"Hub system will stick around -- but at a big cost"

Friday, August 29, 2003

Hub system will stick around -- but at a big cost
By Alexander Coolidge
The Cincinatti (OH) Post


The hub-and-spoke system that the nation's airline industry uses to connect
cities may be here to stay, but not without changes.

Many industry watchers expect the system to contract -- costing thousands of
jobs in cities losing hub status as airlines reshuffle and reroute flights
through fewer collecting points.

This spring, America West slashed flights to a mini-hub at Columbus from 49
flights to four. Before the cuts were announced early this year, America
West enjoyed 25 percent market share in Columbus. Airport spokeswoman Angie
Neal noted Delta Air Lines, Northwest, United Airlines and American all
increased their schedules, blunting the impact of the loss. Still, America
West cut 335 jobs there.

Even bigger cuts were seen in St. Louis last month. American Airlines
announced its decision to slash its operations. Effective Nov. 1, American
said its St. Louis operation would become "a smaller hub that will primarily
cater to the people who live, work or do business there." The maneuver will
cost about 2,000 jobs.

The airline, citing the need to cut costs, said it would reduce total
departures from St. Louis by more than 50 percent from 417 a day to 207. The
airline said it would also close its reservation center there. The airline
will further change 26 nonstop flights into connecting flights through
either Chicago or Dallas.

Richard Butler, a professor of economics at Trinity University in San
Antonio, said the cutbacks at St. Louis were the most significant in recent
memory. He said other airports vulnerable to cutbacks in hub status would be
second-tier hubs of major airlines and all hubs at bankrupt or
nearly-bankrupt airlines.

"It's a major financial step because you take a major write-off when you do
that to a hub," he said.

Last month, United issued a statement denying industry speculation that it
might close operations at Washington's Dulles International. But news
reports citing executive court testimony say the airline, which filed for
Chapter 11 bankruptcy protection in December, has looked at closing one of
its hubs in Washington, D.C., Denver or Los Angeles.

Upon emerging from bankruptcy in March, US Airways disclosed that it is
reviewing costs at its Pittsburgh hub. The company said it wanted to
renegotiate leases at that airport by next year.

Still, experts say most airlines are cutting costs by less drastic means
such as downsizing the planes they fly between routes.

Delta has already used that tactic.

It announced this spring it would actually increase flights 13 percent to
272 flights out of the Dallas/Fort Worth International Airport. However, the
changes include reducing the number of mainline jet flights by 28 percent to
63, while smaller regional jets operated by subsidiary Delta Connection add
38 percent to 209 a day.

Neal, the Columbus airport spokeswoman, credited the presence of Southwest
Airlines and the lack of a dominant carrier for keeping fares low. Columbus
flyers enjoy an 11 percent discount on the average rate for trips of similar
distance and occupancy, according to the DOT.

"We believe it's cheaper to fly here -- we have all the major carriers but
no one has more than 22 percent market share," she said. "Southwest forces
other airlines to look at pricing structures to remain competitive."

 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dc/dcboard.php

*****************************************