ANALYSIS: How consolidation has shifted US airport hubs

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Think again if you thought you might see the inside of Pittsburgh International’s airmall or Lambert-St. Louis International’s Minoru Yamasaki terminal while transiting between flights in the USA.

Both lost hubs during the past decade, the result of consolidation and streamlining at US carriers that has left once-major airports mere shadows of what they were in their prime, while others have continued to boom.

Cleveland, Memphis, Pittsburgh, San Jose and St. Louis saw the largest percentage decreases in boardings out of the busiest 50 airports in the USA from 2000 to 2012, US Federal Aviation Administration data shows. Cincinnati, a former Delta Air Lines hub, also saw a double-digit percentage decrease that pushed it out of the top 50 by 2012.

“The airports were victims of airline hub strategies and consolidation,” says Deborah McElroy, interim president of the Airports Council International North America.
United Airlines has cut capacity in Cleveland since its merger with Continental Airlines in 2010 while American Airlines, Delta and US Airways have eliminated hubs in St. Louis, Memphis and Pittsburgh, respectively, after their own mergers in the past decade.

Charlotte, Denver, Fort Lauderdale, Fort Myers and New York JFK airports have experienced the opposite – significant traffic growth since 2000. Low-cost carriers as well as consolidation and streamlining helped boost these airports.

William Swelbar, a research engineer at the Massachusetts Institute of Technology’s (MIT) International Centre for Air Transportation, calls the growth at Denver, Fort Lauderdale, Fort Myers and JFK “low-cost carrier stories” and adds that streamlining is a factor behind many of the decreases and increases at the top airports in each list.

Delta could be considered the leader in changing its hub strategy. Its former hubs in Cincinnati and Memphis have shrunk dramatically since its merger with Northwest, and prior to that, it pulled down its Dallas-Fort Worth hub in 2005 as a result of post-9/11 capacity cuts.

Both Cincinnati and Memphis overlapped with other hubs and were also affected by the carrier’s shift away from small regional jets. Location was also an issue since Cincinnati is just 370km (230 miles) south of Delta’s Detroit hub, while Memphis is situated 530km from Delta’s main hub in Atlanta. This proximity left the carrier with the question of where best to flow connecting traffic, with the cities with larger origin and destination markets and international traffic winning out.

Glen Hauenstein, executive vice-president chief revenue officer of the Atlanta-based carrier, cites an example when describing the airline’s strategy to shift its regional fleet towards larger gauge aircraft in December 2012.

“We believe that by eliminating the 50-seat regional depth service between Birmingham and Memphis and upgauging the Birmingham to Atlanta [service] to be on medium-sized RJs or smaller narrowbodies, like the 717s, we will be able to produce the product that’s not only more appealing to our customer base but it’s much more cost-efficient for us to produce,” he says.

Delta plans to remove at least 40 50-seat regional jets and add 16 88-seat Boeing 717s leased from Southwest Airlines and 12 Bombardier CRJ900s to the fleet of its wholly-owned subsidiary Endeavor Air, as part of this programme by the end of this year.

American and US Airways are far from innocent. The former has gradually eliminated the St. Louis hub that it acquired through its merger with Trans World Airlines in 2001. The airport saw boardings fall by nearly 60% to 6.2 million by 2012, FAA data shows.

“There was a bit of a silver lining of being one of the first – Lambert had to react right away,” says Rhonda Hamm-Niebruegge, director of the St Louis airport. American’s first cuts began in 2003, before other carriers made similar moves in other cities, prompting the airport to diversify its airline base.

She says that St Louis had service on 14 carriers in 2011, up from seven at the beginning of the decade. Traffic was also diversified with Southwest Airlines carrying nearly half of all passengers with the rest split between other carriers, compared to about 70% on TWA prior to the merger.

US Airways’ pull-down in Pittsburgh followed a showdown between airline and airport management, the latter of which did not agree to reduce costs for the airline resulting in the demotion of the city to just a spoke from a hub in its network.

Boardings at Pittsburgh were down more than 60% to 3.9 million in 2012, according to the FAA. US Airways remains the airport’s largest carrier but Delta and Southwest have both taken advantage of its downsizing to expand at the western Pennsylvania facility.

“If you look at the major metro areas, you’re seeing a consolidation around one major airport instead of two, or two instead of more,” says Swelbar. “It’s a way for airlines to serve metro areas without having redundant service.”

This is true in the Los Angeles area with Burbank and Ontario, the New York area with airlines focusing on operations into the airports where they are strongest – no one has dropped service to any of the city’s main three airports – and in the San Francisco bay area at Oakland and more notably San Jose.

San Jose Mineta International saw boardings drop by more than a third to 4.1 million by 2012, FAA data shows. This drop is partially a result of the tech bubble that buoyed traffic in the late 1990s as well as the reductions in redundant service that Swelbar mentions, says the airport.

The airport has seen a great deal of change in the past decade. American dropped its focus city early on while Virgin America’s launch from San Francisco International in 2007 prompted JetBlue Airways and Southwest’s decisions to enter the Bay Area’s primary airport the same year. Both carriers were focused on service to Oakland and San Jose prior to that.

San Francisco saw boardings rise by more than 1.7 million while San Jose’s fell by a little more than 2 million from 2000 to 2012. Boardings at Oakland were down by about 300,000 over the period.

JetBlue, Southwest – and its present subsidiary AirTran Airways – and Spirit Airlines have driven double digit growth at airports around the country, though none as much as Denver, Fort Lauderdale, Fort Myers and JFK.

Boardings at Denver were up more than 40% to 25.8 million, Fort Lauderdale more than 46% to 11.4 million, Fort Myers 41% to 3.6 million and JFK nearly 52% to 24.5 million, FAA data shows.

Reasons for this growth vary, from the strong local economy and growing population in Denver to becoming the de facto domestic O&D airport for the South Florida area at Fort Lauderdale, but a common theme is low costs.

“Low-cost carriers stimulating the market and the ability of Broward County to keep the cost to the airlines in sustainable parameters are a significant part of the growth,” says Kent George, director of aviation for Broward County, which operates Fort Lauderdale-Hollywood airport. Its cost per passenger boarded is currently $4.05, he adds.
JetBlue, Southwest and Spirit all operate focus cities services at the airport that grew significantly during the past decade. Low-cost carriers are not the only airlines concerned about cost. Charlotte-Douglas International airport, home to US Airways’ largest hub, claims to have the lowest net cost per passenger boarded among large hub airports at $0.96 in 2012. Since 2000, boardings have increased nearly three-quarters to more than 20 million per year.

“We’ve stayed strongly committed to low cost and we have remained a competitive hub because of our focus on our amenities and low cost,” says Brent Cagle, interim aviation director of the Charlotte airport.

Asked if any of Charlotte’s growth could be at all attributed to US Airways’ pull back in Pittsburgh during the same period, he says: “No, I don’t think we got lucky and happened to benefit because of Pittsburgh’s misfortune. You make your own luck.” Indeed, Charlotte’s growth by more than 8.5 million boardings is significantly more than Pittsburgh’s loss of nearly six million boardings from 2000 to 2012, FAA data shows.

Many other airports across the USA saw similar trends. Budget airlines buoyed traffic at airports including Chicago Midway and Las Vegas, while consolidation – and capacity discipline across the US mainline carriers – saw decreases at airports like Chicago O’Hare and Detroit.

By and large, more of the USA’s busiest airports grew than shrank during the decade – a signal that demand for air travel continues to grow slowly albeit with a slightly different geographical representation than before.

“I think the days of wholesale capacity cutting are behind us,” says Swelbar. “What we see is the new normal.”