Will the Hub-and-Spoke System Disappear? (Ask Cranky)

It’s been awhile since I ran an Ask Cranky post, but that doesn’t mean the questions have stopped coming in. This question came in earlier this month, and I thought it was a good one. So let’s talk about it.

Hey there, Cranky! I’m really enjoying your blog. Obviously, you have a really deep knowledge of the airline industry. Do you foresee the hub-and-spoke system going away? It’s one of my least-favorite aspects of air travel.

Keep up the great work! Justin

Will the hub-and-spoke system go away? In short, no, I can’t imagine it will.Ask Cranky As Southwest continues to grow (much more slowly than in the past) and other low cost carriers follow similar point-to-point models, wouldn’t it make sense for the hub-and-spoke system to go away because of its inefficiencies involved?

It may seem that way if you’re in a bigger city, but what about those people who live in Springfield, Illinois or Waco, Texas or Bakersfield, California? See the point-to-point system make work wonders for those who live in bigger cities, but in smaller cities, the hub-and-spoke model is their best bet by far.

Let’s think about Springfield, Illinois. There probably isn’t enough demand to fill a single airplane to almost any city from Springfield at a given point in time. But, if you can send a bunch of passengers to Chicago and then let them fan out around the globe, all of a sudden you do have the ability to fill it up because you’re combining a bunch of passengers going to different places in a single plane.

This doesn’t mean the point-to-point model won’t grow, and maybe one day we’ll see someone try the ExpressJet model between smaller cities again, but I doubt we’ll see the day where Springfield, Illinois can hold its own on many routes on a convenient business-friendly schedule. (Sure, any town can support a couple flights a week to Vegas on Allegiant, but that’s a different story.)

Remember, a hub doesn’t exist solely as a hub. There are a few minor hubs that still exist that don’t have tremendous local traffic, but for the most part, those have disappeared (Pittsburgh, Columbus, etc). Now, most hubs exist in cities where there is a great deal of local demand. Chicago, Atlanta, Dallas, etc are all very big local areas that can support flights to many other destinations on a point-to-point basis. But when you throw in the connecting traffic from smaller cities, you enable the existence of even more flights.

Think about how many places you can get to from Springfield with a single stop. It’s pretty incredible. And you can nearly cover the entire globe with two stops. So the hub-and-spoke model isn’t going anywhere, because it still is the best way to serve many smaller cities around the world while at the same time providing better point-to-point service for those large hub cities.

20 Responses to Will the Hub-and-Spoke System Disappear? (Ask Cranky)

  1. Compared to the days of old the Hub and Spoke model is amazingly efficient.

    It used to be if you wanted to get across the country you’d stop at every airport between here and there. (Take a look at old route maps.) Like an elevator or a train they were collecting passengers and letting them off as they go.

    By collecting everyone into hubs, you reduce that milk run mentality into two legs.

    Which would you rather have? One connection where you change planes and get to where you need to be, or landing and taking off four times staying on the same plane.

    (An aside, my mom did the latter on Southwest for Thanskgiving and she insists she’ll never do it again.)

  2. CF says:

    Nick – It’s funny, because I think I would prefer two stops with no change of plane than one stop in a hub. With Southwest’s model, you aren’t on the ground very long so even with the extra stop you’ll probably get in quicker than the single stop with the hub and you don’t have to collect your carry-on and deal with boarding again. But more than 2 stops and I’m back to the hub.

  3. CF – I’d agree. I think my mom’s flight had 2 or 3 stops…

  4. BLR says:

    I think the total opposite is going to happen – we’ll start to see more airlines become more “hub and spokey” than we have in the past. In an environment where total traffic is shrinking, your variable costs are now higher than your fixed costs, it only makes sense to fly fewer trips with more people onboard, maximizing your returns. Look at Southwest’s recent announcements: MSP-DEN/MDW, LGA-BWI/MDW, and BOS-BWI/MDW. Smells like hub and spoke to me!

  5. b757capt says:

    Don’t look know but Myrtle Beach’s Direct Air back at it again. Looks like they will start SPI. Good luck filling that up.

    http://www.visitdirectair.com/

  6. theboardingpass says:

    I think the only thing which will go away are the outdated terms such as hub-and-spoke.

    Everyone is going to continue to converge to a hybrid route structure.

    Network carriers put on flights primarily due to point-to-point traffic, even out of there hubs. Flow passenger yields are notoriously poor as most airlines won’t internally unbundle the value of each leg.

    So, because they are worried about losing a passenger to another carrier, the connect leg will often be ‘free’ or below cost. The unfortunate people wanting to fly solely to the hub find they are charged a fortune as they effectively subsidize the connect passengers.

    I do not believe any airline has for a long time, if ever, decided on a route by saying – we are a hub-and-spoke carrier. We will collect passengers from X, Y and Z and fly them to A.

    Instead, they estimate point-to-point demand and assuming it is sufficient to make the route look viable, they consider what flow traffic may exist and thus determine if its a good use of the aircraft they have available.

    One premise of the 787 is to enable more route pairs to be viable at the first cut, without reliance on the flow passengers.

    Hub-and-spoke should not be a model as much as a description of what the final route map looks like. Similarly, point-to-point itineraries are relatively easy to combine to approximate a hub-and-spoke network, albeit some of the smaller cities aren’t represented.

    The next question should be, should the smaller cities, e.g. Waco, served solely as spokes on tiny RJs/props even appear on the route map of major carriers? Maybe everyone would be better off if these passengers drove an hour or so to a larger city?

  7. CF says:

    theboardingpass – I think you’re right that no big city routes are being flown for the sake of the flow traffic, but of course, the small city routes are being flown almost entirely for the flow traffic. Do you think United gets much local traffic on LAX to Bakersfield? Or does American get locals on Chicago to Champaign? No way. But those passengers all help fill up other flights.

    And while I do agree that not bigger routes are flown slowly for the sake of flow traffic, I do believe that they have larger aircraft or more flights because of that flow traffic that can help fill up those planes. And there are plenty of mid-sized routes that probably couldn’t be sustained by local traffic either. The hub is a good model.

    As you and BLR point out, it does become more of a hybrid model. Southwest at Midway and Phoenix certainly looks like a hub even though it’s not necessarily scheduled that way.

  8. David says:

    CF – while I can certainly see merits in your argument for the good people of Springfield, I’m not totally convinced that economics prescribes only the hub-and-spoke model. I think that if you offer people the chance to fly non-stop to where they want, they’ll take it – the time spent going via the hub compared to non-stop gives considerable leeway to vary the flight time, while still beating the hub operator on schedule.

    Consider the case of Europe with a load of LCCs, from the big players of Easyjet / Ryanair down to the smaller outfits. Most of them publicly persuade against connections (admittedly because EU law has strict penalties over missed flights when the airline is at fault). They do however offer flights from airports in relatively small cities, to other places all over Europe, without the stops-along-the-way milk run. I’m ignoring the cases where a regional Govt pays Ryanair millions of euros in ‘marketing support’ in return for a base. As the LCCs grow, the network carriers are increasingly being edged out of a good chunk of the short-haul business.

    I’m just kinda puzzled why the economics works well for short-haul between cities of population maybe 500,000, when in the US, it’s so much more of hub-and-spoke.

  9. JK says:

    Certainly not an easy answer to the question. Particularly where you’re dealing with an industry that these days doesn’t seem to place much emphasis on providing top-notch service to its paying customers, on treating its employees well, and on making, to the extent its shareholders desire it, a fair and reasonable profit, but instead, operating in a hellbent manner simply to kill off its competition.

    Hub and spoke is mostly the rule in transportation. Take ocean shipping, trucking, rail freight air freight, what have you. But, does every airline have to operate a spoke to every city? Doesn’t seem to make any sense. How much profit is really generated by operating all these spokes?

    I would envision someday something more along the lines of the “trunks,” or the “point-to-pointers” on the one hand, and the regionals on the other. Interline agreements REQUIRED between everyone, no WN exceptions. Shouldn’t the public interest in having anyone using the public airways to and from public facilities dictate that this must be done, at least to the extent the parties are safety-wise and financially viable?

    I wouldn’t envision the regionals simply operating the old local service carrier “milk runs.” Rather, feeder service, and even some point-to-point service that would sometimes complement the feeder service. And, horror of horrors, it may have to be partially subsidized with local, state, and/or federal funds. Maybe lessen the highway subsidy need for all those highways and bridges going to and from some distant airport. Would be nice to have a rail line to every one of our airports, but….

    Now, on to solve world peace!

  10. CF says:

    David – I think there are some key differences between Europe and the US. Of course, the distances are shorter, and there is an extensive train network that connects many smaller towns to larger ones – often directly into the airport at that next town. This makes flights into that town unnecessary.

    Also, the Ryanair flying doesn’t usually go from small town to small town, as far as I can tell. Sure, the airports are in small towns but they are meant to serve the larger cities that may be more than 100km away. Europeans have gotten used to this whereas an attempt to fly to a far away place in the US like Stewart for New York or Palmdale for Los Angeles falls flat. If the Ryanair flights are in small towns, they’re aimed at the infrequent leisure traveler anyway. A business traveler probably can’t operate on their schedule. For example, you can fly from Smaland, Sweden to Dusseldorf (Weeze) but you can only do it twice a week.

    JK – What your describing is certainly similar to what we had before deregulation in some sense. The local service carriers brought you to the bigger cities, and the trunk lines took you across the country. Then when you needed to go international, those guys would drop you off at one end of the country and Pan Am or TWA would take you from there. This type of model only works if you re-regulate the industry and start doling out route authorities again. It may end up being better for the industry but it would be worse for the traveling public in the form of higher fares and less frequent flights.

  11. CF/JK – while I was never around when this model was in place (the industry deregulated before I was born.) I’ve got some ticket stubs from when my family went to California from Upstate New York. Indeed it was exactly like this. They took Allegeny Airlines (aka USAir, aka USAirways) to Chicago’s O’hare then United took them to San Francisco. Looking at it this seems kindof odd, but I guess thats how the industry worked back then.

  12. The Traveling Optimist says:

    It’s possible still to see a vestige of that pre-regulation system still in operation today.

    Ever lose a bag while traveling on more than one airline? The standard industry response is: “The last carrier you flew is responsible for finding your luggage.”

    That comes right out of the Allegheny/United example provided earlier. Even if Allegheny was clearly at fault, United eats the cost. Yet because of the prevalence of lost luggage all carriers gentlemanly agree that it comes out even in the end, that no one airline pays more than its fair share for re-uniting luggage with customers than the other.

    As for hub-and-spoke, I’ve never believe Southwest’s argument that they are a point to point airline. They state that 80% of their traffic is local and this is probably true. Yet everyone in the southwestern part of the country has long relied on their hub operations at Love and Hobby to get, say, from the Panhandle of Texas to New Orleans or Oklahoma to Midland and El Paso.

    Not since very early Braniff or Continental have any of these city pairs enjoyed nonstop service. If they did have direct service it was the milk run variety, again as mentioned earlier.

  13. Nick B says:

    Traveling Optimist,

    While not always done (and the delivery charge has to pass a certain threshold), airlines can and do bill each other for interline bags that are not transfered properly. If memory serves there’s an IATA procedure for doing this. The same applies to damaged bag claims, although this is a little more time consuming taking the time to prove when/where the damage occurs, as ramp agents aren’t often looking out for broken bags.

  14. MathFox says:

    In the early days of aviation “milk-runs” were almost a necessity because the planes needed refueling every two hours (or more often). Only a few of the most modern planes are capable of flying halfway around the globe without a stop for fuel.
    Now the planes are bigger and can fly bigger legs, the problem becomes to get them filled. The hub-and-spoke system allows for decent coverage of airports and reasonably filled planes. However, I would not be surprised to see airlines declare more “focus cities” (secondary hubs) when travel picks up again. Passengers are interested in minimising their trip time; having shorter flying times is good for the airline’s costs… (People pay for the 300 miles A-B, not for the 800 miles A-C-B and would prefer the quicker 500 miles A-D-B.)

    My prediction is that the number of “hubs” or “airports with advertised connections” will rise, because of efficiencies. There will remain a lot of smaller airports that can only fill a handfull (two handfulls) of regional jets per day.

  15. David SFeastbay says:

    What the hub/spoke system did was do away with flying between small cities or small to medium cities. In a large state like California you used to be able to fly between many smaller cities. Now you have to connect in SFO or LAX to get say between Santa Barbara and Fresno or Bakersfield.

    Also now there are states where you can’t fly between any two cities in that state because the small local stand alone carriers are no longer around. Take Alabama as an example, if someone needed to go from Mobile to Huntsville for business they would have to take a day to drive there, a day to do their business, and a day to drive back. They can’t fly without having to leave the state to connect in Memphis or Atlanta and would pay over a $1000.00 for a last minute trip which isn’t worth it.

    So for a longer distance the hub and spoke system is the best way, but for a shorter distance it’s back to the car, train, or bus.

  16. JK says:

    I have grave doubts about the future of our airline system, and how people are going to get to their air service. Can’t believe we won’t be paying a lot more for air travel soon, assuming there will be an industry still operating.

    Sure, I live near a big hub here at Dulles. Fine, now nobody else move here, please! It’s getting more and more difficult to get to and from Dulles, as close as I am to the airport. Getting out here from downtown? Lot’s of fun! Still boggles my mind that FedEx flies into DCA each morning with a 757, then ferries it empty (as far as I know), all 5 to 10 minutes in the air, out here to IAD. [Trucks simply can't get from IAD to downtown DC to make morning deliveries, so I guess that's the best FedEx could figure out to do. Ugh!]

    And all those folks out there in the hinterlands, who can’t get to the hubs by car and have no intrastate air service anymore. My native Pennsylvania provides a good example of where we are in this country. There are 15 Pa. commercial service airirports, Almost no Pa. intrastate air service except to Philly, and then only from a couple of cities. Can you imagine the state capital, Harrisburg, having service to only one other Pa. city? Philly. And, State College, home to the state’s biggest university, Penn State, having service to Philly but to no other Pa. city. And, roads throughout the state, particularly that Turnpike, are just a mess, compounded with all those trucks?

    Somehow, something isn’t working the way most of us thought it would when deregulation came along. Not suggesting re-regulation, but where are we heading?

  17. CF says:

    JK – Small towns are definitely taking the hit with the way the airline world is moving these days. But that’s because the demand just isn’t there, or at least nobody has shown how to serve that demand profitably. When smaller aircraft started being treated the same at larger ones under Part 121 rules, it made it a lot more expensive to operate and many routes became impossible to justify.

    Could a better, more focused Essential Air Service program actually provide good, useful service? I’m not sure. In fact, I doubt it. The bottom line is that if there’s enough demand, someone will serve the route, so the communities need to rally their residents to start flying more.

  18. JK says:

    I think most small communities, even the mid-size ones, really are “blowing smoke” in their attempts to get any air service at all. They seem ill-equipped, lacking in much knowledge of what their local folks need or want, lacking in financing to do any sort of needs/wants studies prior to arguing for air service, or to do a good job of marketing their service should they be lucky enough to get some service. And, do these people really have a clue how any airline wants to operate and how their needs/wants would benefit any airline’s operations?

    It seems to me this is all so complex, no one community should be asked to do it. Doesn’t it really have to take the work of an entire State, or region, working with available industry players to get anything done?

    All these airlines’ efforts to set up their own “hubs and spokes” seem to be heading us for evetual total breakdown of our air travel business. Can’t we get together the best minds of the industry, States, regions, what have you, and get this back on track? [Oh let's see, say, by Labor Day?]

  19. Alex says:

    I read the article and all comments. Nobody don’t represent any numbers. How many passengers in U.S. use non stop flights and how many use HUBS and fly with 1 or 2 stops. May be you know this statistic?

Leave a Reply

Please use your real name or nickname instead of your company name or keyword spam.