Hub Sizes

[RowUnderDCA]

I must agree with spin doc.

US air needs to utilize the Pittsburgh hub and move all of its connecting traffic to Pittsburgh which is a more efficient hub.

Although after listening to the conference call this morning it sounds like they will be moving a number of mainline jets to Philly, DCA, LGA and BOS. I think those mainline jets will be coming from Pittsburgh.

Time will tell.

But these may not HAVE to be mutually exclusive. I had PRESUMED (just through guessing and intuition) that at one point the plan was to increase point-to-point type operations from BOS, LGA, DCA (to some degree) AND PHL while making PIT a 'right-sized' east coast, small town connecting hub. Right-Sized equals regional jets and e-jets. This is what necessitated bringing down the per pax cost of PIT-- both to adjust for the smaller aircraft AND to free up new capital for conversion of some facilities to E-jet and RJ operations.

This is one of the proposals that couldn't keep up with the changing circumstances of the industry AND was always about threading a pretty tight needle. Alot of things had to fall into place.

Some of that has survived, however, it seems that PIT just wasn't going to work out, so the next best alternative is to try to do it all at PHL.

What I really still LIKE about the presumed plan is to give up being SYR's, ALB's and ROC's hometown airline and go whole-hog into being LGA's, DCA's, BOS's and PHL's hometown airline. This, now, includes point-to-point flying (with rolling and international hub characteristics at PHL), 'easy pricing,' and bigger jets.

CLT still works reasonably well as the 'other SE hub' aka 'not Atlanta' and PIT sadly, did not move fast enough or Dave S. did a miserable job of bringing them to the 'vision.' Probably both.

 

[sfb]

The problem with emphasizing connecting traffic is that it's inherently less profitable than point-to-point/non-stop traffic. And by routing connecting traffic through PHL, you gain the ability to offer your "business" customers there more attractive schedules than your competitors. In certain cases, connecting traffic can be highly lucrative -- an example of this would be the years when US held dominant market share in upstate New York and connected most passengers through PIT and PHL. With control of the market came pricing power and the ability to command a high price, even for connections.

I'd add that if you scale back at PHL and WN continues to expand, what do you have left to offer your customers domestically? Why would they pay a premium for US if WN or FL or TZ or F9 or HP offers comparable or greater frequency on a given route?

PIT is a great facility! And if US Airways were using it for as many passengers as they had planned when it opened, the airport's cost per passenger (due primarily to bonded indebtedness) would be under control. The main problem is that a large number of passengers who used to connect through PIT on US Airways have a lot more choices on other airlines these days, including LCC's for many of them. Growth in RJ fleets at DL Connection, CO Express, and NW Airlink has also had an effect; I'd argue that much of the growth of CVG has come at the expense of PIT.

If you funnel connecting passengers away from PHL and into PIT, you weaken your ability to offer the most attractive schedule. And with a less attractive schedule, the mini-hub is no longer viable.

 

[funguy2]

RowUnderDCA:

I agree... especially with the "hometown" aspect...

sfb:

I understand that my example could equally be switched to PIT... I guess it depends on a number of things... such as the "switching" factor at PIT compared to PHL, as well as the sheer amount of O&D traffic from each locale.

I have to assume, based on what has occured, that there is a general feeling that PHL is more lucrative than PIT, thus worth spending time, money, and effort competing. I think there is an idea that PIT can be "forsaken" for now, as we can probably come back and build PIT back in a few years, where PHL, if we lose it now, it might be gone forever. Thus, any analysis like I did might be outweighed by those ideas.

 

[sfb]

funguy2:

There's no need to switch your example; I agree with you and you stated the case for not giving up PHL far better than I did. The numbers are just dramatically better for PHL both in traffic AND in yields, especially on long-haul flying. I'm certain that's why the company chose to develop PHL as a hub, even with PIT less than 300 miles away.

You can look at DOT numbers and see that PHL is more valuable to US; in 2000, PHL represented $1.39 billion in O&D revenue for US as compared to $0.92 billion for PIT, even with a lower market share percentage at PHL. I believe the 2002 numbers are more like $1.00 billion for PHL and $0.60 billion (though for some reason the numbers actually reported seem to be doubled...) So if the company walked away from PHL, they'd take a pretty significant revenue hit. US faces or will face non-stop competition in 19 of the top 20 markets from PHL. Reducing service unfortunately makes the competition's product more appealing.

I'm not sure you can "forsake" PIT for now and come back, unless it's clear that no one else will go into PIT and try to grab the stronger markets from PIT. AirTran already tried it once and was beaten back by fare matching and capacity additions by a stronger US Airways (and AirTran was weaker at the time). If the company walks away from PIT, they probably won't get it back; probably WN or FL or B6 would take over.

 

[shaka]

So do you think Pit just moves most of its big jets to the big city markets and continue to increase the regional jet service.

Or does it all go away after labor day?? Do you take all of your guns to the other markets?

Thanks Again

 

[shaka]

So do you think Pit just moves most of its big jets to the big city markets and continue to increase the regional jet service.

Or does it all go away after labor day?? Do you take all of your guns to the other markets?

Thanks Again

 

[ClueByFour]

This is academic: PHL cannot support a serious connecting operation. It'll implode operationally if you tried to take the current folks who connect at PIT and run them via PHL.

 

[BoeingBoy]

The only way to do it (move PIT connecting traffic to PHL) is to increase the size of A/C serving PHL and we're going the other way - adding lots of RJ's and, according to the annual report, probably not taking delivery on additional mainline A/C on order due to the financing burden of the RJ's.

Jim

 

[funguy2]

The only way to do it (move PIT connecting traffic to PHL) is to increase the size of A/C serving PHL and we're going the other way - adding lots of RJ's and, according to the annual report, probably not taking delivery on additional mainline A/C on order due to the financing burden of the RJ's.

Jim

I concur... although, I might say end the flights to PIT (i.e. the ALB/BUF/BDL, et al sited earlier) and simply fill up the existed unused capacity to PHL... If demand warrants, then you can upgrade... Right now, there is no need to, since PHL-ALB/BUF/BDL et al are running loads in the 50 and 60 percent ranges. The problem is, if you start pulling down PIT-ALB/BUF/BDL et al, PIT-LAX/DFW/SFO/ORD et al beging to fail, and PIT implodes...

Not to mention, what do you do with the planes which formerly flew PIT-ALB/BUF/BDL et al... Presumably there is something better, but what?

 

[ClueByFour]

You can look at DOT numbers and see that PHL is more valuable to US; in 2000, PHL represented $1.39 billion in O&D revenue for US as compared to $0.92 billion for PIT, even with a lower market share percentage at PHL. I believe the 2002 numbers are more like $1.00 billion for PHL and $0.60 billion (though for some reason the numbers actually reported seem to be doubled...) So if the company walked away from PHL, they'd take a pretty significant revenue hit. US faces or will face non-stop competition in 19 of the top 20 markets from PHL. Reducing service unfortunately makes the competition's product more appealing.

I'm not sure you can "forsake" PIT for now and come back, unless it's clear that no one else will go into PIT and try to grab the stronger markets from PIT. AirTran already tried it once and was beaten back by fare matching and capacity additions by a stronger US Airways (and AirTran was weaker at the time). If the company walks away from PIT, they probably won't get it back; probably WN or FL or B6 would take over.

PIT is relatively "easy money" for US, and a great operational connecting hub to boot.

They won't regain that revenue in other markets. If they rationalized fares somewhat, they might also get the lion's share of the .5 million estimated yearly boardings that drive to CAK and CLE.