Hub situation post merger (if)

[SparrowHawk]

Expensive or not, it's in the ideal location for a S American gateway. The cost of a hub isn't the be all and end all answer - if it were US wouldn't have a hub at PHL or have wanted more slots at DCA as all that would have gone to CLT instead.

Any hub depends on a combination of factors - cost, revenue, O&D and competition for hub carriers at that airport (plus you could throw in a carrier's network needs). Otherwise, every airline would have hubs at a few low-cost airports and none would make money because of the competition. CLT has the low cost, but not the O&D to be much bigger. PHL has more O&D than CLT, but not the cost. PHX has the O&D and cost, but not as much revenue. MIA doesn't have the cost, but has the revenue and O&D.

Jim

Jim,

True enough except when you talk to a Doug "Price of everything, value of nothing" Parker disciple. Everything in business can't be displayed in Excel!

How do I know this? Did Henry Ford have Excell? Sometimes a CEO has to actually know the business his company is in. No spreadsheet for that.

 

[roabilly]

When I look at CLT… I see incredible potential for O&D as time goes on. Most of the other metropolitan hub areas have already reached their population densities and/or are bound by geographic restrictions.

It’s not what the picture looks like now… it’s what the picture will look like a decade or so down the road! I’ll stick to my original statement… CLT will be a major player in the proposed merger with AA!

 

[SparrowHawk]

When I look at CLT… I see incredible potential for O&D as time goes on. Most of the other metropolitan hub areas have already reached their population densities and/or are bound by geographic restrictions.

It’s not what the picture looks like now… it’s what the picture will look like a decade or so down the road! I’ll stick to my original statement… CLT will be a major player in the proposed merger with AA!

Amen,

I too thought about that. PHL has been losing population for decades. If not for the growth in the suburbs the shrinkage would be pretty dramatic. OTOH, NC in general and CLT in particular are growing. PHX has been crushed growth wise by the housing bubble and immigration issues. Their local economy is struggling today but what goes up comes down and vice versa.

Your point that the US/AA should take a longer view and be a bit visionary is spot on IMO. However we have yet to see a decision out of Tempe that went beyond 2 quarters unless you include the decision to become an all Airbus Shop which will go down the drain if they merge.

IMO Doug Parker and his team manage their Comp Plan not their airline.

 

[Claxon]

You told us LAS was not going anywhere. PHX will go to SWA.

PHX is doomed. Hopefully Parker will part it out to SWA. They have already blown the former AWA out of LAS. PHX is the next prize. LAX is logical. PHX makes absolutely no sense. It doesn't matter anyway,Doug Parker is not capable of taking AA. He has a failed record, and this next debacle at the hands of Horton will cement his bad rep. Horton is going to make AA a stand alone, and stay away from this mess Parker runs. Nobody wants to merge with AWA USAirways. Horton is lining up his backers as we speak.

 

[BoeingBoy]

Jim,

True enough except when you talk to a Doug "Price of everything, value of nothing" Parker disciple. Everything in business can't be displayed in Excel!

True enough, but how do you combine that with Parker's continued use of PHL - same cost as PIT was ("too expensive) and going to be higher.

As I said much earlier in this thread, there is no single metric for what makes a good hub - it's a combination of factors.

PHX? A US/AA needs a western hub as much as it needs a more centrally located eastern hub than MIA.

PHL? You talk about "market dominance" but that's largly due to connecting traffic - enplaned passengers - and not O&D. Keep in mind that US is the only hub carrier there so almost by definition nearly every other carrier boards O&D traffic. The same is true for every hub - the hub carrier dominates on enplaned passengers but unless they also have a dominant percentage of the flights the O&D traffic is more evenly split. PHL also suffers from low O&D for it's population.

Finally, hub airports and carriers are often at odds over expansion and the reason is simple - airport expansion can take a decade or longer so must be planned well ahead if the airport is to remain competitive. Carriers all too often don't want to pay for the expansion till the extra capacity is needed, then they berate the airport for it not being available at the drop of a hat. Just look at the little spat Parker is having with PHL over the cost of expansion. That is a perfect example of "the cost of everything but the value of nothing" thinking.

Jim

 

[nycbusdriver]

Charlotte is the largest city in the U.S. state of North Carolina and the seat of Mecklenburg County.

This phrase is a shining example of the "Big fish in the little pond syndrome."

I hate that for y'all.

 

[gaucho99]

CLT and PHL will be major hubs if this merger happens. Lack of a southeast hub for AA is one of the reasons this merger makes sense. If clt is reduced, then what's the purpose of merging? CLT wlil increase domestic flights but will likely see a reduction in international.....PHL is dominated by US...why would you throw that away? JFK does not have the room to absorb their flts. JFK will remain about what it is now with AA and PHL will continue to be a major NE hub like UA has in EWR. PHX may lose some flights but it will still be a strong western hub. Maybe LAX could be used to expand as an Asian gateway. DFW, MIA and ORD will be the same or grow a little. DCA may have to shrink due to govt regulations.

 

[SparrowHawk]

This phrase is a shining example of the "Big fish in the little pond syndrome."

I hate that for y'all.

Let's tackle the "Big Fish, Small Pond" syndrome for a minute. There are several highly profitable companies in other industries that us that syndrome as a business model.

The example I'm most familiar with is a company called "Charming Shoppes". If you have teen aged or 20 something kids then you know they go to a store called Fashion Bug, which is Charming Shoppes brand. They operate in 39 states and they are almost NEVER in big regional malls (there are exceptions) or in downtown Metro area shopping districts. The will however have a store in a strip center is Tunkhannock, PA where they will be the ONLY national chain. This results in what amounts to a "Fortress Hub" in the airline business. They duplicate that about 1,100 times in stores across the nation. It makes them a formidable competitor.

WN has done it to a certain extent in building up BWI, BNA, MDW and other airports nobody was much interested in.

I've often felt an airline could not only survive but thrive if it could find 4 to 6 CLT sized cities with good growth potential, reasonable but not spectacular O&D and become a highly successful airline. I know that's not the conventional wisdom but nobody thought a 4 plane airline in TX would grow into the game changer that WN has become.

 

[FWAAA]

In my opinion, CLT won't go anywhere. I've seen posts that MIA will replace CLT, but that doesn't make sense. MIA will never have the feed that CLT has. MIA is great for connecting to the Caribbean and Latin America but is otherwise not conducive for getting to most domestic destinations. CLT is currently the only viable alternative to ATL, and the SE can support two domestic hubs.

You won't find me saying that CLT will disappear, nor will you find me even alleging that MIA works for domestic connections. But there's no escaping the fact that MIA is the gateway to Latin America and South America - CLT is not. CLT lacks the O&D.

MIA is waay too expensive to hub at, CLT gets the gain, likewise, PHX is inexpensive to operate at, it should stay the same size, ORD and DFW are not going anywhere, nor is JFK or DCA. PHL is the one that doesn't make much sense.

AA does not operate MIA as a domestic connecting hub. AA feeds the highly profitable Latin America and South America flights (to which MIA offers significant O&D) with a large schedule of domestic flights that will only increase over time.

In terms of O&D… CLT has more room to GROW than any other hub in both systems!
So, don’t fool yourself… CLT just announced a one billion dollar expansion plan that adds another runway, tower, and international departure terminal.

Mark my words… CLT will be a major player in this merger!

Your post betrays your lack of understanding for what O&D means. Yes, Jerry can grow the physical layout of CLT to eventually rival ATL if he chooses. But the amount of O&D CLT attracts has nothing to do with how many runways or concourses are built.

When I look at CLT… I see incredible potential for O&D as time goes on. Most of the other metropolitan hub areas have already reached their population densities and/or are bound by geographic restrictions.

It’s not what the picture looks like now… it’s what the picture will look like a decade or so down the road! I’ll stick to my original statement… CLT will be a major player in the proposed merger with AA!

Yes, CLT will be a major player. It just may not be quite as large as it is today.

The estimated population of the CLT Combined Statistical Area is 2.44 million, approximately 36% larger than the population of the RDU combined statistical area of about 1.8 million. Yet the O&D traffic in 4Q2010 at CLT was only 15% more than the O&D traffic at RDU. What's that tell you? CLT is weak in Origination and Destination traffic. On a relative basis, it's weaker than RDU.

Don't get me wrong - CLT isn't going to end up looking like STL. But it's never going to resemble ATL, and if US and AA combined, you might find that it isn't as necessary for international flights in the combined airline as it was for the old US. Like Jamie Baker (analyst) said recently, it's necessary so US can connect passengers from RIC to JAX. But it's not necessary for South America.

PHX may see some rationalizing as well. Right now, passengers flying from TUS to RIC on US must double-connect at PHX and CLT. The good old "barbell" strategy. Right now, AA flies those passengers TUS-DFW-RIC with just a single connection. Examples like that will lessen the need for as many PHX-CLT flights and will reduce the number of TUS-PHX flights. There are many other examples like that. PHX may be the natural connecting point to fly TUS-SMF, but for TUS-LAX, AA already does that nonstop. No need to connect at PHX. Like I said, there are many similar examples. All mergers eventually result in some reductions and US-AA would be no different.

 

[ChockJockey]

Did Henry Ford have Excell? Sometimes a CEO has to actually know the business his company is in. No spreadsheet for that.

Henry Ford might not have had Excel, but Doug Parker isn't a frothing-mouthed anti-Semite. Oh well, too bad, accidents of history, etc. Doug Parker seems to be making some serious progress towards running what might be the largest airline in human history and the known universe. You've already demonstrated through countless posts your psychological dependency on denigrating Parker at every opportunity. I am concerned about what will come of your mental well-being should Parker become the king of the hill.

PHX is doomed. Hopefully Parker will part it out to SWA. They have already blown the former AWA out of LAS. PHX is the next prize. LAX is logical. PHX makes absolutely no sense. It doesn't matter anyway,Doug Parker is not capable of taking AA. He has a failed record, and this next debacle at the hands of Horton will cement his bad rep. Horton is going to make AA a stand alone, and stay away from this mess Parker runs. Nobody wants to merge with AWA USAirways. Horton is lining up his backers as we speak.

You sound like a man more desperate to convince himself than anyone else.

PHX would be a great complement to LAX. LAX is severely limited in its ability to grow and is expensive. PHX has great O&D and would serve as a connector to west coast cities instead of going through LAX.

PHX won't be going anywhere.

I agree, although I am heavily biased towards PHX. LAX is a great asset for AA to be sure and I think that properly refocused it would be an excellent Pacific gateway. PHX on the other hand would (continue to) be an excellent gateway to the West Coast, and especially SoCal. Right now AA only flies to one other destination in California from LAX and that's SFO; PHX serves 15 markets there. Out of LAX AA serves but a single Mexico destination, PHX serves 10 plus SJO.

DCA I think has nothing much to worry about. CLT should be utilized to troll DL in ATL for maximum effect. There's been discussion about the possible redundancy of PHL and I really hope that it can be maintained as an integral part of any new network. In the event of a merger all hubs and stations will face changes and the pains and advantages that come with them. Some may shrink in some respects but grow in others; all of the hubs and focus cities have strengths and I'd like to see those utilized to their full potential. I for one am excited about the prospects and look forward to being a part of any changes. I want the work I do to contribute to the development of a reborn global airline and really be part of something awesome, instead of the hum-drum day to day business of keeping our heads above water and not getting ground into the dirt by towering competition and seditious coworkers.

 

[ClueByFour]

This is painful. Here is what will happen:

1. Every international flight that will fit at JFK will be moved from PHL. PHL is excessively expensive and lacks the NY O&D. PHL will retain flights which the local O&D can handle and/or feed other oneworld hubs internationally. PHL will keep more domestic feed than it deserves simply by virtue of the slot rules at JFK at prime time. If you are going to have to deal with crappy ATC and airfield layouts, you might as well do it in a much larger market.

2. Anyone who thinks that CLT will somehow supplant MIA needs to see their neurosurgeon in short order. CLT is cheap (which is good) and has absolutely horrible O&D traffic for a metro area of it's size. This is directly related to the hub premium US charges (witness the upward jolt in PIT's O&D after it was dehubbed). People from the islands and South/Central America are either going to Miami or take advantage of the outbound connectivity to go wherever they are subsequently headed. This won't work in CLT, because there are far fewer people from Central/South America going to CLT as a destination. CLT will retain lots of domestic connectivity (because it makes no sense to shuttle someone from Mobile to Norfolk via Miami). It would not surprise me at all to see CLT lose European connectivity to Miami, down to the floor of whatever corporate contracts in CLT sustain the London and Frankfurt flights.

3. ORD and DFW will essentially remain unchanged. They are two huge hubs right in the middle of the continent that sit on huge O&D patches.

4. LAX. Don't know what AA has ever wanted to be at LAX when they grew up. I don't think they know now. I think it remains largely as-is until PHX starts getting the axe (see below) and then it'll pick up some more flights to more places. Don't know if they'll ever truly turn it into a domestic connecting hub by virtue of terminal and airspace issues.

5. PHX. Will eventually be PIT-ed. It'll take years, but LUV murders the domestic yield, regardless of how much it actually costs to operate there. Neither the existing AA management nor Parker has ever really faced LUV down domestically. PHX won't be any different.

Now, all of this speculation presupposes things work. They won't. Parker has never been able to manage an airline without the advantage of bankruptcy produced labor costs. And he's intentionally not going to have those this time.

 

[ClueByFour]

I think that US hubs will benefit from this. CLT is the cheapest hub in the nation to run, with fees almost at $2 a passenger. CLTs expansion could play real good with the merger scenario, as extra metal from AA including 757s, 777s and 767s could play a role in increasing international flights from CLT. People always keep on saying that MIA
will get bigger, DFW will stay as it is etc etc. I dont think so, These airports are good, but there is something obviously wrong with these so called strong hubs, or a airline wouldn't be continously losing money, and going into bankruptcy.

US (old) went bankrupt twice with the mighty CLT hub.

CLT is cheap, which is good. It's O&D sucks for a metro it's size, and that size is not particularly large by hub airport standards these days.

CLT/ATL are the only prime southeast hubs, and there is no way you would NOT make CLT even stronger, as ATL is already the worlds busiest, and i think one of the most efficient hubs in the US.

There is a limited area (in the Southeast) where having traffic crossfeeds over an inexpensive hub works. CLT does that already. The Atlanta metro area has something like 5.4 million people. Charlotte has 1.8 million people. It's comparing apples and oranges.

What do you guys think ? I think some transcon widebodies would be taken off, and replaced by narrowbodies, and instead, start new routes from CLT.

I think AA has a revenue premium on the routes out of NYC, BOS, SFO, LAX where it runs transcon widebodies. And I think one would have to be significantly high (or interested in ensuring UA's success) to give that up in favor of new routes anywhere out of CLT. YMMV.

 

[BoeingBoy]

Good to "read" you Clue...

Jim

 

[SparrowHawk]

Henry Ford might not have had Excel, but Doug Parker isn't a frothing-mouthed anti-Semite. Oh well, too bad, accidents of history, etc. Doug Parker seems to be making some serious progress towards running what might be the largest airline in human history and the known universe. You've already demonstrated through countless posts your psychological dependency on denigrating Parker at every opportunity. I am concerned about what will come of your mental well-being should Parker become the king of the hill.

Frothing-mouthed Anti-Semite versus a mere frothing mouth drunk?

If DP's conduct is acceptable then so is Mr Ford's.

Let's substitute Bethune for Ford Or Thomas Edison, the Olds & Dodge Brothers, Charles M. Schwab and Joseph Wharton formed the Bethlehem Steel Corporation.

These folks grew industry giants the old fashioned way NOT with a bunch of spreadsheet jockeys.and as usual you missed the point in an effort to insult. Wait until morning and it will dawn on you.

 

[ChockJockey]

Frothing-mouthed Anti-Semite versus a mere frothing mouth drunk?

If DP's conduct is acceptable then so is Mr Ford's.

Vices don't justify other vices. Bigotry does not justify alcohol abuse. My point being we can cherry pick the virtues and vices of any one person and make them a visionary or villain for it. You'd better believe that there were folks back in Ford's day that thought he was some wingnut fanatic that was going to run his business into the ground. Turns out those people were wrong.

Let's substitute Bethune for Ford Or Thomas Edison, the Olds & Dodge Brothers, Charles M. Schwab and Joseph Wharton formed the Bethlehem Steel Corporation.
These folks grew industry giants the old fashioned way NOT with a bunch of spreadsheet jockeys

You are comparing apples with horse apples. Those people lived in a world and time fantastically different from our own. They were at the helm of nascent industries set to explode. The conditions under which those men made their names and livelihoods don't correspond to the U.S. airline industry of 2012. How is DP supposed to grow US "the old fashioned way" where there is virtually no room for organic growth anywhere in the industry? Again, to you, until DP has proven himself to be some kind of perfect messianic figure he won't be anything more to you than exactly what you need to see him to be; a voodoo doll foil to project your own insecurities against.

And finally, just how adept are you at Excel? I've used it extensively in past jobs, and it is an extremely useful tool. It's not any more a substitute for real leadership than is a coffee mug, but I'd imagine anyone who doesn't know the ins and outs of it would be as dismissive of it.