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)
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)
Labels: air fares, airline industry, Delta, merger, Northwest
Wednesday, January 30, 2008
Keep Your Hands Off My Merger!
This isn’t good. In last Monday’s Cincinnati Enquirer, area congress critters seemed to be worried about the status of Delta’s hub here. It seems that concerns about the status of the hub come from the fact that Delta is rumored to be thinking about maybe possibly merging with either United Airlines or Northwest Airlines. I have stated in the past,Delta-Northwest merger makes sense. Seeing as how the airlines are still code sharing and seeing as how they both filed for bankruptcy in the same court on the same day, and because I thought the merger would be a good geographical fit, the merger made sense to me. I haven’t been looking, but nothing has come up to dissuade me from my previous opinion of the situation.
I had not considered a Delta – United merger as a possibility, but a merger would allow the airlines to (much like a Delta – Northwest merger) share financial obligations, would make sense geographically as well with United being headquartered in Chicago and Delta out of Atlanta, and finally the move would take seats out of the skies thus allowing the airlines to charge more per seat than they otherwise could. A quick aside: concerns about the consumers in Cincinnati on the part of lawmakers is, in my mind, misguided. With Delta’s hub in place, Cincinnati travelers pay some of the highest airfares in the country. Getting rid of that blasted hub would hopefully put downward pressure on ticket prices here making it easier to travel in and out of our fair area.
I think the prospect of losing airline jobs here would hurt in the short term. I think it would be far more constructive on the part of the area's Congress men and women and the airport board to look to Indianapolis as an example to follow. The airfares out of Indy are considerably cheaper than out of Cincinnati (I have made the drive several times to fly across the country). Indianapolis doesn’t have one airline’s hub to the virtual exclusion of everyone else. Instead, what it does have is United Airlines heavy maintenance facilities. I would hope something like this could point the way forward. Good paying, high skill airline jobs would either stay the same or might increase and the loss of jobs here would be somewhat mitigated in the short term. Another benefit of allowing Delta to end its hub here would be the lower prices to consumers in the area.
The airport board, our Congress critters and other area lawmakers should stop freaking out about the possibilities of a Delta merger. Getting rid of a monopolistic, inefficient, hub and consolidating planes and seats can move the region and the airlines forward in a constructive manner.
UPDATE: okay, after reading this article from the New York Times, it seems that the possibility of a Delta and Northwest merger isn't so far fetched after all. My overriding conclusions about a merger haven't changed, only the imminence of the event have. I still think a merger would be a good thing for the region in the end IF, and that's a big word here, the political "leaders" and airport board handle their cards right.
I had not considered a Delta – United merger as a possibility, but a merger would allow the airlines to (much like a Delta – Northwest merger) share financial obligations, would make sense geographically as well with United being headquartered in Chicago and Delta out of Atlanta, and finally the move would take seats out of the skies thus allowing the airlines to charge more per seat than they otherwise could. A quick aside: concerns about the consumers in Cincinnati on the part of lawmakers is, in my mind, misguided. With Delta’s hub in place, Cincinnati travelers pay some of the highest airfares in the country. Getting rid of that blasted hub would hopefully put downward pressure on ticket prices here making it easier to travel in and out of our fair area.
I think the prospect of losing airline jobs here would hurt in the short term. I think it would be far more constructive on the part of the area's Congress men and women and the airport board to look to Indianapolis as an example to follow. The airfares out of Indy are considerably cheaper than out of Cincinnati (I have made the drive several times to fly across the country). Indianapolis doesn’t have one airline’s hub to the virtual exclusion of everyone else. Instead, what it does have is United Airlines heavy maintenance facilities. I would hope something like this could point the way forward. Good paying, high skill airline jobs would either stay the same or might increase and the loss of jobs here would be somewhat mitigated in the short term. Another benefit of allowing Delta to end its hub here would be the lower prices to consumers in the area.
The airport board, our Congress critters and other area lawmakers should stop freaking out about the possibilities of a Delta merger. Getting rid of a monopolistic, inefficient, hub and consolidating planes and seats can move the region and the airlines forward in a constructive manner.
UPDATE: okay, after reading this article from the New York Times, it seems that the possibility of a Delta and Northwest merger isn't so far fetched after all. My overriding conclusions about a merger haven't changed, only the imminence of the event have. I still think a merger would be a good thing for the region in the end IF, and that's a big word here, the political "leaders" and airport board handle their cards right.
Labels: airline industry, Delta, Northwest
