Embattled Hubs

[Captain Ed]

It looks to me after seeing the JB ads and their route structure that it offers a lot of non-stops to a lot of places, which really doesn't fit the HUB airline concept.

I could be wrong.

Looking at the big picture of the necessity of the United States transportation structure, and airlines being a major factor in our country, many fairly large cities will be left without any airline service, or at best, marginal service.

Places like Albany, Cleveland, Akron, most places in WV and the Appalachian region, etc. have a lot of population whose people will be hard pressed to fly anywhere on an airline.

I realize that this is more of a national problem than an industry problem, and it should be addressed by our representatives, but I'm afraid they are short sighted in matters like this, and more interested in re-election and therefore reluctant to support measures that are unpopular, such as regulation of airlines routes.

I don't know how this problem will be resolved of course, but it should be recognized as a problem.

I saw the demise of our once proud Merchan Marine by national neglect, and this is/was a vital part of our transportation system. Now it is all but forgotten, and people could care less how our imports arrive. Freight bills to foreign carriers constitute 20% of our trade imballance.

As a result, our shipyards are closed, or closing in large numbers and another industry vital to our national interests suffer. They now rely of Navy projects, and there are just so many of them.

This could happen to our airline industry unless something is done about it.

At 72, I have no real personal interest in this, but I still care about the future of the USA.

So much for my morning rant.

 

[Fubijaakr]

Capt. Ed,

Without hub and spoke, how are people from, say Grand Forks, ND going to get anywhere?

Hub and spoke is here to stay, although SWA has shown that more direct service is in order and can be profitable.

 

[ladevale]

The lure of the hub concept is that it allows for greater economies of scale (some bean counter babble).

It also allows the bread winner at the hub, to have the largest market share, the winner of the largest market share typically gains a revenue premium at that hub.

This whole concept could be turning on its head, when the bread winner is bankrupt, and is forced to lower its ticket$ (and revenue) to attract more passengers and compete, ie keeping up the cash flow.

The other reason this hub concept could potentially be a dud at certain cities, the hub is saturated, and any small wx event causes costly delays, that ©ripple across the entire system.

The question that needs to be debated, is the additional revenue premium gained, by having a mega-hub, worth the delay costs that typically result, due to over saturation.

GP

Don't look for answers to your question about delay costs vs. revenue premium over at United. They don't even seem to be aware it is a problem. Or, they would have already done something to fix the problems over at O'Hare.

The other airline at O'Hare, however, has been putting serious thought to this question for a couple of years. That questioning finally led them to turn Chicago into a "rolling hub." There are two perspectives on "rolling hubs." The first is that it cuts down on efficiencies in the use of labor and equipment. The second is that it shifts the emphasis of the hub operation from connecting traffic to O&D traffic. Typically, O&D traffic is more profitable. And, typically O&D traffic tends to migrate to the operator with more point-to-point routes and greater reliability in running those point-to-point routes. So, there might be a revenue premium after all to running a "rolling hub."

Recently, it was reported in the WSJ that the other airline at O'Hare will try something more to maximize on its "rolling hub" concept. Borrowing another idea from Southwest, they are now going to match crews to a single plane in order to further insulate the network from shocks due to weather or other delays at a single hub or node in the network. The hub that they are most concerned about causing those cascading effects is, of course, Chicago. So, that's where the experiment is going to begin. My sense is that they wouldn't be trying this out if they did not hope to gain two advantages, a further reduction in delay related costs and greater overall network reliability.

That other airline, of course, long ago conceded the fact that reducing CASM needed to take priority over increasing RASM. In the last year or so, therefore, it's been turning all of the presumptions that guided its business model on their head. On the other hand, United still remains by and large a traditional hub and spoke carrier.

Even Ted, United's Low Cost entry, has a hub. We're told that hub is very effective since Ted gets quick turnarounds there. As if that were truly the secret of Southwest's low cost success. But, that's what the general thinking has been so far. The other airline at O'Hare is finally adapting the most essential parts of Soutwest's operational methodology. And, you don't hear them tallking at all about quick turnarounds.

 

[mweiss]

There are two perspectives on "rolling hubs." The first is that it cuts down on efficiencies in the use of labor and equipment.

It absolutely does not. Quite the contrary. It increases efficiencies of labor and equipment because a reduced staff and a reduced number of gates can handle the same number of flights.

The second is that it shifts the emphasis of the hub operation from connecting traffic to O&D traffic.

That's somewhat true. There was a study done that suggested a reduction in the yield for connecting traffic. Nothing was determined about O&D, however.

 

[jimntx]

The other airline at O'Hare, however, has been putting serious thought to this question for a couple of years. That questioning finally led them to turn Chicago into a "rolling hub." There are two perspectives on "rolling hubs." The first is that it cuts down on efficiencies in the use of labor and equipment. The second is that it shifts the emphasis of the hub operation from connecting traffic to O&D traffic.

However, there is still a LOT of connecting traffic on AA at ORD. One, perhaps unexpected, benefit of rolling the hub at ORD was that it turned out that connecting passengers liked it! Rolling the hub increased passenger time between flights by an average of 19 minutes IIRC. In a survey conducted by an independent polling org., it was discovered that passengers liked the extra time allowed to get from one gate to the next.

In fact, the experiment at ORD was so successful that they were going to roll DFW as well (or already have). It had not happened before I was furloughed.

 

[whatkindoffreshhell]

Don't look for answers to your question about delay costs vs. revenue premium over at United. They don't even seem to be aware it is a problem. Or, they would have already done something to fix the problems over at O'Hare.

The other airline at O'Hare, however, has been putting serious thought to this question for a couple of years. That questioning finally led them to turn Chicago into a "rolling hub." There are two perspectives on "rolling hubs." The first is that it cuts down on efficiencies in the use of labor and equipment. The second is that it shifts the emphasis of the hub operation from connecting traffic to O&D traffic. Typically, O&D traffic is more profitable. And, typically O&D traffic tends to migrate to the operator with more point-to-point routes and greater reliability in running those point-to-point routes. So, there might be a revenue premium after all to running a "rolling hub."

Recently, it was reported in the WSJ that the other airline at O'Hare will try something more to maximize on its "rolling hub" concept. Borrowing another idea from Southwest, they are now going to match crews to a single plane in order to further insulate the network from shocks due to weather or other delays at a single hub or node in the network. The hub that they are most concerned about causing those cascading effects is, of course, Chicago. So, that's where the experiment is going to begin. My sense is that they wouldn't be trying this out if they did not hope to gain two advantages, a further reduction in delay related costs and greater overall network reliability.

That other airline, of course, long ago conceded the fact that reducing CASM needed to take priority over increasing RASM. In the last year or so, therefore, it's been turning all of the presumptions that guided its business model on their head. On the other hand, United still remains by and large a traditional hub and spoke carrier.

Even Ted, United's Low Cost entry, has a hub. We're told that hub is very effective since Ted gets quick turnarounds there. As if that were truly the secret of Southwest's low cost success. But, that's what the general thinking has been so far. The other airline at O'Hare is finally adapting the most essential parts of Soutwest's operational methodology. And, you don't hear them tallking at all about quick turnarounds.

Methinks ladevale ain't such a newbie to us.....

Good thoughts. Thanks.