Delta is consistently the most profitable of the US3 despite having hubs in much smaller cities. Why? Of the 8 largest metro areas in the US, AA has hubs at 7 (NYC, LAX, ORD, DFW, DCA, PHL, and MIA) while UA has five (EWR, LAX, ORD, IAH, and IAD). However, DL has hubs in just NYC and LAX. Theoretically, this means that UA and AA get more premium business travelers that pay more. Also, all of the lucrative markets (NYC, LAX, BOS, SEA, etc.) that DL has a presence are not legacy hubs for the airline, while UA/CO has long dominated ORD, IAH, SFO, etc. and AA have long dominated DFW, MIA, ORD, etc.

So my question is why? How does DL do it?

Common misconception, size of a city does not determine whether it is more or less premium. You have to look at the industries and corporate travel spend within the city...

In fact I’ll go a step further and say that DL having hubs in less competitive markets allows them an advantage in some aspects. In the case of MSP/SLC/DTW they can charge higher fares due to lower competition than they would be able to if all their hubs were in highly competitive metros

Cost and Connections that's what the US Airline business is all about big cities usually are not good for either.

This assessment is not even close to accurate. DL has the massive ATL hub. Atlanta is one of the largest metro areas in the US. DL also has a hub at BOS, which is almost the same size as SFO/DFW. DTW is also a large metro and DL has a large presence in SEA. Major DL Ops in JFK, LGA, LAX, BOS, ATL, SEA, DTW, SLC, which focus ops in AUS, RDU among others.

DL goes where they can fill planes and make a profit.

HP69 wrote:

Delta is consistently the most profitable of the US3 despite having hubs in much smaller cities. Why? Of the 8 largest metro areas in the US, AA has hubs at 7 (NYC, LAX, ORD, DFW, DCA, PHL, and MIA) while UA has five (EWR, LAX, ORD, IAH, and IAD). However, DL has hubs in just NYC and LAX. Theoretically, this means that UA and AA get more premium business travelers that pay more. Also, all of the lucrative markets (NYC, LAX, BOS, SEA, etc.) that DL has a presence are not legacy hubs for the airline, while UA/CO has long dominated ORD, IAH, SFO, etc. and AA have long dominated DFW, MIA, ORD, etc.

So my question is why? How does DL do it?

While a city like NYC may have more higher yielding passengers, it also has more competition, both domestic and foreign.

We have a lot of strange topics on Anet but this one actually made me think for a while so congratulations.

I think MSP and ATL being huge corporate towns help. PHL and MIA have far fewer corporate HQs than you'd expect for huge metros though MIA does have a lot of regional HQ's.

DL's consistent presence in the NYC market and general market reputation on the east coast (where so many corporate decisions continue to be made) also helps.

This is a really good topic, because however it gets rationalized here, DL does have less "cornerstone" type hubs in terms of major markets than UA or AA.

One other note is that airports like MSP and DTW, two key DL hubs, are not known as delay proned airports and are usually airports that run very smoothly. I don't include ATL on the list because ATL is prone to Thunderstorms.

UA and AA both have ORD as a hub, which is known as a delay proned airport. UA also has hubs in EWR and SFO, two of the most notorious delay proned airports in the country. The only UA hubs that really run smoothly as far as delays go are IAH and IAD.

AA has good hubs that aren't really delay proned other than ORD and possibly PHL, but the issues surrounding AA have been well documented in other threads.

OP is ignoring competition. It's nice that UA has a hub at ORD but CHI traffic is spread across three hubs/carriers, meaning lower destination count and average gauge for all. It's the same phenomenon at LAX and NYC.

HP69 wrote:

Delta is consistently the most profitable of the US3 despite having hubs in much smaller cities. Why? Of the 8 largest metro areas in the US, AA has hubs at 7 (NYC, LAX, ORD, DFW, DCA, PHL, and MIA) while UA has five (EWR, LAX, ORD, IAH, and IAD). However, DL has hubs in just NYC and LAX. Theoretically, this means that UA and AA get more premium business travelers that pay more. Also, all of the lucrative markets (NYC, LAX, BOS, SEA, etc.) that DL has a presence are not legacy hubs for the airline, while UA/CO has long dominated ORD, IAH, SFO, etc. and AA have long dominated DFW, MIA, ORD, etc.

So my question is why? How does DL do it?

I believe you should go back to the drawing board and do more research. DL's hubs are indeed LAX, JFK but also BOS, DTW, MSP, SEA, SLC and of course ATL and still to some degree CVG. Focus cities RDU and AUS. I believe though that you are missing the fact of connection traffic is a huge factor for DL especially at ATL which is the largest volume airport in the world and DL's largest hub.
DL still holds the largest marketshare IIRC for BOS and is slowly closing in on SEA and is second IIRC in NYC. However, one thing most people miss is the business travelers for DL. The SkyMiles program retains a huge portion of DL travelers. I know for a fact that the largest concentration of SkyMile Gold and Diamond members are in Greenville, SC per capita of which connect 90% of the time in ATL most likely. Not sure where you get that UA/AA get more premium business travelers that pay more when they are in NYC/LAX because those markets are typically lower yields due to increased competition. Markets like GSP/LIT and BOI have less competition and still have high concentrations of SkyMile travelers paying premium (as you state it) which should equate to better profitability for DL.

If we're looking at the top 10 metro areas, then you can add Boston and Atlanta to the list for Delta.

HP69 wrote:

Also, all of the lucrative markets (NYC, LAX, BOS, SEA, etc.) that DL has a presence are not legacy hubs for the airline

What are you basing your list of "all" the lucrative markets on? DL makes huge amounts of money in ATL, MSP, DTW, etc., all of which have dozens of major corporate operations and none of which are on your list.

I'd also bet DL makes a lot more money than AA and UA in many small to medium sized cities across the country where they are often the #1 or #2 player. Case in point: Madison, WI. DL is handily the #1 airline, and there's a significant amount of business travel from companies like Epic (which made the Corporate Travel 100 list last year), American Family Insurance, etc. Average fares from MSN are consistently near the top of all medium to large airports across the country, and there are many more like it where DL is likely a revenue leader. These are comparatively less important markets on their own, but when you add them all up together they do matter for the bottom line. I think UA realized that relatively recently and has since been trying to beef up their presence in small to medium sized markets to their major hubs. Madison is also an example of that, where over the past few years UA has added nonstops to SFO and LAX, and has added/increased mainline to DEN and ORD.

DL also seems to be concentrating growth in regions who’s expanding. Such as AUS and RDU. DL has really good coverage of the continental US, save intra Texas travel. DL operates a reliable schedule and offers amenities people are willing to pay a little more for. I admit I do the same, I stay loyal to Bonvoy hotels because I get consistent quality that I think is a good value. I think many business people see the value in traveling on Delta.

http://visualapproach.io/most-expensive ... passenger/

I would argue CPE plays into profitability as well. The attachment shows the CPE at the top 50 airports. Here's how AA, DL and UA stack up:

AA
CLT: $3.19
ORD: $16.78
DFW: $9.50
LAX: $16.08
LGA: $18.68
JFK: $25.45
PHL: $13.08
PHX: $5.71

DL:
ATL $2.38
BOS: $14.10
DTW: $9.57
LAX: $16.08
MSP: $6.27
LGA: $18.68
JFK: $25.45
SLC: $4.03
SEA: $10.10

UA:
ORD: $16.78
DEN: $11.03
IAH: $10.28
EWR: $28.05
SFO: $16.67
IAD: $20.95

I think AA and DL may be fairly close on overall average CPE, depending on how much traffic flows between each hub (I'd still give the edge to DL). However, as you can see, all of UA's hubs are high in CPE. Also, high CPE doesn't necessarily mean you can command a fare premium. For example, F9 and WN operate many flights out of DEN, so UA's ability to command premium fares may be limited.

I also think Delta is better at pursuing opportunities that are outside the traditional hub-spoke line of thinking (ex. IND-CDG, PDX-LHR) and perhaps benefited from the some legacy NW routes. (Ex. PDX-NRT (soon to be HND), PDX-AMS). As far as legacy carriers go, DL seems to have to have the most nimble business model- IMHO.

Midwestindy wrote:

they can charge higher fares due to lower competition than they would be able to if all their hubs were in highly competitive metros

Agreed. Aside from NYC and I guess Los Angeles, DL does not have to deal with [significant] competition from secondary airports or other hubbed airlines in their hub markets.

AA/UA face significant competition from the likes of: MDW, DAL, HOU, FLL, etc...

A successful airline’s network is much more complicated and driven by an insane amount of data and analytics than the OP’s comparison of hub locations to top eight metro areas. Networks are built to not only consider hubs with large O&D traffic but also draw from the surrounding region, geographic access to other markets, competition, potential growth, corporate contracts, political climate, fleet capability and range, operational reliability, operational cost, and, ultimately, where the most money can be made,i.e., profitability.

A few examples:
- ATL is not just about Atlanta but the incredible amount of traffic from the Southeast
- LAX is a huge metro area with a lot of O&D passengers but it is also served by a lot of airlines with major operations there and is therefore extremely competitive. However, similar to JFK/LGA, DL has made/is making huge capex investments in infrastructure because they believe in the long term they can obtain lower operating costs with more efficient operations and a higher margin by providing a superior customer experience on the routes their targeted customers want to fly
- Any markets without a hub and where DL believes they can hit a profitability target, DL will supplement with point to point service

apodino wrote:

I don't include ATL on the list because ATL is prone to Thunderstorms.

Umm yeah, every airport East of the Rockies is prone to TS in the summer. However, with 5 parallel RWY's (3 simul IMC arrivals capable) ATL is probably in one of the best positions to recover.

With current weather trends, you're more likely to see a storm in ORD than ATL. With climate change, that's only going to get worse as the Northern areas heat up.

All that to say, I'd put ATL up against any other large hub for efficiency (lower 48 states).

rta wrote:

Midwestindy wrote:

they can charge higher fares due to lower competition than they would be able to if all their hubs were in highly competitive metros

Agreed. Aside from NYC and I guess Los Angeles, DL does not have to deal with [significant] competition from secondary airports or other hubbed airlines in their hub markets.

AA/UA face significant competition from the likes of: MDW, DAL, HOU, FLL, etc...

Yes, a significant portion of Delta's revenue advantage is from lack of competition (with the cost benefits of the low CPE as mentioned by another poster).

That said, you can't exclude SEA from the competition roster - AS is definitely real competition there for North American flying.

On the flip side, Delta's international J revenue suffers from flying mostly out of Tier 2 cities (LAX and NYC aside). There is a reason why Delta's J cabins are so tiny compared to United's. United flies exclusively out of Tier 1 cities with the exception of Denver (I would argue Houston is not normally Tier 1, but the energy industry presence there makes it a Tier 1 city for international J).

dcaproducer wrote:

This assessment is not even close to accurate. DL has the massive ATL hub. Atlanta is one of the largest metro areas in the US. DL also has a hub at BOS, which is almost the same size as SFO/DFW. DTW is also a large metro and DL has a large presence in SEA. Major DL Ops in JFK, LGA, LAX, BOS, ATL, SEA, DTW, SLC, which focus ops in AUS, RDU among others.

DL goes where they can fill planes and make a profit.

Can you clarify the statement in bold?

1. Delta’s hub in BOS is almost the same size as UA’s SFO hub and AA’s DFW hub?
2. Boston metro area is almost the same size as SF Bay Area and Dallas metro area?

Thanks.

questions wrote:

dcaproducer wrote:

This assessment is not even close to accurate. DL has the massive ATL hub. Atlanta is one of the largest metro areas in the US. DL also has a hub at BOS, which is almost the same size as SFO/DFW. DTW is also a large metro and DL has a large presence in SEA. Major DL Ops in JFK, LGA, LAX, BOS, ATL, SEA, DTW, SLC, which focus ops in AUS, RDU among others.

DL goes where they can fill planes and make a profit.

Can you clarify the statement in bold?

1. Delta’s hub in BOS is almost the same size as UA’s SFO hub and AA’s DFW hub?
2. Boston metro area is almost the same size as SF Bay Area and Dallas metro area?

Thanks.

He obviously meant the latter. Delta's operations out of BOS barely even qualify it as a hub.

The metro comparison is reasonable, although a bit of a stretch for BOS vs. DFW. Of course, everything is so tight in the NE that if you look at the CSA as the catchment area (which is roughly the same land area as the DFW metro), BOS is certainly comparable to DFW.

MIflyer12 wrote:

OP is ignoring competition. It's nice that UA has a hub at ORD but CHI traffic is spread across three hubs/carriers, meaning lower destination count and average gauge for all. It's the same phenomenon at LAX and NYC.

DL owning the MSP market (or DTW) tends to equate to equal or higher revenues than UA/AA splitting the market three ways at ORD.

Jeremy

[dup]

Delta has much lower costs and less competition at these hubs. They make more money due to lower costs and less competition.

We have had this discussion alot on a.net.

I like how OP arbitrarily picked the top 8 metro areas, given that ATL and BOS are 9 and 10.

As has been mentioned, it boils down to one thing: competition.

DL has hubs in markets that are relatively competition free. They can charge fare premiums in those markets and their cost of operation is lower to boot. ATL, MSP, and DTW are not small markets either. They are just a lot smaller than ORD or NYC. From an O&D perspective, ATL is about the same size as DFW. Domestically DTW and MSP carry about the same amount of O&D as IAH. They just have less than half of its international O&D, but DTW and MSP dont have many foreign carriers not tied to Delta.

Its also important to note domestic flying is FAR more profitable than international flying currently.

questions wrote:

dcaproducer wrote:

This assessment is not even close to accurate. DL has the massive ATL hub. Atlanta is one of the largest metro areas in the US. DL also has a hub at BOS, which is almost the same size as SFO/DFW. DTW is also a large metro and DL has a large presence in SEA. Major DL Ops in JFK, LGA, LAX, BOS, ATL, SEA, DTW, SLC, which focus ops in AUS, RDU among others.

DL goes where they can fill planes and make a profit.

Can you clarify the statement in bold?

1. Delta’s hub in BOS is almost the same size as UA’s SFO hub and AA’s DFW hub?
2. Boston metro area is almost the same size as SF Bay Area and Dallas metro area?

Thanks.

Metro area size, not hub size.

cranberrysaus wrote:

I like how OP arbitrarily picked the top 8 metro areas, given that ATL and BOS are 9 and 10.

Population as a whole is a bit arbitrary in general, go down the list of largest CSAs and you will see that population of an area is a bad indicator of OD traffic.

https://en.wikipedia.org/wiki/Combined_statistical_area

EBiafore99 wrote:

http://visualapproach.io/most-expensive-airports-per-passenger/

I would argue CPE plays into profitability as well. The attachment shows the CPE at the top 50 airports. Here's how AA, DL and UA stack up:

AA
CLT: $3.19
ORD: $16.78
DFW: $9.50
LAX: $16.08
LGA: $18.68
JFK: $25.45
PHL: $13.08
PHX: $5.71

DL:
ATL $2.38
BOS: $14.10
DTW: $9.57
LAX: $16.08
MSP: $6.27
LGA: $18.68
JFK: $25.45
SLC: $4.03
SEA: $10.10

UA:
ORD: $16.78
DEN: $11.03
IAH: $10.28
EWR: $28.05
SFO: $16.67
IAD: $20.95

I think AA and DL may be fairly close on overall average CPE, depending on how much traffic flows between each hub (I'd still give the edge to DL). However, as you can see, all of UA's hubs are high in CPE. Also, high CPE doesn't necessarily mean you can command a fare premium. For example, F9 and WN operate many flights out of DEN, so UA's ability to command premium fares may be limited.

Isn’t MIA an American Hub? How is the CPE?

cranberrysaus wrote:

I like how OP arbitrarily picked the top 8 metro areas, given that ATL and BOS are 9 and 10.

Yeah, I was wondering the same thing...seemed odd to to stop at 8. Ijs

Delta which have always been strong in the Southeast; population is growing like crazy. Atlanta metro population is double of what is was 20 years ago. Delta also goes after business travelers instead of leisure travelers. Lastly Delta just flat out know how to manage.

Delta28L wrote:

EBiafore99 wrote:

http://visualapproach.io/most-expensive-airports-per-passenger/

I would argue CPE plays into profitability as well. The attachment shows the CPE at the top 50 airports. Here's how AA, DL and UA stack up:

AA
CLT: $3.19
ORD: $16.78
DFW: $9.50
LAX: $16.08
LGA: $18.68
JFK: $25.45
PHL: $13.08
PHX: $5.71

DL:
ATL $2.38
BOS: $14.10
DTW: $9.57
LAX: $16.08
MSP: $6.27
LGA: $18.68
JFK: $25.45
SLC: $4.03
SEA: $10.10

UA:
ORD: $16.78
DEN: $11.03
IAH: $10.28
EWR: $28.05
SFO: $16.67
IAD: $20.95

I think AA and DL may be fairly close on overall average CPE, depending on how much traffic flows between each hub (I'd still give the edge to DL). However, as you can see, all of UA's hubs are high in CPE. Also, high CPE doesn't necessarily mean you can command a fare premium. For example, F9 and WN operate many flights out of DEN, so UA's ability to command premium fares may be limited.

Isn’t MIA an American Hub? How is the CPE?

Totally forgot MIA - it's $19.85 CPE (4th highest).