Which hub will close first, post-merger?

[700UW]

With your vast four years of experience, tell us why it will remain a hub.

 

[ChockJockey]

so tell us why PHX wont be a hub? and dont use PIT or LAS as an example give a educated all facts reponce. and what is this merger about? and WTH if we dont have LAX PHX OR the biggest hun in this airline DFW what the pont of the merger?

Me? I was just being sarcastic. US continues to invest in PHX facilities and equipment. This could change, but unless PHX is closed within the next 60 days they're going to have to continue installing the 35 new air conditioning units on our jet bridges, since they took the old ones off months ago.

 

[FWAAA]

in any merger, some adjustments will happen. But I don't see a wholesale abandonment of the eighth-largest domestic O&D airport. PHX actually has more domestic O&D than DFW. Yes, the metroplex also has very small DAL which will be a bigger annoyance next year when WN can fly nonstop to CA and NYC from DAL. PHX has more domestic O&D revenue than larger Denver (as PHX fares are higher). Where I differ from some others is that I do not predict that PHX will suddenly sprout nonstops to Asia and additional Europe nonstops (besides the existing BA to LHR). Likewise, I don't think that CLT will see 3 or 4 daily nonstops to London anytime soon either. One, definitely. Two, maybe.

 

[WorldTraveler]

I've said it before: If Parker's goal is to downsize the combined airline and de-hub any of the nine hubs/focus cities (the nine on the OP's list), then he would not have merged US and AA - rather, he would have simply applied for the position of CEO and the AMR creditors would have hired him (as Horton had no chance of sticking around).

This is a merger about growth, not contraction. Since 2007, when NW and DL got hitched, the steady drumbeat has been that both AA and US were too small on their own and the only way they would thrive is to merge and grow.

Most of the analysts predicted that AMR would shrink by at least 10% in 2012. They were wrong by a country mile, as AMR shrank by about two percent and increased revenue by $900 million compared to 2011. Jamie Baker wrote in December, 2011 that AMR's bankruptcy would cause AMR to shrink and spill revenue to be picked up by the other airlines, just like what happened in the earlier bankruptcies of US, UA, NW and DL. What he failed to take into account was that AA had spent the last decade shrinking and didn't file for bankruptcy so that it could shrink a lot more.

In 2008-09, AMR retired 34 A300s. That's more widebody capacity than US currently flies. AA also put down dozens of MD-80s. Throughout the past decade, AA let go of the 19 incompatible engined 757s acquired from TWA (subsequently leased by DL). The past 10 years has seen massive shrinking by AA, on top of all the shrinking that US did 10 years ago in its bankruptcies.

This merger is about growth. If the airline closes hubs and begins shrinking right away, then that will be proof of failure by Parker. It might happen eventually, but that's not the plan.

the creditors have specifically said that they like mergers because it results in capacity rationalization.

AA threw out the idea of 20% growth at the beginning of its BK when everyone knew it was completely unrealistic to expect it.

AA has now been given approval by the APA to have the most extensive domestic codesharing in the history of US airlines and to add hundreds of large RJs.

There is no way that AA would have grown at the rate it said it would even before the merger, let alone after a merger when there are duplicate hubs.

I'm not going to predict which hubs will go first but the creditors made it clear they want capacity out of the system in order to drive up fares and profitability.

There will be capacity cuts no matter how attractive it is to tell people otherwise. 700 is a lot more on the mark than some might think.

 

[necigrad]

so tell us why PHX wont be a hub? and dont use PIT or LAS as an example give a educated all facts reponce. and what is this merger about? and WTH if we dont have LAX PHX OR the biggest hun in this airline DFW what the pont of the merger?

First of all, to exclude historical examples is a chickenshit way to avoid facts. PIT and LAS were both destroyed for many reasons, some relevant to PHX, some not. For example, part of the LAS downsizing had to do with fares; LAS had a LOT of local traffic, and once it was downsized to a focus city the fares couldn't justify the flights going into there. PHX will not have the same issue (IMO) with fares; I think it's a more stable market (not MUCH more, but more nonetheless). That said, LAS was turned into a focus city in part because it wasn't suited for a fully national airline. It was all well and good when HP was operating largely as a western airline with a lot of flights to the east coast; once the merger with US shifted things to substantial flights on both coasts it made less sense. This led it to become a focus city; once that happened it was doomed.

Being a HP guy I can't speak with substantial intelligence on PIT, but I firmly believe that PIT got screwed because it was too close to PHL. Being less then 400 miles from one hub, and 200 from another was disasterous. I personally think it was PHL or PIT, and PHL won due to its existing int'l flights as well as its proximity (and ironically distance as well) from NYC.

Based on the above, I think PHX is the most likely candidate for at the least downsizing to a focus city, and possibly just another route. I'll expand the applications as well as add a few more.

• PHX is 300 miles from LAX. While shorter then the PIT-PHL distance, out west this is just down the road
• PHX has a smaller market then LAX
• LAX has better and more varied int'l connections to other airlines, plus already existing markets to Asia(though small)
• It would be simple to move most or all PHX int'l flights to LAX

I will admit there are some arguments for PHX as well. While PHX has serious heat (and thus AC performance) issues, LAX has fog to contend with. One could say that maintaining dominance at PHX is better then not having or fighting for dominance in LAX. As mentioned, there's substantial infrastructre existing in PHX already, however in the big scheme of things this is irrelevant, being written off as losses, in addition to the fact that these existing things really aren't that big of a line on the balance sheet to begin with. One wildcard will be what will happen with the maintance facilities in PHX. If PHX is saved I think that will be why.

 

[Crazy Daytripper]

With your vast four years of experience, tell us why it will remain a hub.

I can respect that BUT here is why PHX will stay and GROW. With the new AA we will be 3d in the west, and number 1 in the mid and east. There are a lot of cities that phx can go into in the west. Take thes cities MFR, EUG, MSO, BZN, BLI, FCA, TUL, XNA, MSY just to name some. the only 2 airlines that AA needs to look at are AS/DL they own the west. and the only HUB city that we can use is eather LAX, PHX i dont see DFW going to thes cities bc of the AC routing and PAX routeing. but for MSY,XNA, and TUL why would a pax go MSO-DFW-SAN they can go MSO-PHX-SAN. Why would someone take a flight from the west to DFW to the west (longer then 1hr away from DFW) and before you say they can use LAX this is why they cant. LAX it way to big now and they have slot issues, the new AA can grow all the flight that PHX has into LAX bc thats WAY to much flights in LAX. So this is why PHX need to stay.

 

[necigrad]

From another thread:

LAX will also be a split operation in all likelihood for a long time and may require multiple busses to connect all terminals that AA flights will use.

I would have to add this to a list SUPPORTING PHX remaining a hub. Depending on how bad it would be that might be something to consider.

 

[WorldTraveler]

LAX has very little room for anyone to grow so it is a stretch to think it will be a hub at all. US' move out of T1 is allowing WN to expand but none of the big 3 have room to add gates - other than the previously discussed idea that AA might be able to gain gates in the international terminal. UA has more gates than they currently use right now but they have shown no willingness to give them up.

From a strategic standpoint, if PHX is significantly reduced in size by AA/US, it could be hard for them to remain large enough to continue to compete effectively against WN, although US still is large enough to have room to do some downsizing.

It is also possible that WN could add flights to Latin America from PHX which could put pressure on US.

 

[wings396]

I don't think that SWA is really going to put any
"Pressure" on anyone, not like they did in the past anyway. The days of competition running from them are over, since their cost advantage has been severely reduced in the last few years. Their pressure in PHL didn't work out too well, and expect more of the same in the future.

 

[WorldTraveler]

I didn't say that WN would push US out; only that if AA/US decides to reduce PHX as part of its own internal capacity reductions, it could make it harder to maintain PHX as a smaller hub.

Also, WN still has a cost advantage to every network/legacy carrier and they are expected to lower their CASM further as more 737-800s are added.
And AA/US' CASM will rise.

WN's rapid growth in the 2000s was driven largely by their fuel hedges compared to difficult finances for the network/legacy carriers; the legacy carriers are indeed in far better shape today.

And, yes, having a competitor add service to a new region such as Latin America will we felt but that hardly means US can't handle it.

 

[ChockJockey]

As WT and others have mentioned before, competition and space are a lot tighter at LAX than they are in PHX. PHX, with its proximity, capacity, and current capabilities would, in my mind, make it much easier for LAX to optimize its offerings and become a true Asia/Pacific gateway. I think that done right, LAX and PHX could compliment each other nicely.

If AA had 40% of the market share at LAX and space to grow I would have grave concerns for PHX, but as it stands now it barely leads the market with about 18.6% share. In addition, between Dec '11 and Nov '12 AA had 8.57 million arriving/departing pax at LAX while US in PHX had 14.55 million for the same period, so it's not as if PHX could simply be shuttered and its volume dumped on to LAX. Even shifting "just" PHX's international traffic to LAX would be a not-so-simple endeavor. Take away all the codeshares and there's not much "hub" at LAX at all.

It doesn't make sense to me that PHX would be eliminated just so the new AA would try to compete in the West using the old AA's inadequate, pre-merger network, especially when US has 40% of the PHX market and is the only U.S.-based carrier offering international flights there. Even if PHX were closed and its volume somehow absorbed by LAX/DFW that doesn't do much to improve AA's position in the West against UA (LAX/SFO/DEN/IAH), DL (SLC/LAX/MSP), and WN (everywhere).

I don't see the heat being all that much of an issue since it doesn't seem to bother the other carriers that bring widebodies in and out of PHX, and I don't see PHX getting that many AA widebodies anyway. ORD, JFK, one or two Hawaii routes, possibly DFW and maaaaybe LHR, but those are all just hunches anyway.

Also, here are some fun tools mess around with.

 

[WorldTraveler]

very well said, CJ, and you note the exact issue regarding PHX on the west coast. However, there is a lot of traffic that US carries via PHX that originates from the eastern US which could be more efficiently carried via DFW or ORD. IN fact, there is more of a strategic argument to be made for shifting some of PHX' traffic via ORD to help AA better compete with UA there; the large RJs with their long legs could allow the new AA to compete very effectively in the west w/o routing traffic over PHX. Also, the time to fly from the west coast from the Midwest and NE might be shorter via ORD than via PHX.

The point is that capacity will come out of the combined AA/US system, at least domestically. The creditors expect consolidation force up fares which AA/US needs in order to increase revenues. Where those domestic cuts will come is anyone's guess but they are coming.

 

[flybynite]

RDU

 

[WorldTraveler]

as in you believe more capacity will come out of RDU or will be added?

 

[robbedagain]

i believe PHX will be a focus city similar to DCA but without the mileage restrictions that DCA has... but i dont think it will be a hub hub but nonetheless it will be a big city i could see a lot of MEX and Latin America routes out of there as well as Western Canada and Alaska and may be an aircraft upgrade for Hawaii