Sunday, April 20, 2008

hub and spoke you in the eye 

Tom Blumer over at Bizzyblog has posted a column he originally wrote for pajamas media, talking about the potential merger between Delta Airlines and Northwest Airlines. His point was that media scaremongering about higher air fares just did not hold water when compared to fares out of single hub cities like Cincinnati. He goes on to give real examples of how much higher fares from Cincinnati are when compared to the relatively close cities of Columbus, Indianapolis, Dayton and Louisville. His point is well made and spot on.

His column got me thinking about the fares out of Cincinnati in comparison to other cities in the U.S. Tom was more right than he lets on in his column. Let's examine some recent data from the Department of Transportation Office of Aviation Analysis "Consumer Air Fare Report" (link). These quarterly reports demonstrate that residents in Cincinnati pay local premiums that are almost twice the next city's premiums. This is pretty consistent year after year since at least 2002. I also noticed that when I stepped back from the data a little bit, I noticed that other cities with "fortress hubs" were consistently near the top spots as well. Cities such as Memphis (Northwest), Dallas-Ft. Worth (American), Atlanta (Delta), Minneapolis-St. Paul (Northwest), Charlotte (U.S. Air) were consistently in the top 20 of cities when arranged by fare premiums. To examine my research go here, here, and here and scroll down to table seven in the reports and see for yourself.

I wrote not to long ago that losing Delta's hub here in Cincinnati would hardly be the end of the world if the people who run the airport took action to bring in other discount carriers or seek to expand the presence of one of the "legacy" carriers here. I also wrote here my support of a Delta/Northwest merger. I thought then that the merger made sense and I still feel that way. As a caveat, the airlines will have to be careful in their negotiations with their unions and they will have to execute precisely to make the move a true success, but I think they have a good opportunity to do it. I have my concerns about this merger, but looking at the data and reflecting on my own experience as an airline passenger, losing a fortress hub is one of the least of my concerns.

(HT: BizzyBlog)

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