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Tue February 4, 2014
What Airline Hub Closures Mean For Communities
This weekend, United Airlines announced it was cutting roughly 60 percent of its departures from Cleveland, beginning this spring. The move effectively eliminates United’s hub at the Cleveland Hopkins International Airport.
Yesterday, city officials gave their official response to the news, doing their best to put a positive spin on it. We hear a report from Brian Bull of WCPN, a Here & Now contributor station.
In 2003, St. Louis was in much the same position that Cleveland is in now. Here & Now’s Jeremy Hobson speaks to Juli Niemann of Smith Moore and Company in St. Louis about what Cleveland can learn from St. Louis. And Seth Kaplan of Airline Weekly joins them with an update on what hub closures could follow the merger of American and U.S. Airways.
- Seth Kaplan, managing partner of the industry trade publication Airline Weekly.
- Juli Niemann, financial analyst with Smith Moore and Company in St. Louis, Mo.
ROBIN YOUNG, HOST:
It's HERE AND NOW, and it could be a lot less crowded at Cleveland's Hopkins International Airport come spring. United Airlines is cutting about two-thirds, 60 percent, of its departures from the city because, to paraphrase CEO Jeff Smisek, it's just not profitable to operate there anymore.
The move effectively eliminates United's hub in Cleveland, but yesterday, city officials tried to put a positive spin on the news. From the HERE AND NOW contributors network, WCPN's Brian Bull reports.
BRIAN BULL: Mayor Frank Jackson is, of course, disappointed Cleveland is losing its hub status, but a city-owned airport, he says, is still an important regional asset. That's why he says infrastructure improvements, terminal renovations and construction of a new air traffic control tower will go ahead.
MAYOR FRANK JACKSON: Because of these efforts and others, Cleveland Hopkins International Airport, even with the loss of United hub, is in a stronger position to grow today than it was eight years ago.
BULL: Jackson says he's asked the Ohio attorney general to do an audit related to United's decision, and he's asked city, county and state workforce development teams to help displaced workers get new training or new positions that fit their skills. Most of the roughly 500 United jobs to be eliminated starting in April are in airline operations, though about 40 are in food services.
RICKY SMITH: We will bounce back. We'll be fine. We're going to get through this.
BULL: That's Cleveland airport director Ricky Smith. He says Cleveland will retain 20 of United's high-demand, nonstop markets, including New York, Washington, D.C. and Las Vegas. And he added that competition among the remaining carriers could drive down airfares. Both Smith and Cleveland Mayor Frank Jackson say other prospective carriers have been approached about filling in United's void.
That's something that Ned Hill, dean of the Levin College of Urban Affairs at Cleveland State University, thinks could happen.
NED HILL: I expect to see Southwest to expand here.
BULL: Hill says Southwest operates both at Cleveland Hopkins and the other regional commercial airports at Akron-Canton. He says with the available gates, counter space and larger concentration of travelers, it would make sense for Southwest to shore up its presence in Cleveland following United's reduction in flights. But other analysts disagree. They say regional hubs that service mostly small commuter jet traffic have become unprofitable because of the high cost of fuel.
Richard Aboulafia, an air travel analyst with the Washington, D.C-based Hill Group, says it will be difficult for Cleveland to find a carrier to fill United's soon-to-be-empty gates. Just look around, he says.
RICHARD ABOULAFIA: You go to St. Louis, formerly the TWA hub, and there's simply quite a few empty, unused gates, and the level of service is much smaller than it was when TWA was an independent carrier. I don't think you're going to see a whole lot of folks race to fill the vacuum here.
BULL: But airport director Richard Smith says the very day United Airlines notified city officials of their intent to reduce departures from Cleveland, another carrier said they would replace their regional jets with larger aircraft. That will make operating in Cleveland profitable. For HERE AND NOW, I'm Brian Bull, in Cleveland.
JEREMY HOBSON, HOST:
Well, as we just heard there, St. Louis is one city that has experience with this. Just two years after American Airlines bought TWA back in 2001, it stopped using St. Louis as a hub. Joining us now to talk about what that meant for the city is Juli Niemann, a financial analyst with Smith, Moore and Company in St. Louis. Juli, welcome.
JULI NIEMANN: Morning, Jeremy.
HOBSON: Well, what promises were made when American bought TWA back in 2001 about what would happen with St. Louis?
NIEMANN: Well, American Airlines basically picked up the residue from Carl Icahn's total destruction. Nobody else wanted it. But, of course, with the grand announcement being made - and I'm sure I saw (unintelligible)'s fingers crossed at the podium - he announced plans for integration and expansion of the systems, that we would not be de-hubbed.
Well, you could just set the clock by what was going to happen next. There was no need for American to have a backbone of hubs: Chicago, St. Louis and Dallas. So it was inevitable, and it did happen, that we were de-hubbed. In fact, air traffic fell in 2003 to about half of where it was back then.
HOBSON: Yeah. And when you go to St. Louis Airport - and I've been there in recent years, many times - there are not nearly as many flights as you would think there would be for an airport of that size. What happened to the city, though? What happened to the economy in St. Louis when that hub went away?
NIEMANN: Well, it is painful, simply because if you can't provide direct flights, point-to-point business, then a lot of businesses don't want to relocate here. They want to be able to spend less than a whole day trying to get from here to there. So now we have to reroute through virtually everything. There are a few direct flights going out, but the number really puts you behind the eight ball in terms of business expansion.
Corporate headquarters simply want to have easy access to a facility, and you simply don't have that now here in the Midwest.
HOBSON: Although you still do have a lot of big companies based on St. Louis, right? You've got Enterprise. You've got Monsanto. You've got Express Scripts. There are still many companies there.
NIEMANN: There are, including Emerson Electric. But believe it not, their needs to travel extensively have dropped. And that's probably the biggest positive about technology, is that you don't have to have as many face-to-face meetings now. So that, in effect, has decreased the need for a lot of face-to-face meetings. But it still exists. If you have easy access to an airport, direct flights, then you're likely to see significant business expansion and corporate headquarters.
HOBSON: Well, stand by, Juli. I want to bring in Seth Kaplan from Airline Weekly. And Seth, this is something now that all the hubs of American Airlines and U.S. Airways are going to have to worry about, right? Because there's no way that the new, merged American is going to keep all of them, is there?
SETH KAPLAN AIRLINE WEEKLY: It'll probably keep most of them, but certainly some would be more vulnerable than others. You know, the two that people seem to be asking me a lot, they say what about Phoenix? What about Philadelphia? And part of what they're doing there is just looking at a map. You know, just as a place like Cleveland became redundant with Chicago, because of that merger, and just as St. Louis became somewhat redundant with Chicago and Dallas because of that merger so long ago, Phoenix and Philadelphia are ones where people say, you know, there are other hubs that can carry some of the same kinds of connecting traffic as some of the other hubs.
You know, somebody connecting between somewhere in the Eastern U.S. and somewhere in the West, if they're using Phoenix, well, now they could just use Dallas, because the same airline controls both of them. In that case, Phoenix is probably somewhat more vulnerable than Philadelphia just because Philadelphia, very strong corporate traffic. It's just a hub that's rather profitable in its own right. Phoenix, a little bit tougher and one that, if anything, might be more vulnerable, although a little soon to say that it's surely going away. We'll have to watch and see.
HOBSON: Isn't there enough traffic, though, air traffic, for all these hubs to exist?
WEEKLY: Well, there is, you know, and right now, airlines are doing rather well. But everybody's always trying to do better than they're already doing. And so, you know, it's - airlines are not running charities. I mean, let's be clear about that. And United, in their defense, seemed to have done some things to try to make the Cleveland hub work, but in the end, when you've got that hub over in Chicago that can carry a lot of the same connecting passengers, but also supported with so much local demand - people actually going to or from Chicago that are willing to pay those higher nonstop fares - just in comparison, Cleveland didn't stack up.
And we'll see, as things go forward, if Phoenix becomes that sort of place for American and U.S. Airways. But, again, because of what you said, because there's been so much consolidation, because the industry is doing rather well, Phoenix probably not quite as vulnerable as places, in retrospect, like Cleveland, like Memphis, Cincinnati and others were in past years.
HOBSON: Seth Kaplan of Airline Weekly, and we've also been speaking with Juli Niemann of Smith, Moore and Company in St. Louis. Thanks to both of you.
WEEKLY: Thank you.
NIEMANN: You bet.
HOBSON: This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.