Airline Travel Revolves on Hubs

DALLAS â€”  It is just before 11 a.m. at American Airlines’ terminal at Dallas-Fort Worth International Airport. It is ghostly quiet. The shops and restaurants are empty. Most of the terminal’s chairs are vacant. Ticket takers and gate clerks stand around idly.

But then--suddenly--near chaos. It is like Grand Central Station during rush hour, with hundreds of people scurrying in all directions. They stride quickly, or run, between gates, some of which are as much as a mile apart.

Elderly people are driven in electric golf carts that weave in and out through the crowds. Some transferring passengers stop for a quick cup of coffee or a newspaper or a souvenir of Dallas where they will spend less than an hour.

Within 11 minutes, from 11:04 a.m. to 11:15 a.m., 36 American planes have landed and taxied to their gates. The passengers are shuffled like cards in a deck and dealt out again. Less than an hour after they have landed, the 36 planes are once again in the air--and Terminal 3E is deserted.

The scene is repeated 11 times a day at the American terminal; during each “bank� or “rush� or “complex,� as they are called, an average of 3,000 to 4,000 of the airline’s passengers pass through the facility.

The airport rushes are an important aspect of a new route structure concept, called the hub-and-spoke system, that has revolutionized the airline industry since it was deregulated by the federal government in 1978 and provided it with one of its most important marketing tools.

The concept of a transportation hub was first used by the railroads. America’s great trains of yesteryear met at Chicago. This offered passengers the chance to change from one train to another, greatly increasing their destination possibilities.

Like the railroads, airlines can serve more destinations with greater frequency, increase their market shares and retain more connecting passengers with hub-and-spoke systems.

Using the bicycle-wheel analogy, Chicago’s O’Hare Airport is a United Airlines hub; flights from Burlington, Vt.; Phoenix; Boise, Idaho, and Norfolk, Va., are a few of the spokes.

Before deregulation, airlines in this country flew many more linear, point-to-point routes than they do today. At one time it was possible, for instance, to fly directly from Little Rock, Ark., to New York City, a nonstop route that no longer exists.

Nonstop flights will always be available between cities large enough to generate profitable traffic. But the airlines have sharply reduced nonstop service between some smaller communities where, previously, planes often took off with many empty seats.

“The response of airline management to eroding market shares and persistent excess capacity has been to further the development of hub-and-spoke systems,� said Timothy P. Pettee, airline analyst with L. F. Rothschild, Unterberg, Towbin, a New York brokerage house.

“These route networks have exploded . . . and today are the core of the industry planning efforts,� he said. “Simply stated, hub-and-spoke route systems maximize a carrier’s asset use--its revenue potential--and minimizes its cost of production. The effectiveness of these route networks has resulted in multi-airline hub complexes in major U.S. cities.�

Delta and Eastern operated hubs in Atlanta on a much smaller scale before deregulation because the structure of their routes--allotted to them, as to all airlines, by the now-defunct Civil Aeronautics Board--happened to allow them to do so.

Lengthy Procedure

For other airlines, though, the bureaucratic obstacles to setting up hub-and-spoke systems before deregulation proved insurmountable. Sometimes it took as much as 10 years to win CAB approval for a new route, and the regulators forced airlines to serve small cities even if they did not generate enough traffic to economically justify the service.

Today, however, airlines can begin domestic routes without asking anyone for permission, allowing them to set up hubs with little trouble. Thus, the carriers’ officials say, they can serve a maximum number of cities with a minimum amount of flying.

According to George W. James, president of Airline Economics Inc., a Washington consulting firm, airlines are operating or planning to operate 43 major hubs in 30 U.S. cities. That compares to only a handful of carriers that operated hubs before deregulation went into effect eight years ago.

Each major U.S. airline now has one or more hubs. In the past few years, a number of new hubs have been put into operation, including United’s at Denver and Western’s at Salt Lake City. American has just started one at Nashville, Tenn., and plans others at Raleigh-Durham, N.C., and San Juan, Puerto Rico. United established one just last week at Washington’s Dulles International Airport.

By linking flights at the hubs and tightly coordinating arrivals and departures, the airlines are able to offer much more frequent service than they did when they flew mostly linear routes.

The big airlines maintain that their hub-and-spoke systems allow them to offer flight frequencies and to realize load factors that cannot be matched by the new upstart carriers of the post-deregulation era that do not offer transfer facilities and related services.

For instance, one airline official said, a hub that has 36 inbound and 36 outbound flights in an hourly bank theoretically could provide service between 1,295 possible pairs of cities.

More Product to Sell

“The principal advantage of the hub-and-spoke system is that it gives us more product to sell,� said Thomas G. Plaskett, American’s senior vice president-marketing. “We are not selling hubs. We are selling origins and destinations. The total number of markets in which we are selling air transportation is currently 3,751, as compared to 357 before we began our hub here in Dallas in 1981.�

More than a million people went through Delta’s Atlanta hub in March. But, according to W. Whitley Hawkins, the airline’s senior vice president-marketing, 70% of them were transit passengers just changing planes there. “No way could I justify 365 flights a day just by what comes out of Atlanta, Ga.,� he said.

Another major reason for the trend toward hubs was that, with the new system, an airline can carry more passengers from point of origin to destination without having to turn them over to a competitor.

Before deregulation, it was sometimes impossible to offer such single-carrier service to connecting passengers because of the government’s assignment of routes to other airlines.

However, the hub system causes some inconvenience. Only 2% of all passengers on airliners arriving at hubs are able to stay on the same planes to continue their trips, airline officials said.

United Airlines says that most connecting passengers who get off its planes now get back on other United flights. That represents a dramatic change.

A Transportation Department spokesman said a recent study shows that, whereas 23% of all revenue passenger miles in 1973 involved connections to other airlines, the figure is now down to about 10%.

Dominate Their Hubs

As a result, airlines largely dominate their hubs. USAir, for example, has an 81% share of the market at Pittsburgh, Piedmont has 76% of all the traffic in and out of Charlotte, N.C., and Western has 76% of the Salt Lake City market. Eastern and Delta carry 95% of the Atlanta traffic.

However, American’s Plaskett said monopolies at hubs do not lead to higher ticket prices.

“Even though flights go through certain hubs,� he said, “the market is the entire United States. For example, there are numerous different ways to get from Philadelphia to Phoenix on 10 different airlines. . . .

“All the hub does is provide a convenient connecting point. If one of the carriers serving Philadelphia-Phoenix has a $39 fare, all of the others will have to make the decision whether or not to compete on price.�

What is to stop an airline that has a monopoly or near-monopoly at a hub from raising prices on flights for which the hub is the final destination? Despite the monopoly, competition still exists. For example, if an airline raises its fares, that would encourage competitors to move into the route, charging less. Since deregulation, airlines can move into and pull out of routes without permission and on a moment’s notice.

Time is a key element in hubbing, and that is a major reason for the pandemonium at airports during the rush periods. Avmark Inc., an aviation management service, says flights via hubs take from one to three hours longer than nonstop service.

Although passengers seem to be accepting the loss of time in exchange for the benefits of flying through a hub--frequency of flights and, often, lower ticket prices--they do want to proceed with their trips as quickly as possible.

Thus, the quicker a carrier can schedule a flight through its hub, the greater prominence it earns on the computer reservations system. The shorter a trip’s elapsed time, the higher on the reservations systems’ computer screens it appears.

Since travel agents are likely to sell from the first screen of the CRS display--often from the first line--schedule time is important. Most people book the first flight that the agent reads to them.

Airlines, according to Richard de Neufville, a Massachusetts Institute of Technology professor and airport systems planner, choose their hub locations according to their own criteria.

A minimum requirement is that the airport be fairly central to their system--some place in the Midwest for a transcontinental carrier or, for regional airlines, a city such as Charlotte for Piedmont or Pittsburgh for USAir.

Location Helps Denver

Denver’s Stapleton Airport is the only airport where three airlines--United, Continental and Frontier--have located hubs. “Denver is within 90 miles of the geographic center of the United States,� Bill Neary, Continental’s regional vice president, said. “It is the most centrally located hub in the country.�

The rush with which airlines push people through their hubs is clearly evident in Atlanta. The Delta control tower there is a beehive of activity at 10:50 a.m. as the first of 40 planes of the 11 a.m. bank comes into view.

Soon, another can be seen through binoculars. Then another. They land two at a time on parallel runways and, in less than 30 minutes, planes are parked wing tip to wing tip on the Delta apron.

The passengers are not given much time to make their connections. Generally, the planes are on the ground for an hour. But since the last plane in a bank usually lands only 30 minutes before the first plane is scheduled to take off, Delta passengers have an average time of only 35 minutes to change planes.

Delta has 10 banks a day in Atlanta varying from 33 to 44 flights. An average of 33,000 to 34,000 people move through the hub daily.

Some of United’s connections in Denver, where the airline has expanded its schedule by 30% to 220 flights a day since January, give passengers only 18 minutes to transfer from one plane to another.

Can Produce Havoc

When the hub-and-spoke system works well, it works very well. But when it breaks down, it can produce havoc the like of which was not often seen in the days when the airlines flew linear routes.

The delay of one airplane can affect all of the other planes and their passengers on the same bank. If many aircraft are delayed, the chaos can spill over into later flights. Sometimes, the cause of such delays is what some observers call unrealistic scheduling.

Rex A. Mason, director of the Atlanta station for Delta, recalls the systemwide trouble resulting from the Christmas, 1984, blizzard in Denver.

Passengers slept at the Atlanta airport for a few days. Unaccompanied children were taken home by Delta employees. Airline officials now say that their mistake was in allowing passengers headed for Denver to fly to the Atlanta hub rather than stopping them at their points of origin.

How long to hold a flight for connecting incoming passengers is always a dilemma for the airlines. Frequently it depends on how many connections are to be made and how much later the passengers could be flown to their destinations.

Continental will hold a flight at Denver two minutes for every passenger who is connecting. Delta will hold no plane waiting for only three or fewer connecting passengers.

All of the airlines will hold their last banks of the evening much longer than any other, to get as many passengers home as possible and to save themselves the cost of the passengers’ hotels and meals.

Sometimes it is not the passenger who cannot make the connection in time. It is his baggage.

Baggage Moved Quickly

When the planes in a bank have landed and taxied to their gates, they are quickly surrounded by clusters of small trucks.

With as many as 90 baggage handlers on the job at once at Atlanta, for example, the baggage is sorted on the spot so that it can be quickly moved from one plane to another.

It is not unusual to see a jet, its engines roaring, its passenger doors closed, still taking on passengers’ bags at the rear door. Because of the rush, bags are more likely than ever to go astray, so many of today’s passengers tote carry-on bags.

Cities garner great benefits from having an airline hub, and this has led to fierce competition among communities to lure them. The reason is simple: A hub city gets superior airline service, making it attractive for new industry and for business conventions.

Also, even though connecting passengers spend little money during their few moments on the ground (the average connecting passenger spends $1.09 at Atlanta) airlines spend a lot locally in salaries and for such things as fuel, food and maintenance. United employs 7,000 people in Denver; the payroll is about $250 million a year.

Since passengers usually have a choice of hubs to fly through to get to their destinations, there occasionally is fierce rivalry between hubs and between the airlines that serve them. One such battle is taking place between Denver and Salt Lake City.

Western Airlines, alluding to the snow that occasionally closes the Denver airport, has taken out a series of advertisements extolling its Salt Lake City hub.

In one ad, a member of a corporate board of directors arrives late for a meeting. He apologizes and explains that he had flown through Denver.

In response, Bruce G. Strand, United’s vice president-hub operations, points to troublesome fog at Salt Lake City and to floods that have forced the airport there to close down.

Years ago, when Atlanta was the nation’s only airline hub, a joke went around that said that when someone died he had to go through Atlanta before getting to heaven. But that’s all changed now. Today he might have to go through Denver, or San Francisco, or Memphis, or Charlotte.