Monday, April 09, 2018

Is the Airline Hub History?

Photo - Eric Salard CC BY-SA 2.0

A reader sent me this article from the Daily Beast (good God, man! What are you reading that for?) which foresees the denouement of the airline hub due to the arrival of a new class of commuter jets which can hop from destination to destination while skipping hubs.

Once those [smaller] jets reach the airlines they will have the same hub-killing effect in the rest of the world as here. Given the choice of flying a straight line from A to B instead of having to change airplanes on the way is a no-brainer in any language.

While the article gives a decent roundup of the recent history of the airline industry and the introduction of smaller yet longer range commuter jets, it should have been written about 15 years ago. The Canadair CRJ-200 first flew in 1991 and along with the Embraer ERJ series of regional aircraft came to dominate the regional airline market through the 2000s.

These smaller, faster jets held promise to both serve smaller markets from fortress hub airports, or to skip the hub entirely and fly point to point. Analysts thought they'd be handy in poaching passengers from a rival's hub as well. As it turned out, the hub killer commuter jet was anything but.

Primarily deployed by regional airlines which wet-leased their aircraft and crews to a major airline partner, commuter jets mostly enhanced hub operations by offering service to smaller "spoke" airports which couldn't support full narrow body service.

Airline hubs have always been inefficient in their use of crews and equipment, but very efficient in revenue generation using the ability to create many different city pairs. Point to point regional operations were never embraced by the major airlines which viewed those operations as subtracting value from sizable investments in their hubs.

The old Canadair and Embraer CRJ and ERJ jets are now being replaced by newer more comfortable "C" and "E" series jets but I don't see the economics changing much. In fact, an ongoing pilot shortage seems to be making some major airlines reconsider their relationships with their regional partners. Bringing their regional operations in-house means that they're more likely to retain the pilots they have brought onto their master seniority lists.

For instance, both United and Delta have recently purchased regional aircraft directly, though United may still have their regional aircraft flown by one of their regional partners.

However it shakes out, it doesn't appear, though, that the airline hub will be going anywhere soon.

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Capt Rob