Playing arm-chair airline CEO is fun, to be sure. Looking at the operations, competition and other factors and trying to figure out where things should be adjusted, augmented or cut. For the new American Airlines there has been plenty of speculation about the future of the carrier’s nine domestic hubs. Following the Delta/Northwest merger cuts were made, with the eventual de-hubbing of Memphis and significant cuts at Cincinnati. With United/Continental it was Cleveland which got the axe. And no one really knows what’s on the horizon for American, but there is plenty of speculation. Here’s a bit more fuel for that fire.
The carrier published a “rollcall” for the hubs, identifying the strengths that airport brings to the network as a whole. And it is somewhat telling with respect to the value the company sees in each hub.
Only Philadelphia, Miami and Charlotte are explicitly identified as connecting points for international partners. That’s not to say that the other hubs have no connectivity, of course, but those three see a greater share of connections for partner travel. Is the implication that New York, DFW and Chicago are more O/D traffic, more passengers just flying American rather than partners or something else?
DCA, DFW and ORD get solid marks for connecting business travelers onward while NYC and LAX are identified as markets unto themselves, though there is also a nod to the connections those airports provide. The split across LGA/JFK is acknowledged and that can create some issues for connecting passengers, but that’s why Philly, Miami, Charlotte, Chicago and Dallas are seen as great connecting gateways.
And then there’s Phoenix. Not only does it get the shortest description, but also perhaps the saddest.
Connects customers from coast to coast and to leisure destinations in North America.
So, not a huge O/D market and not a lot of business travelers. That rarely bodes well for yields. Sure, the airline needs capacity to push connecting leisure passengers through, too. But if that can be consolidated elsewhere then the role of Phoenix can be usurped pretty quickly. And for coast-to-coast travel American already identified ORD and DFW as alternatives. Those are alternates which can also offer international feed. Phoenix is in the wrong location and wrong climate to be a great base for intercontinental service so that’s not likely to go so well.
At this point it is hard to believe that Phoenix has a long life ahead as a hub. Maybe a few years into the merger to get through the integration and shake out the rest of things before cuts like that get made. And maybe it does survive, growing as a connection point for some traffic which cannot get in to LAX because of capacity constraints. But that doesn’t seem too likely to me. Especially not when this is the best they can come up with for why it is a useful operation.
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“Phoenix is in the wrong location and wrong climate to be a great base for intercontinental service so that’s not likely to go so well.”
I’m honestly curious, not contentious here: why wrong climate? Isn’t the climate in Phoenix far better suited to running a smooth operation than, say, Chicago’s?
Hot is bad for aircraft performance. The air is less dense so lift is reduced. And for long-haul flights that can be a significant issue. UA has had issues with their EWR-HKG flight on the 772 in the past, delaying departure until later in the afternoon/evening during the hottest days in the summer. PHX-NRT/HKG is shorter but still lots of potential issues with the hotter climate and the efficiency of operations.
And longer flights means carrying more fuel and if it is harder to get off the ground with that extra fuel then you either run out of runway or you have to carry less fuel. And the latter might mean diversions in some cases.
Interesting. Good to know
and the analysis?
That’s what AA did when they produced that list.
My contribution is calling out the obvious (but unstated) bit inside.
@james – From what I understand, the airport is at 1K+ feet of elevation and is of course fairly hot since it is in Phoenix. The wiki article on “hot and high” explains the problem this can cause with diminished performance.
Also, perhaps I am wrong but I am guessing Seth meant to write intracontinental (instead of intercontinental) when he said PHX has the wrong location and wrong climate service as this would make a lot more sense. It is true Phoenix doesn’t make sense in that role as it is too far south and west to be an appealing connection spot.
AA is in a bind with PHX. Like you say, the yields are probably trash due to it being mostly connections, but what other option is there? LAX? Definitely not, they just don’t have the physical space and I believe it’s the number of flights or gates is capped, so little opportunity to connect smaller dots around the country. With no PHX there would be a massive hole from LAX to DFW, emphasizing the smaller destinations in the west.
After seeing Seth’s response I retract my last statement but not that even now as a hub SkyHarbor has a single intercontinental flight. So there is pretty much no question that it is not going to be an intercontinental hub.
Intercontinental – meaning between the continents – is what I cannot envision happening. Intracontinental would be within the continent and that is what the hub operates as today.
LAS is no better for a hub on the “hot” factor and probably only slightly better on the O/D front, but with lower yields because of the leisure factor. And the two do comparable traffic in total.
I do agree that LAX has issues with capacity and growth potential. I even mention that in the post. But there is some room to grow. Not a ton, but some. And AA is doing so where they see strong demand (e.g. LAX-ATL).
The real question is whether a hub is needed in that region. Yes, dropping it means losing intra-regional traffic to UA/WN/F9 at DEN or DL at SLC but those are less densely populated areas already so likely less traffic to lose.
Living in CVG and being originally from CLE, I’m quite familiar with the de-hubbing of airports after mergers. I agree with you that I can definitely foresee major drops in service at PHX at some point in the near future
I think you are spot on, but there is the one bonus of a direct BA to London flight from PHX, which then works well as a hub to that, and the other points about LAX not having lots of space (and what a pain with Alaska connections–try it sometime–you can’t walk it w/o leaving security and the shuttles vary in frequency). It might survive. I see more one of CLT or PHL or DCA taking the cut. Then again, larger airline, they might all survive.
BA flies lots of places (e.g. SAN or LAS). That alone doesn’t create a need for a hub – if anything, BA with just a single-hub is able to effectively capitalize on whatever O/D demand there is for a given city and the rest of Europe/et al.
AA will continue to fully utilize DCA for a long time. It’s one of three slot-restricted airports in the US (along with EWR and LGA0, and it’s one of the closest airports to the downtown business district of a top-10 metro area. When AA was acquired by US, it had to divest DCA slots, thus losing some valuable routes, just to avoid litigation with the DOJ.
CLT and PHL will probably experience some cuts, but I doubt either will be de-hubbed. CLT is too valuable as the only southeastern hub that can compete with ATL – MIA (AA) is too far south, IAD (UA) is too far north. PHL
Just because no one anticipates PHX becoming an int’l gateway hub for AA, it doesn’t follow that PHX goes into decline. There are very few similarities to CLE, MEM, or CVG, the other domestic hubs that closed post-merger.
The talk about poor yields is not backed up with any facts. If DL can profitably run hubs at MSP and DTW, which are roughly 50% closer than PHX and DFW, I don’t see why AA can’t at PHX and DFW. (AA does not run LAX as a domestic connecting hub and lacks the capacity to do so in the future.)
Also, let’s not forget that this is Kirby and Parker’s sentimental home. AA/US just renewed leases on a lot of their space in Tempe. It is not relocating all the HQ jobs like DL did from NW’s hub in MSP.
Finally, US has a history of pulling out of competitive markets they could not make money in, LAS most notably. PHX is a very competitive market with heavy WN competition. If it was not a profitable hub it would have been shrinking, not growing as it had.
What would do PHX in, if AA had sufficient alternate capacity, was if it lacked high-yield O/D traffic. That to me is the wild card.
But let’s not put much stock in trying to read tea leaves in a piece of internal corporate pr. Because that’s what it is.