Updated with additional capacity and destination details
United Airlines finally joined every other mainline carrier in cutting a hub in a second-tier midwestern city with its decision to downsize operations at Cleveland Hopkins International airport.
American Airlines led the pack by pruning St. Louis in 2003, US Airways followed by downgrading Pittsburgh in 2004 and Delta Air Lines has been cutting flights from both Cincinnati and Memphis since its 2008 merger with Northwest Airlines.
“The demand for hub-level connecting flying through Cleveland simply isn't there," said Jeff Smisek, chairman, president and chief executive of Chicago-based United, in a letter to employees on 1 February. "Ultimately, we can't create demand, but we do have a responsibility to react to it. We must make the right business decisions, even when those decisions are painful, so we can continue to compete effectively and invest appropriately in our business.”
The carrier has lost money in Cleveland for the past decade, he says. New US Federal Aviation Administration (FAA) pilot hour requirements and the poor economics of 50-seat regional jets accelerated the decision, he adds.
United will reduce peak day flights to just 72 from about 200 over three waves from April to June. Only nonstop flights to Albany, Baltimore, Boston, Chicago O’Hare, Dallas/Fort Worth, Denver, Fort Lauderdale, Fort Myers, Houston Intercontinental, Las Vegas, Los Angeles, Milwaukee, Newark, New York LaGuardia, Orlando, St. Louis, San Francisco, Tampa, and Washington National and Dulles will remain.
United routes from Cleveland, January 2014
Innovata FlightMaps Analytics
In April, United will end flights to: Burlington, Hartford, Madison, Manchester (New Hampshire), Montreal, Oklahoma City, Philadelphia, Providence and Raleigh-Durham, according to the Cleveland Airport System.
In May, flights to Charlotte, Louisville, Minneapolis-St. Paul and Nashville will end.
In June, flights will end to Atlanta, Austin, Bradford (Pennsylvania), Buffalo, Columbus, Dayton, DuBois (Pennsylvania), Erie (Pennsylvania), Franklin (Pennsylvania), Flint, Grand Rapids, Greenville/Spartanburg, Indianapolis, Jamestown (New York), Kansas City, Harrisburg, Phoenix, Pittsburgh, Parkersburg (West Virginia), Richmond, Rochester, Syracuse and Toronto.
The changes represent a 64% decrease in United's total departures and a 36% reduction in available seat miles (ASMs), according to the airline. This translates to only one less mainline departure and about 126 fewer regional departures.
United routes from Cleveland, June 2014
Great Circle Mapper
Analysts agree that the cuts are a good move.
“This is not a surprise to anybody because Cleveland just didn’t fit,” says Helane Becker, an analyst at Cowen Securities. “It’s really important as part of its merger process that United pull out of markets that don’t make money.”
United inherited the Cleveland hub from Continental Airlines when the two merged in 2010.
“The changes in Cleveland make strategic sense given that much of the flying out of that hub is done on 50-seat regional jets,” says Fitch Ratings in a report. “Small regional jets have become less attractive from a unit-cost perspective in recent years as fuel prices have remained high, making the changes in Cleveland positive from a cost per available seat mile standpoint.”
The rating agency adds that the move is a credit positive.
United will increase ASMs 1% to 2%, and reduce its mainline and regional fleet count by just nine aircraft in 2014, according to its 23 January guidance. This includes removing 34 regional jets with up to 50 seats and replacing them with 27 76-seat Embraer 175s.
The guidance – released less than two weeks before the Cleveland announcement – includes the cuts, says Becker. The airline confirmed this for her, she adds.
With this in mind, the majority of the capacity that United is cutting from Cleveland will have to move to other hubs.
About 1.48 billion available seat kilometres (ASK) will need to be shifted, based on the airline's comments of a 36% capacity reduction and the 4.1 billion ASK that it flew from Cleveland in 2013, according to Flightglobal/Innovata data.
“United knows it can just send those [Cleveland] passengers over other locations, over Newark or Chicago,” says Becker.
Washington Dulles International would be another possible location for some of United’s flow traffic over Cleveland.
Bishop International airport in Flint, Michigan, confirmed on 4 February that the carrier’s four peak day flights to Cleveland would be replaced by three daily flights to Chicago O’Hare from 5 June.
Other network capacity changes have yet to be disclosed.
Jamestown is another city that United only serves from Cleveland. The airport found out about the schedule changes on 3 February and they are meeting with Silver Airways, which operates the United Express flights, on 6 February, says Sam Arcadipane, manager of airports and parks for Chautauqua County, which includes the airport.
“It’s a very dangerous situation for us as a small community,” he says. “This came in as a sidewinder missile and hit us.”
He hopes that the flights can shift to another United hub or carrier.
In addition to its investor guidance, United is contractually obliged to continue sourcing specific levels of feed from its regional partners. Changes in the amount of flying and what routes regional airlines fly require modifications to existing capacity purchase agreements, says Becker.
Burlington, Vermont-based CommutAir says that it’s “premature” to comment on the impact of the changes on its operations. The regional carrier operates some of United’s regional flights from Cleveland, including those to Flint and Erie, and has a number of administrative functions at the airport.
United declines to comment on what the changes in Cleveland mean for the rest of its network and capacity guidance.
With few other options, Cleveland officials are putting a positive spin on United’s decision.
Frank Jackson, the city’s mayor, says that, despite being “disappointed” with the move, it creates an “opportunity” for the city, during a media event on 3 February.
“When you have a hub, other airlines consider that fact when they make decisions about how to grow their business, sometimes seeing it as too much competition,” he says. “Now, Cleveland Hopkins International airport can more effectively market itself and work on building on the successes we have had with other airlines in recent years.”
Ricky Smith, director of the Cleveland Airport System, says that “several” airlines had expressed interest in expanding service from the airport pending a change in the United hub, during the event.
These are likely to include low-cost carriers. Frontier Airlines plans to begin new nonstop flights between Cleveland and Trenton, New Jersey, in April, and JetBlue Airways told Airline Business in October 2013 that it saw the potential for new service to cities in the Midwest from its Boston Logan hub.
However, any new service will likely only be on routes to large cities or leisure destinations that can support origin and destination (O&D) traffic.
“Cleveland itself can support approximately 35 [to] 40 nonstop routes – the majority being the hub site airports of the incumbent carriers,” writes Michael Boyd, chairman of the Boyd Group International, in a newsletter on 3 February. “It can likely add some additional Florida service. And that's all she wrote.”
He continues: “The majority of the nonstop routes being dropped by United won't be replaced, simply because there isn't enough O&D traffic generation to support such flights.”
Local officials appear to understand this.
“We can no longer live a hub approach to life,” says Smith. “We have to live a local approach to life. How the airport structures its resources, we have to do that with the local community's interest in mind--not spend resources to support passengers that will never step outside the airport.”