega hubs. Speaking for CLE though, the hub got axed quickly because United needed to cut RJ45 flying, and they had to do it quick.


Can you provide any evidence that CLE was ever Continental's most profitable hub?

CO was critical of CLE's performance throughout the 2000s, routinely threatening to shutter the hub; there's oodles of threads in the archives if you care to search. And that big 2009 expansion? That was a derivative of excess regional jet capacity created by upgauging at EWR:

http://www.aviationpros.com/news/103856 ... newark-hub

I find it doubtful that CLE was ever CO's most profitable hub -- most likely, it was a distant third in performance behind EWR/IAH.
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cvgComair
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 2:10 am

CVG has remained a Delta hub for over 3 decades and was originally highly profitable due to Comair/the ability to connect midwest passengers. As said, O&D traffic is mostly to blame, but its not to say these cities cannot be hubs for airlines. Delta still maintains a hub at CVG, although its greatly reduced in size, 670 daily flights was just not profitable with increased costs at Comair due to the pilot strike in 2001. Today Delta operates just under 90 daily flights to 35 cities, including a daily 767 flight to Paris. I think CVG shows that the path STL/BNA/CLE/MEM took was not inevitable and that small cities can be profitable hubs. Delta has actually grown capacity at CVG the last two years and Delta has said numerous times that Cincinnati is profitable operation. Look at SLC and CLT, which have retained large hubs, despite being in smaller cities. All three of these cities have found their place in DL's network for CVG/SLC and AA's for CLT.
 
rajincajun01
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 2:17 am

RDU was significantly smaller of a metro in the AA hub days. The population has doubled and many companies have bases there now creating O&D now.
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 2:24 am

rajincajun01 wrote:
RDU was significantly smaller of a metro in the AA hub days. The population has doubled and many companies have bases there now creating O&D now.


BNA now has more passengers than it did in its hub days. Is RDU similar?
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rajincajun01
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 2:53 am

Cubsrule wrote:
rajincajun01 wrote:
RDU was significantly smaller of a metro in the AA hub days. The population has doubled and many companies have bases there now creating O&D now.


BNA now has more passengers than it did in its hub days. Is RDU similar?


Yes, RDU was around 11 million pax in 2016. During the hub days was about 8 million if I remember correctly.
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theSFOspotter
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:05 am

BUR is slightly a hub for WN even though they have more destinations from LAX. WN recently added PDX-BUR and adding SLC-BUR bringing it to 10 destinations. I hope to one day see BUR-HOU and MDW. On 1/18/17 WN had 50+ departures from BUR.
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BoeingGuy
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:06 am

alexrg wrote:
Looking back through history, you'll see a number of smaller cities acting as hubs for major air carriers. For example, AA had RDU, STL, and BNA (the last 2 inherited from TWA), USAirways had PIT, Northwest had MEM, and United had CLE. All of these cities have since been dehubbed. In general, the big three US airlines' hubs are all located in bigger cities, with the notable exception of AS, which has made major hubs/focus cities out of both SAN and SJC. What made these smaller hub cities unprofitable (despite them having been around for a long time), and why is AS seeming to be investing in building hubs in smaller cities as well?


BNA wasn't inherited from TWA. AA had it before. SJC may not have its 77 AA flights a day, but it certainly has more overseas flights than ever before.
 
commavia
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:08 am

It is true that smaller hubs face the handicap of generating a lower volume of O&D, which tends - in general - to be higher yielding. But I would submit that the far larger reason why smaller hubs have essentially vanished in the U.S. is economies of scale. It is simply no longer efficient to operate an operation catering primarily to connections, and primarily on smaller aircraft, when much of that connecting demand can be flowed over a far larger hub where the incremental cost per passenger - on a fully-allocated basis, including accounting for opportunity cost - is dramatically lower.
 
LAXdude1023
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:32 am

I cannot fathom that CLE was ever, at any point, CO's most profitable hub. Not above O&D behemoths IAH and EWR and the business traffic each generate.
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grbauc
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:46 am

P2P and small focus/Small hubs are what left for the most part for the major airlines. I'm a fan of lots of focus cities and wish AA would do something out west here for traffic flow with more focus and mini hubs. SFO has a flow from south to north might work. SJC was a long time ago and yes i miss it. They can share a few choice routes with UA they do at LAX ORD. WN has a good model Of using bigger and larger stations for traffic flows. Im all about having a ton of options out of one nice hub airport but the DOT seems hell bent over election that there needs to be a harmony balance to city pairs and routes and since the major cities are all taken. Isn't this the logical and only area left?

I suppose I should make a map of WN hub and focus cities that they don't have.
 
grbauc
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:53 am

theSFOspotter wrote:
BUR is slightly a hub for WN even though they have more destinations from LAX. WN recently added PDX-BUR and adding SLC-BUR bringing it to 10 destinations. I hope to one day see BUR-HOU and MDW. On 1/18/17 WN had 50+ departures from BUR.
ONT was in this category also at one time until the WN takeover of Terminal 1 has US was dropping its footprint. DL also abandoned space oh I bet they could have a time machine. I really hope airlines start looking forward more now that they all should be more stable with the market share equalization.
 
alexrg
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 4:37 am

RDU was significantly smaller of a metro in the AA hub days. The population has doubled and many companies have bases there now creating O&D now.


The funny thing is that AA still operates a nonstop flight from RDU to London-Heathrow, suggesting they know that there is enough O&D traffic from RDU to warrant an international flight no other non-AA hub gets. Strange...
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SLCUT2777
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 4:47 am

The big thing to understand about DL & SLC is the population of the Wasatch Front has more than doubled since Western Airlines began utilizing it 35 years ago. By comparison CVG, STL, PIT, CLE & even MEM have become much more stagnant. According to the SLC airport website, SLC handled over 23 million passengers in 2016 with roughly a 50/50 split between connecting and O&D passengers. If SLC were more stagnant in population growth, DL would have pulled the hub plug long ago.
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drdisque
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 5:46 am

Completely inaccurate to say that CLE was going to get a "huge investment" in 2009 considering what had happened in 2008

CLE was going to get new service to LAN and AZO (not markets that CO served). LAN even had a Continental check-in counter ready to go and fitted out when the service was pulled, which was done before the flights even began.

Later, there was a huge cut on Sept 3, 2008 - CLE lost: SAN, GRB, GSO, LIT, AUS, BHM, CHS, DSM, DTW, MEM, ORF, OKC, OMA, YOW, SAT, SRQ, and SAV.

Also, it was announced that CLE-CDG which was a new seasonal route that operated during the summer of 2008 would not return for summer 2009.

I find it very hard to believe that CLE was going to see a huge investment in the middle of a recession right after it had lost a ton of flights.
 
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redzeppelin
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:45 am

I get tired of hearing the chorus that hubs need lots of O&D traffic in order to be viable. It's an example of missing the forest for the trees. From my perspective (and having lived much of my adult life in "spoke" markets), a hub is made viable by the critical mass of connecting traffic that an airline's network naturally sends there, and the resulting economy of scale.

It is true that non-stop O&D tickets can command premium fares in many markets, and this is a major part of airline economics. But it's also true that we don't see the legacies launching many point-to-point routes to chase that traffic. It is important to recognize that the legacy carriers have built their business models around comprehensive route networks capable of serving virtually all possible city pairs. The LCCs are picking off the high-volume, point-to-point O&D routes, reducing the profitability of those routes for the legacies, and thereby making the comprehensive connection opportunities ever more valuable to the legacies.

A lot of A.net posts get caught up in the economics of individual routes rather than examining the contribution of that route to the broader network. We see comments like (for example) "DL increased the frequency on SLC-LHR, so that route must be making good money!" More often, I think that the truth is that (in this example) overall LHR volumes are up, an extra flight is needed, and the balance of the total network is best served by adding that new capacity in SLC. It's really hard for me to say that incremental changes in capacity on any route by a major network carrier is a direct result of the profitability of that particular city pair. It is similarly hard for me to accept any characterization of a given hub as more or less profitable to an airline. The networks are too complex and there are too many confounding factors.

When the business model is to serve a comprehensive hub-and-spoke network, it is good to have hubs in cities with a lot of local traffic, but also VERY important to consider the number of hubs and the location of those hubs. You don't want too many hubs--you need the economy of scale that comes from centralized operations. But you don't want too few hubs--this leads to inefficient traffic flows. It's a math problem. Beyond the O&D potential, you need hub locations that can (1) minimize total distance flown and (2) maximize economies of scale while also (3) maximizing fleet utilization and (4) meeting passenger expectations of convenience and frequency. It's a delicate balance, and is not an exact science.

We are too quick to say that a historic hub was closed because it was "unprofitable" or because it didn't have strong O&D numbers. It's not that simple. You have to look at the entire network, and the purpose of the hub in that network. Hubs get closed when a merger makes their purpose redundant (STL lost to ORD and DFW for AA, MEM lost to ATL, etc) or when the carrier's business model changes (US cutting PIT and consolidating at PHL to improve economy of scale).

That's enough for tonight's rant. My perspective may be skewed by living in small markets for most of my life. I get on a plane and assume that 94% of my fellow passengers are also making a connection, so I may overvalue the importance of connecting traffic...
 
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:53 am

What is KEF?
 
USAirKid
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:55 am

redzeppelin wrote:
We are too quick to say that a historic hub was closed because it was "unprofitable" or because it didn't have strong O&D numbers. It's not that simple. You have to look at the entire network, and the purpose of the hub in that network. Hubs get closed when a merger makes their purpose redundant (STL lost to ORD and DFW for AA, MEM lost to ATL, etc) or when the carrier's business model changes (US cutting PIT and consolidating at PHL to improve economy of scale).

That's enough for tonight's rant. My perspective may be skewed by living in small markets for most of my life. I get on a plane and assume that 94% of my fellow passengers are also making a connection, so I may overvalue the importance of connecting traffic...


I'd toss the question back why would US keep PHL and cut PIT and not the other way around if it isn't O&D driving a hub's profitability? PIT was better from an air traffic delay perspective (PHL is in the shadow of the NYC airports), PIT had the better terminal by far, and US definitely had a significant portion of the flights there.

I too used to live in small markets and used to assume 94% of my fellow passengers were making a connection, but it really does vary.
 
flyguy89
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 7:17 am

Vctony wrote:
The smaller hub cities were unprofitable because they didn't have enough origin / destination traffic.

SAN and SJC are located in decently large metropolitan areas and the majority of passengers that AS serves on flights from those airports either originates or ends their trip at SAN or SJC.

It's the same as the WN model. Yes several passengers connect at WN's large stations but the majority of passengers on the flights begin and end their travel between the city pairs WN flies.

I don't know that that's really an accurate characterization. Certainly, yes, a solid O&D component is important...but equally as critical is network prominence and the yield of the connecting flows the hub serves. In the 2000s the Midwest was over-hubbed between CHI, DTW, CLE, CVG, PIT, and CMH (to a lesser extent with HP)...in other words, a lot of airlines competing with each other in the same traffic flows. Consequently we've seen a great thinning here due to mergers and market dynamics with just CHI, DTW, and nominally CVG remaining as hubs in the region. On the other hand, in the Southeast CLT (which has historically been 10-20% O&D) has stood strong due to its prominence in US's network and only having one other hub (ATL) to compete with for its primary connecting traffic flows.

cvgComair wrote:
CVG has remained a Delta hub for over 3 decades and was originally highly profitable due to Comair/the ability to connect midwest passengers.

Also critically important to note was Comair being an early adopter of the CRJ. For a number of years DL/CVG had a practical monopoly on all-jet regional service that did drive a revenue premium.
 
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PatrickZ80
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 7:20 am

Amsterdam is a relatively small city, but still a major hub in Europe.
 
FlyingHollander
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 10:09 am

PatrickZ80 wrote:
Amsterdam is a relatively small city, but still a major hub in Europe.

There are 32.5mil people in a 200k radius of AMS. That's slightly more than JFK, and doubled that of ORD. That's not exactly small. City populations are worthless for pretty much anything. Each city can chose where to put their border, making one on one comparison pretty much impossible.
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mjoelnir
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 11:59 am

rebr wrote:
What is KEF?


The single hub for two airlines.
 
mjoelnir
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 12:00 pm

The reduction of the number of hubs is a straight result of the mergers in the USA air transport industry.
 
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flyPIT
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 12:24 pm

SLCUT2777 wrote:
The big thing to understand about DL & SLC is the population of the Wasatch Front has more than doubled since Western Airlines began utilizing it 35 years ago. By comparison CVG, STL, PIT, CLE & even MEM have become much more stagnant. According to the SLC airport website, SLC handled over 23 million passengers in 2016 with roughly a 50/50 split between connecting and O&D passengers. If SLC were more stagnant in population growth, DL would have pulled the hub plug long ago.


SLC remains a hub - and a stagnant one at that based on historic passenger totals - because it is only one of two cities in that part of the country capable of serving as an omni-directional hub. In 2007 SLC served 22 million passengers. Last year it was 23 million. SLC would still be a hub today even if it had its 2007 population, or its 1987 population. It has little to do with population growth (although that doesn't hurt) and more to do with geographical privilege.
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 12:50 pm

mjoelnir wrote:
The reduction of the number of hubs is a straight result of the mergers in the USA air transport industry.


The U.S. was losing hubs even before the big mergers started. AA at BNA, RDU, and SJC as examples. US dropping PIT.
 
klm617
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 1:12 pm

I would also say Charlotte is also one of the smaller hub cities that has hung on along with Salt Lake City
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 1:14 pm

MIflyer12 wrote:
mjoelnir wrote:
The reduction of the number of hubs is a straight result of the mergers in the USA air transport industry.


The U.S. was losing hubs even before the big mergers started. AA at BNA, RDU, and SJC as examples. US dropping PIT.



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CMH for America West.
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CLEguy
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 1:19 pm

drdisque wrote:
Completely inaccurate to say that CLE was going to get a "huge investment" in 2009 considering what had happened in 2008

CLE was going to get new service to LAN and AZO (not markets that CO served). LAN even had a Continental check-in counter ready to go and fitted out when the service was pulled, which was done before the flights even began.

Later, there was a huge cut on Sept 3, 2008 - CLE lost: SAN, GRB, GSO, LIT, AUS, BHM, CHS, DSM, DTW, MEM, ORF, OKC, OMA, YOW, SAT, SRQ, and SAV.

Also, it was announced that CLE-CDG which was a new seasonal route that operated during the summer of 2008 would not return for summer 2009.

I find it very hard to believe that CLE was going to see a huge investment in the middle of a recession right after it had lost a ton of flights.


Major expansion of the CLE hub was announced in fall 2017 (before the recession began). Included in that was the CDG flight. As the recession hit in 2008, most of the expansion was curtailed, although a number of new flights were added in early 2008. Check out the links below.

http://www.prnewswire.com/news-releases ... 40357.html

http://blog.cleveland.com/business/2008 ... ed_wi.html
 
commavia
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 1:27 pm

SLCUT2777 wrote:
The big thing to understand about DL & SLC is the population of the Wasatch Front has more than doubled since Western Airlines began utilizing it 35 years ago. By comparison CVG, STL, PIT, CLE & even MEM have become much more stagnant. According to the SLC airport website, SLC handled over 23 million passengers in 2016 with roughly a 50/50 split between connecting and O&D passengers. If SLC were more stagnant in population growth, DL would have pulled the hub plug long ago.


As said, the reason SLC is a hub is not it's local population. Despite the region's growth in the last 35 years, SLC is still the smallest U.S. metro area to sustain a full-scale network airline hub (and by a wide margin, as the next smallest is CLT with a metro population more than twice as large). Rather, the reason SLC is still a hub is its geography. There is no other hub that can replace the network function SLC provides for Delta. In addition to begin the smallest U.S. network carrier hub market, it's also arguably the most geographically isolated - and in SLC's case, that actually works in the hub's favor. There are only two hubs in the Mountain time zone capable of viably acting as network carrier gateways into the Rocky Mountain region. The preeminent hub in the region, in every sense including but not limited air travel, is DEN, and SLC is #2 as far as air hubs go.

redzeppelin wrote:
I get tired of hearing the chorus that hubs need lots of O&D traffic in order to be viable. It's an example of missing the forest for the trees. From my perspective (and having lived much of my adult life in "spoke" markets), a hub is made viable by the critical mass of connecting traffic that an airline's network naturally sends there, and the resulting economy of scale.


Whether anyone is tired of hearing it or not, there is a reason these comments are repeated - because they are true, and reflective of economic reality. Network airline hubs need a substantial amount of both O&D and connecting traffic to make their economics work.

USAirKid wrote:
I'd toss the question back why would US keep PHL and cut PIT and not the other way around if it isn't O&D driving a hub's profitability? PIT was better from an air traffic delay perspective (PHL is in the shadow of the NYC airports), PIT had the better terminal by far, and US definitely had a significant portion of the flights there.


... and PHL had more, and more naturally high-yielding, O&D. PHL metro is nearly three times the size of PIT metro.
 
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 1:44 pm

Reykjavik is currently a decent sized hub for Icelandair and has a population of less than 120,000.

Interestingly Dubai only has a population of 2,400,000. Which is quite large, but not nearly large enough to support the amount of service the airport provides.
 
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:15 pm

alexrg wrote:
RDU was significantly smaller of a metro in the AA hub days. The population has doubled and many companies have bases there now creating O&D now.


The funny thing is that AA still operates a nonstop flight from RDU to London-Heathrow, suggesting they know that there is enough O&D traffic from RDU to warrant an international flight no other non-AA hub gets. Strange...


Isn't/wasn't this route heavily supported by the pharmaceutical industry?
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 3:55 pm

I don't know why people have the view that wherever an airline places a hub is just based on one thing. Its based on three things:

1) Size of O&D market
2) Geographic location of hub
3) Location of other potential hubs in the area.

Right now, there are two large small market hubs in the continental US: CLT and SLC. In both cases the big reason is that there are no other suitable alternatives in the regions which they reside. AA obviously wont hub in ATL but they wanted a hub in the Southeast. CLT is the next best option. CLT is also boosted by high fares because of the finance industry. Delta wanted a hub in the Mountain West. Other than DEN, SLC is the only alternative for a hub. In these cases, the fact that CLT and SLC are the only suitable alternatives in their regions mean that, despite the fact both markets are small for hubs, they work well.

Let me also emphasize that a small market hub has NOTHING to do with metro area size. It has everything to with O&D traffic. DEN for example has a small population, but a massive O&D.

Now lets look at failed or stagnant hubs in the Midwest. For example, once UA and CO merged, what use was CLE as a hub? Its sandwiched between ORD, IAD, and EWR. Those three hubs are far larger, far more international, and far more important. Same goes for CVG. DTW and ATL are larger, more international, and more important cities/hubs. Why would the airlines in question choose CLE and CVG at the expense of ORD, EWR, IAD, ATL, and DTW? Despite the fact that CLE and CVG are larger in total O&D than SLC, it doesn't matter. SLC has the geographical position where no other hub (other than DEN) works. With CLE and CVG, there are tons of other alternatives close by.

That's why the airlines choose larger cities for hubs (and rightfully so).
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incitatus
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 4:08 pm

FlyingHollander wrote:
PatrickZ80 wrote:
Amsterdam is a relatively small city, but still a major hub in Europe.

There are 32.5mil people in a 200k radius of AMS. That's slightly more than JFK, and doubled that of ORD. That's not exactly small. City populations are worthless for pretty much anything. Each city can chose where to put their border, making one on one comparison pretty much impossible.



Another example like Amsterdam is Atlanta - the city of Atlanta is only 460,000 people. The metro area is more than 5 million.
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jbs2886
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 4:19 pm

commavia wrote:
SLCUT2777 wrote:
The big thing to understand about DL & SLC is the population of the Wasatch Front has more than doubled since Western Airlines began utilizing it 35 years ago. By comparison CVG, STL, PIT, CLE & even MEM have become much more stagnant. According to the SLC airport website, SLC handled over 23 million passengers in 2016 with roughly a 50/50 split between connecting and O&D passengers. If SLC were more stagnant in population growth, DL would have pulled the hub plug long ago.


As said, the reason SLC is a hub is not it's local population. Despite the region's growth in the last 35 years, SLC is still the smallest U.S. metro area to sustain a full-scale network airline hub (and by a wide margin, as the next smallest is CLT with a metro population more than twice as large). Rather, the reason SLC is still a hub is its geography. There is no other hub that can replace the network function SLC provides for Delta. In addition to begin the smallest U.S. network carrier hub market, it's also arguably the most geographically isolated - and in SLC's case, that actually works in the hub's favor. There are only two hubs in the Mountain time zone capable of viably acting as network carrier gateways into the Rocky Mountain region. The preeminent hub in the region, in every sense including but not limited air travel, is DEN, and SLC is #2 as far as air hubs go.

redzeppelin wrote:
I get tired of hearing the chorus that hubs need lots of O&D traffic in order to be viable. It's an example of missing the forest for the trees. From my perspective (and having lived much of my adult life in "spoke" markets), a hub is made viable by the critical mass of connecting traffic that an airline's network naturally sends there, and the resulting economy of scale.


Whether anyone is tired of hearing it or not, there is a reason these comments are repeated - because they are true, and reflective of economic reality. Network airline hubs need a substantial amount of both O&D and connecting traffic to make their economics work.

USAirKid wrote:
I'd toss the question back why would US keep PHL and cut PIT and not the other way around if it isn't O&D driving a hub's profitability? PIT was better from an air traffic delay perspective (PHL is in the shadow of the NYC airports), PIT had the better terminal by far, and US definitely had a significant portion of the flights there.


... and PHL had more, and more naturally high-yielding, O&D. PHL metro is nearly three times the size of PIT metro.


I suspect that SLC is also benefited by the Mormon Church's HQ in the city, which uses a lot of travel. In addition, the banking sector is enormous because of special banking laws. These two things probably lead to disproportionately more travelers and higher fares than comparable cities.
 
masseybrown
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 4:27 pm

LAXdude1023 wrote:
I cannot fathom that CLE was ever, at any point, CO's most profitable hub. Not above O&D behemoths IAH and EWR and the business traffic each generate.


My recollection is that in the 90's in Gordon Bethune's first days, when CO was a total basket case, CLE was the first hub to become profitable under his management. It was by default CO's most (and only) profitable hub at that time. The techniques proven successful in CLE, where a failed experiment would not be so costly, were then applied to IAH and EWR. Larry Kellner, Bethune's eventual successor, ran the CLE hub.
 
klm617
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 4:34 pm

redzeppelin wrote:
I get tired of hearing the chorus that hubs need lots of O&D traffic in order to be viable. It's an example of missing the forest for the trees. From my perspective (and having lived much of my adult life in "spoke" markets), a hub is made viable by the critical mass of connecting traffic that an airline's network naturally sends there, and the resulting economy of scale.

It is true that non-stop O&D tickets can command premium fares in many markets, and this is a major part of airline economics. But it's also true that we don't see the legacies launching many point-to-point routes to chase that traffic. It is important to recognize that the legacy carriers have built their business models around comprehensive route networks capable of serving virtually all possible city pairs. The LCCs are picking off the high-volume, point-to-point O&D routes, reducing the profitability of those routes for the legacies, and thereby making the comprehensive connection opportunities ever more valuable to the legacies.

A lot of A.net posts get caught up in the economics of individual routes rather than examining the contribution of that route to the broader network. We see comments like (for example) "DL increased the frequency on SLC-LHR, so that route must be making good money!" More often, I think that the truth is that (in this example) overall LHR volumes are up, an extra flight is needed, and the balance of the total network is best served by adding that new capacity in SLC. It's really hard for me to say that incremental changes in capacity on any route by a major network carrier is a direct result of the profitability of that particular city pair. It is similarly hard for me to accept any characterization of a given hub as more or less profitable to an airline. The networks are too complex and there are too many confounding factors.

When the business model is to serve a comprehensive hub-and-spoke network, it is good to have hubs in cities with a lot of local traffic, but also VERY important to consider the number of hubs and the location of those hubs. You don't want too many hubs--you need the economy of scale that comes from centralized operations. But you don't want too few hubs--this leads to inefficient traffic flows. It's a math problem. Beyond the O&D potential, you need hub locations that can (1) minimize total distance flown and (2) maximize economies of scale while also (3) maximizing fleet utilization and (4) meeting passenger expectations of convenience and frequency. It's a delicate balance, and is not an exact science.

We are too quick to say that a historic hub was closed because it was "unprofitable" or because it didn't have strong O&D numbers. It's not that simple. You have to look at the entire network, and the purpose of the hub in that network. Hubs get closed when a merger makes their purpose redundant (STL lost to ORD and DFW for AA, MEM lost to ATL, etc) or when the carrier's business model changes (US cutting PIT and consolidating at PHL to improve economy of scale).

That's enough for tonight's rant. My perspective may be skewed by living in small markets for most of my life. I get on a plane and assume that 94% of my fellow passengers are also making a connection, so I may overvalue the importance of connecting traffic...



I agree 100% it's more about what the airports and cities do for the airlines to keep them there as said ATL, SLC and CLT are all examples of cities that sustain much larger hubs than their local markets would dictate but yet they all thrive and survive.
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LAXdude1023
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 5:10 pm

klm617 wrote:
redzeppelin wrote:
I get tired of hearing the chorus that hubs need lots of O&D traffic in order to be viable. It's an example of missing the forest for the trees. From my perspective (and having lived much of my adult life in "spoke" markets), a hub is made viable by the critical mass of connecting traffic that an airline's network naturally sends there, and the resulting economy of scale.

It is true that non-stop O&D tickets can command premium fares in many markets, and this is a major part of airline economics. But it's also true that we don't see the legacies launching many point-to-point routes to chase that traffic. It is important to recognize that the legacy carriers have built their business models around comprehensive route networks capable of serving virtually all possible city pairs. The LCCs are picking off the high-volume, point-to-point O&D routes, reducing the profitability of those routes for the legacies, and thereby making the comprehensive connection opportunities ever more valuable to the legacies.

A lot of A.net posts get caught up in the economics of individual routes rather than examining the contribution of that route to the broader network. We see comments like (for example) "DL increased the frequency on SLC-LHR, so that route must be making good money!" More often, I think that the truth is that (in this example) overall LHR volumes are up, an extra flight is needed, and the balance of the total network is best served by adding that new capacity in SLC. It's really hard for me to say that incremental changes in capacity on any route by a major network carrier is a direct result of the profitability of that particular city pair. It is similarly hard for me to accept any characterization of a given hub as more or less profitable to an airline. The networks are too complex and there are too many confounding factors.

When the business model is to serve a comprehensive hub-and-spoke network, it is good to have hubs in cities with a lot of local traffic, but also VERY important to consider the number of hubs and the location of those hubs. You don't want too many hubs--you need the economy of scale that comes from centralized operations. But you don't want too few hubs--this leads to inefficient traffic flows. It's a math problem. Beyond the O&D potential, you need hub locations that can (1) minimize total distance flown and (2) maximize economies of scale while also (3) maximizing fleet utilization and (4) meeting passenger expectations of convenience and frequency. It's a delicate balance, and is not an exact science.

We are too quick to say that a historic hub was closed because it was "unprofitable" or because it didn't have strong O&D numbers. It's not that simple. You have to look at the entire network, and the purpose of the hub in that network. Hubs get closed when a merger makes their purpose redundant (STL lost to ORD and DFW for AA, MEM lost to ATL, etc) or when the carrier's business model changes (US cutting PIT and consolidating at PHL to improve economy of scale).

That's enough for tonight's rant. My perspective may be skewed by living in small markets for most of my life. I get on a plane and assume that 94% of my fellow passengers are also making a connection, so I may overvalue the importance of connecting traffic...



I agree 100% it's more about what the airports and cities do for the airlines to keep them there as said ATL, SLC and CLT are all examples of cities that sustain much larger hubs than their local markets would dictate but yet they all thrive and survive.


Ok, ATL is one of the largest O&D airports in the country. It does not even belong in the same sentence as SLC and CLT despite your constant attempts to slight it. Every hub is over served (EVERY SINGLE ONE), but get real man.
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ahj2000
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Thu Jan 19, 2017 5:17 pm

A few things about CLT and SLC:
1) Both have ridiculously high O&D fares. Both have large finance businesses (CLT is the US's #2 banking city), and SLC has the Mormon mission traffic going for it (something not to be ignored)
2) They are the cheapest hubs by pax enplanement. They keep costs down because they know that AA and DL can choose to send pax over different hubs for many traffic flows. Look at PIT for what happens if your costs spike too much- no hub and an empty terminal.
3) Both are wealthier areas, and have a larger O&D:population ratio because of it.
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flyoregon
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 5:18 pm

SLCUT2777 wrote:
The big thing to understand about DL & SLC is the population of the Wasatch Front has more than doubled since Western Airlines began utilizing it 35 years ago. By comparison CVG, STL, PIT, CLE & even MEM have become much more stagnant. According to the SLC airport website, SLC handled over 23 million passengers in 2016 with roughly a 50/50 split between connecting and O&D passengers. If SLC were more stagnant in population growth, DL would have pulled the hub plug long ago.


The big thing you have to remember about SLC is that it's a hub because of where it is. It's certainly not the population. Sure, the Wasatch Front is growing, but SLC is very lucky to have a hub, especially a hub for Delta, and the reason is...location. Argue all you want about skiing, national parks, whatever. You have to admit that SLC is extremely lucky to have TATL flights to LHR, CDG and AMS (on 2 carriers no less).

And the argument for SLC that the LDS Church is a major factor into the success of the hub is rubbish. The church certainly uses Delta primarily, but that's because that's the best option. And yes, the church has a lot of travel with missionaries leaving each week as well as other church officials traveling, but it's not an overwhelming amount.
Last edited by flyoregon on Thu Jan 19, 2017 5:24 pm, edited 1 time in total.
 
rajincajun01
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 5:22 pm

alexrg wrote:
RDU was significantly smaller of a metro in the AA hub days. The population has doubled and many companies have bases there now creating O&D now.


The funny thing is that AA still operates a nonstop flight from RDU to London-Heathrow, suggesting they know that there is enough O&D traffic from RDU to warrant an international flight no other non-AA hub gets. Strange...


It's actually not strange. Raleigh-Durham is a major tech and pharmaceutical hub for companies that have bases in London and Germany. There is also a huge Indian population that use the flight if they have a visa.

AA is upgrading the route to a 777 in March and DL is upgrading their CDG route to a 767 in May.

Nearly 20% of all travelers through RDU are international travel as of 2015.
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Rajahdhani
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:03 pm

Cause;

VetteDude wrote:
Speaking for CLE though, the hub got axed quickly because United needed to cut RJ45 flying, and they had to do it quick.


Effect;

VetteDude wrote:
...and CLE had some of the highest fares in the country when it was a CO/UA fortress



Which leads to, in an economic recession (where traffic is depressed), or during a fuel hike (where fuel efficiency becomes a mantra), or in response to LCC competition (where the LCCs are likely competing on larger aircraft and further maximizing their ability to lower the seat cost), or even considering how the other RJ operators were faring at the time (and so affecting the availability of pilots) the issue of costs change. If you are to build a hub on RJ traffic (and then further consider how that was the smallest ('most fragile') option that CO could have offered - it also demonstrated how reactive those markets would have been to change), the thought is always there that at the first sign of trouble - the RJ operation will see some change. It's not as if CO were in the business of protecting passengers from the true costs of operation, and higher fares could have been justified by using the RJs (as in those RJs were the smallest they could use to accurately serve the market - based on their models of asset allocation). The RJs were no more cheaper then, than they are now - to operate. It's likely that airlines were well aware of the costs, but did not at that time - have as many challenges, that they do now. From the company perspective - it is not difficult to see how one of (and that is not combining the nexus of any of the above happening concurrently) those could easily lead to this description;

VetteDude wrote:
"So, basically they were unprofitable because the company said so; its easy to shift traffic throughout a system to get whatever result your want (and CLE had some of the highest fares in the country when it was a CO/UA fortress),

Well, the CLE hub went from being one of, if not the most profitable Continental hub (with a huge investment planned for 2009 which was put on hold when the recession began), to being a "money losing hub for the past decade" in the words of the great Jeff Smisek.


So, in other words - look at it from the issues of cost, and from the perspective of the airline - and its a logical assessment of the facts.

VetteDude wrote:
and the result airlines want is overcrowded mega hubs,"


The issue here is one based on costs. Consider the proposed 'improvements' at CLE;

http://www.prnewswire.com/news-releases/continental-airlines-announces-major-expansion-at-cleveland-hopkins-international-airport-58040357.html
Airport Improvements Support Expansion
To support the growth of Cleveland, future facility plans call for an
expanded security checkpoint area, a new meet-and-greet waiting area and
additional ticket counters. A concession redevelopment program is underway
to provide more retail and food and beverage options for travelers at
Cleveland Hopkins -- at prices that are comparable to non-airport
locations. Continental and the Airport are also reviewing different options
to expand and/or relocate the current Federal Inspection Services (FIS) and
customs hall.
Already completed are a new runway and centralized de-icing pad, C
Concourse ramp replacement, expansion of the Transportation Security
Administration (TSA) bag room with a new in-line baggage screening system,
and restroom renovations.


All of those 'improvements' came at a cost, and it likely went straight to the customer (be it CO, then passed onto their passengers via higher fares). Every addition there was completely necessary - in most cases - under the assumption that you will see an increase in passenger numbers. If you do not, though, the cost of the additions will then be funneled onto the same number of passengers as before (thus making the overall cost higher to those passengers), and in time, will see a trend of passengers walking away from the higher fares as soon as competition arrives. Every addition there is necessary now, however CLE has a much more realistic (and advantageous) position at this moment - in that the market is more realistically based on a broader range of competitors, and so CLE must also compete more effectively to survive.

Backing to the point - consider how high costs have dampened UA's hub performances before at IAD. Consider why US pulled back from PIT. In another vien, consider how the LCC competition and RJ costs effected the closure of a hub like SJU for AA.
Last edited by Rajahdhani on Thu Jan 19, 2017 6:31 pm, edited 1 time in total.
 
slcdeltarumd11
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:06 pm

LAXdude1023 wrote:
Despite the fact that CLE and CVG are larger in total O&D than SLC, it doesn't matter. SLC has the geographical position where no other hub (other than DEN) works. With CLE and CVG, there are tons of other alternatives close by.


Actually SLC o&d is is significantly more then those cities combined, but i see your point its lots of factors at play.


Its 2017 the hubs that work have been thru trail and error for years. We know which ones work and the airlines are using them.

Its a combination of population, o&d, economy, last minute business demand,disposable income, location, future demand etc. There is no one factor but overall we have the answers of what hubs just work.
 
mtnwest1979
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:07 pm

Just to correct something from opening post. AA did not inherit BNA hub from TWA. It was internal growth hub from 1986. AA only got STL hub from TWA until ending it.
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compensateme
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:16 pm

masseybrown wrote:
My recollection is that in the 90's in Gordon Bethune's first days, when CO was a total basket case, CLE was the first hub to become profitable under his management. It was by default CO's most (and only) profitable hub at that time. The techniques proven successful in CLE, where a failed experiment would not be so costly, were then applied to IAH and EWR. Larry Kellner, Bethune's eventual successor, ran the CLE hub.


CLE may have been "the most profitable" by a technically -- losing the least amount of money in the system (because of its size) during down years, the first to be restructured, etc. -- but I highly doubt there was ever a prolonged period where CLE outperformed EWR & IAH. CO began venting about CLE in the late 1990s, claiming that while profitable and an important piece of its network, the local community and airport weren't supporting the hub as much as they should; this rhetoric continued throughout the 2000s, escalating to hub closure threats following 9-11.

That CLE was the most profitable, prosperous hub in the CO network but the evil CO management went out of their way to ensure its failure is nothing more than a.net fan fiction, driven on these forums for a decade by a group of CLE-based posers upset that CLE didn't become the hub that they wanted it to be.
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Rajahdhani
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:21 pm

I think that we also need to consider how hub airports also have to actively manage their costs, in order to maintain their advantages.

Case in point - CLT. The hub has maintained a significant place in the AA network, precisely because of the ability of the hub to not only attract a high-yeilding O/D, but also, keep costs down so much so that it lowers the threshold of performance for operations there (as a whole, and in some cases specifically). Consider how close, geographically, CLT is to DCA, to the RDU area, to PHL - and then consider how massive of an operation it is. For the same reason, ATL is precisely managed within the understanding that major upgrades, or major costs - will affect the overall profitability margins of operations there.

The timing of project is crucial (so as to not 'catch' the hub operator, when they are worst prepared for it). No one wants a repeat of PIT (from the US perspective).

http://usatoday30.usatoday.com/travel/columnist/grossman/2007-10-15-dismantling-pittsburgh-hub_N.htm
Though the airport once handled 20 million passengers annually, only 20% of that traffic originated or terminated in Pittsburgh. The vast majority of passengers were simply connecting to another flight – almost always a connection on US Airways.

In 2000, Pittsburgh had the fourth highest average airfares among the top 120 markets in the nation according to the DOTand Pittsburgh passengers paid a 37% premium over travelers in other cities. By the beginning of 2007 Pittsburgh had dropped to 71st place in the DOT ranking and Pittsburgh passengers now enjoy airfares that are 7% lower than the national average. With the higher cost structure inherent in operating a hub, US Airways could no longer compete at this lower price point.

Though some LCCs, like ATA, Independence Air, and Vanguard Airlines only briefly flashed upon the scene, larger and more powerful airlines like AirTran, Southwest, and JetBlue are now entrenched and poised for further expansion at Pittsburgh. Over the last seven years (sic, between 2000 and 2007) LCCs have increased their collective market share in Pittsburgh from 1% to 17%.

In Chicago, Southwest now fills the gap created by US Airways' exit from that market. In many cases, flights to and from Pittsburgh are carrying passengers who now must connect through another airline's hub to reach a destination that is no longer served by a direct flight from Pittsburgh.


In other words, LCC entrants and higher cost structure effectively made PIT unworkable for US (at their costs structures). I can see how connecting that many passengers, through PIT (at the high costs) would require additional 'fat' to make it work (at the higher costs). The LCCs (especially those with a lower-costing hub operation where they could pull O/D and essentially attract those O/D away from paying the 37% premium to PIT) came in an took away traffic, to their lower costs. I can see how that would erode US's ability to operate, and the decision to head to PHL.

Consider the airport now. How much does WN have, market share wise (and many don't even consider WN to be an LCC anymore)? It all boils down to costs.
Can you imagine the business case for CLE, if the improvements were allowed to have happened? High landing fees, high user fees, higher costing operations - and the competition is, in most cases, from LCCs.
Last edited by Rajahdhani on Thu Jan 19, 2017 6:50 pm, edited 1 time in total.
 
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aemoreira1981
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 6:23 pm

rebr wrote:
What is KEF?


Keflavik International Airport, a hub for Icelandair and WOW air...capitalizing on a one-stop European strategy.

As for PHL vs. PIT...I believe it was landing fees that caused US Airways to move the hub...as for why American would keep PHL even though JFK is only about 100 miles away, JFK is slot restricted and would do mostly O&D, while PHL is better situated as a connecting airport where American has a fortress hub. 9/11 also changed the game greatly as airlines had to rethink their networks, which doomed STL as a hub after the absorbance of TWA by American.

As for cargo operations, however, I'm surprised that St. Louis hasn't tried to make a play for UPS to leave Kentucky, as St. Louis is more centrally located in the USA than Louisville, and 757 flights to Europe make a stop in Newark for fuel anyway.
 
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PatrickZ80
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Re: Smaller Hub Cities?

Thu Jan 19, 2017 7:43 pm

incitatus wrote:
Another example like Amsterdam is Atlanta - the city of Atlanta is only 460,000 people. The metro area is more than 5 million.


That's true. Another thing about Atlanta is that there hardly are any other airports in this region, so everybody from the whole wide area has to use Atlanta airport. Athens Ben Epps and Columbus are so small they hardly count as competition, certainly not for long haul flights. I think Huntsville and Birmingham-Shuttlesworth are the closest airports capable of handling long haul traffic, but they're so far away they're hardly serious alternatives.

Same is true about Amsterdam, it has a large catchment area because of the lack of other large airports in the area. Rotterdam isn't exactly big. Eindhoven would be the closest airport capable of handling long haul traffic and despite the fact that there's a shuttle bus between Amsterdam and Eindhoven airport it's still quite a distance plus Eindhoven isn't the largest airport either.

However in a few years in the case of Amsterdam that's going to change when Lelystad opens up for commercial traffic. It will have a 2.700 meters runway which should be sufficient for long haul flights. Lelystad is definitely closer to Amsterdam than Eindhoven.

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