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Experts See Little Hope For STL.....

Tue Nov 11, 2003 1:26 pm

St Louis Biz Journal
Experts see little hope for Lambert's future as a hub
Heather Cole
Gary Liebscher's weekly trip to and from his St. Louis office and his Florida home now takes twice as long as it did before American Airlines' cuts in daily flights took effect Nov. 1.
Liebscher, president of VNA-TIP HomeCare, previously flew directly from St. Louis to Fort Myers, Fla. With the direct flight to Fort Myers eliminated, he now flies from Lambert-St. Louis International Airport to American's hub at Dallas/Fort Worth International Airport before taking a flight to Florida. "It doubles the time of the commute from two hours to four hours, each way," Liebscher said.

Things aren't likely to improve soon for Liebscher and other travelers out of Lambert, and could get worse, according to economists and analysts.

On Nov. 1, American Airlines reduced the number of flights in and out of Lambert by more than half, to 207, with most of the cuts coming from connecting flights. The number of endpoints, or destinations, that can be reached through direct flights from St. Louis is at 68, down from 93.

That's still a lot for a market the size of St. Louis, said Jan Brueckner, IBE Professor of Economics at the University of Illinois at Urbana-Champaign. "It could get worse. American Airlines could find some routes are not viable without connecting traffic," Brueckner said.

Brueckner was in St. Louis as a panelist for an Oct. 31 public forum on the future of the airline industry sponsored by the Murray Weidenbaum Center on the Economy, Government and Public Policy at Washington University. He is the author of a study predicting that the St. Louis area could lose a total of 47,500 jobs as a result of American's reductions in service, because the area is a less-attractive business location without the service.

Any comment on further cuts in routes is speculation at this point, said Tim Wagner, a spokesman for American Airlines. "We have not announced any further changes to St. Louis. Like any business, we're subject to the law of supply and demand."

Lambert Director Leonard Griggs had a more optimistic view of American's presence in St. Louis. During the panel discussion, he said American may add flights at Lambert as the economy improves and the airline's budget situation improves. "I think American is going to continue to grow," Griggs said.

AMR Corp., parent company for American, averted bankruptcy this year by finding $4 billion in annual cost savings. AMR reported a loss of $3.5 billion, or $12.97 a share, last year.

The addition of flights at Lambert is a possibility, American's Wagner said. "We do respond to markets all the time. For instance, we already have in the system a fourth flight from St. Louis to LAX (Los Angeles International Airport) that begins in December." Before the cuts, there were six flights from St. Louis to LAX. After the reduction, there were three.

American has been adding far more flights in Chicago and Dallas, however. The airline announced late last month that starting Nov. 1, its hub at Dallas/Fort Worth would be getting 43 more daily flights, bringing the total to 500, and Chicago's O'Hare International will have 25 additional American Airlines flights and 23 additional flights through its regional affiliate, American Eagle. That brings the total number of American's daily departures at that airport to 532.

"American has withdrawn to its best markets and will make a stand there," said Darryl Jenkins, director of the Aviation Institute at George Washington University in Washington, D.C.

Griggs, however, said Lambert still is an attractive airport, more efficient than other American Airlines airports, such as Dallas or Chicago. "I haven't given up on American," he said.
After the economy, the return of the business traveler in historically greater numbers is the strongest driver for American, said Robert Mann, president of R.W. Mann & Co., an airline industry consulting firm in Port Washington, N.Y. The smaller aircraft now used in an increasing number of flights from St. Louis have higher per-unit, or per-seat, costs, so a mix of fares that includes business travelers paying higher prices is an important factor, Mann said. However, the total operating cost of the regional jets is far less than that for flying mainline jets, Mann said.

Mainline jets, such as 757s and MD-80s, with 176 seats and 131 seats, respectively, have been replaced with regional jets that seat between 37 and 50 passengers for 18 of the 68 flights at Lambert.

"If revenue (at Lambert) outperforms expectations, it's possible American will be flying more, or larger aircraft will be introduced," Mann said. "If it's underperformed, it's conceivable further cuts will be taken. With the economy in substantial flux, it's a very difficult call to make."

Cutbacks are always a possibility as American strives to become profitable, said Ray Neidl, analyst at New York-based Blaylock & Partners. And 747s that exited Lambert aren't likely to return, he said. "I wouldn't count any time soon on mainline aircraft. They're being deployed in other markets."

Frequent flier Liebscher now takes a regional jet to Dallas before transferring to a larger jet for the remaining leg of his trip to Florida. "I prefer the larger jet, but the comfort level is basically equal."

Passengers have to pay more attention to their schedules if they want to fly on the larger jets, said Steve Stogel, president of developer DFC Group Inc. Stogel recently opted to book a flight on an American regional jet to make a 10 a.m. meeting in New York. However, the flight was aborted when the captain announced an equipment failure with a backup battery system.

"The new wrinkle is, do you want to fly on the smaller regional jets, or do you want to schedule on the larger jets?" Stogel said. He said the new schedule includes more early flights to New York, meaning travelers don't have to leave the night before for morning meetings.

If the economy is strong and growing at a good rate, and business travelers come back, there likely won't be further cuts at Lambert, the Aviation Institute's Jenkins said. If the economy doesn't improve, "I believe wholeheartedly we'll see a whole lot more cuts then. The answer is, it depends."

Griggs pointed to the expansion at Lambert of other airlines -- including Delta, Northwest, Air Canada, United, United Express and Frontier, for a total of 17 additional flights -- as evidence of Lambert's viability. He hopes Southwest will add 15 to 20 flights by next year, he told the Business Journal in an interview in August.

Panel member Brueckner, however, held out little hope for substantial additions by other airlines to fill the gap left by American. "The remaining capacity is adequate to serve the local demand. The only way (flights) can come back is if somebody else puts up a hub. Don't expect Southwest to take up the slack."

-Well we still have one Ft. Myers flight on a S80. The rest of the article is correct to my knowledge. I like AA's approach to the whole STL situation. A wait and see approach so to speak, and they don't rule out the possibility of additional flights which would be a welcome sight. We'll see even though I've heard of future cuts. I have no clue as to how the new schedule is working out, as I can't get any type of financial details. Anyone know yet? Big thumbs up

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Joined: Wed Aug 13, 2003 11:23 pm

RE: Experts See Little Hope For STL.....

Tue Nov 11, 2003 1:51 pm

As I have learned to accept this..its hard.

However, if AA does not see any money making on any routes, then how would Delta,. AWA or CO make money on it?? THAT is the question. I definetly do not expect WN to add some routes, much les cities, except maybe to PHL. I do believe that it was STUPID of AA to drop STL-JFK. now Delta has a hold on it, and I don't see B6 coming in and making ti cheap. I don't expect AirTran, I do admit, we ARE lucky AA did not drop the hub at STL and juts have flgihts to DFW and ORD only. One thing tho..I did track a Delta Boeing 767-300 ATL-STL, what was that about? Charter? Test Flight?? flew ijn at 11:00pm and flight number was 9901 so I assume it was a charter?? What we "got back" from CO and F9 really helped STL alot! So...the sad fact is STL is not the hub it is, much less a busy airport. 200 flights pales in comparioson to DFW and ORD's 500+ and correct me if im wrong thats just AA only?!?!?? or all the airlines combined? Southwest is now the #1 airline at STL. with only about 50 or so Mainline from AA and over 70 for WN. Man, if u had told me a year ago that Southwest would be the number 1 airline today at STL I would have punched you and said ur dreaming...thats like me saying Jetblue will be the number one airline at ORD, althought with the economy I wouldn't be surpised...but getting off topic here........STL is no longer the Hub it is, period.

Good things come to those who wait, better things come to those who go AFTER it!
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Joined: Fri Sep 26, 2003 6:32 am

RE: Experts See Little Hope For STL.....

Tue Nov 11, 2003 1:55 pm

If STL really is in a death spiral, it saddens me. It's a great city with so much to offer, and great people.

Hopefully they can get things turned around.
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Joined: Mon Nov 10, 2003 12:39 pm

RE: Experts See Little Hope For STL.....

Tue Nov 11, 2003 2:02 pm

I think American decided to redeploy its assests in markets where it is sure to have greater returns. AA has an excellent network minus STL - so it makes sense for them to retreat from STL. This isn't a comment on the STL market as a whole. If another airline has the resources to invest in a STL hub - it does have some advantages. However, a lack of high yielding O & D would make it a weak hub compared to ATL, DFW, ORD, MSP. With WN so strong in the market, I think many airlines might be afraid to move a lot of lift into STL. When I was at TWA - we all knew that TW was the only one who would make STL a hub. I remember one time flying from CDG-STL nonstop thinking TW was the only crazy airline in the world to fly nonstop from Paris to Missouri. I think pure supply and demand will determine where STL ends up in terms of air service. They def need to improve the terminal facilities and the runway configuration.

Good luck to all in STL!


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