Delta’s Dismantling of the Memphis Hub

Many are surprised that it’s taken this long, but Delta has finally begun taking the first big steps in what will ultimately likely result in the dismantling of the Memphis hub. Flights will be slashed 25 percent after this summer. Big cuts like this only hurt the viability of the hub going forward. I thought it would be fun to look inside the Memphis hub to see how it works and why this change will be bad news for its future hub status.

The hub itself has settled in with three banks per day. Planes come into Memphis in the early morning and then go right back out. There’s also an early afternoon arrival that turns around. Lastly, there’s an evening operation. Nearly all of Delta’s operations in Memphis fit into those three banks.

I say “nearly” all, because Delta has more operations from Memphis to its other hubs. For example, there are 10 flights a day to Atlanta. Those flights, however, aren’t there to support the Memphis hub but rather to feed Memphis customers into the Atlanta hub. These operations aren’t impacted by the cuts so far, and they’re some of the few routes where you’ll see larger mainline airplanes in operation. Here are the destinations from Memphis to Delta hubs and focus cities.

Delta Hub Cities From Memphis

The other area where you’ll see larger airplanes is to the sun markets. Florida, Phoenix, Vegas, etc. You know the deal there. Memphis, like other non-hub cities, can often support larger airplanes to these markets because there is enough traffic going back and forth. That’s why we see Delta mainline airplanes in Ft Lauderdale, Miami, Orlando, Tampa, and Vegas. There are a few cuts in these sun markets, but it’s really the smaller sun markets that are hurt most, like Panama City. For the most part, however, these aren’t seeing much of an impact.

Once you get beyond those two groupings, there are very few mainline airplanes at all. It’s mostly a regional jet operation to a mix of small and medium cities in the South and Midwest along with large cities around the country. The large cities are untouched in these cuts. These are generally other airline hubs that have enough traffic to warrant some flights to Memphis. I’m considering a city to be large if it’s in the top 25 Metropolitan Statistical Areas (MSA) in the US from the 2000 census.

Delta Large Cities From Memphis

Once we get below that level, the cuts start becoming more fierce. I’m considering a mid-size city to be one between 25 and 100 on the MSA list. As you can see, none of these cities are going away, but some are losing frequency.

Delta Medium Cities From Memphis

Then when we get to the small cities (anything below 100 on the MSA list), it’s a bloodbath. Not only are we seeing a slew of cities losing service entirely (this doesn’t even include Montgomery and Monroe which were discontinued before the summer), but many of the rest are taking hits in frequency. The small cities are in trouble here.

Delta Small Cities From Memphis

So why does this matter? Well, it’s a shot at the heart of how hubs work. The idea of a hub is to bring in traffic from a variety of cities, aggregate it in one place, and then put people on planes to other cities. So you might only have 1 person from Lafayette, LA wanting to go to Chicago, but when you combine that with the little numbers from Montgomery, Baton Rouge, Lubbock, Austin, etc, you get enough to fill that airplane. When you start taking away these small cities, it will inevitably make the other flights at the hub perform worse as well.

If Lafayette is gone, that’s one less person that will fly on that flight to Chicago. Maybe that’s the tipping point for making that Chicago flight unprofitable. You could try a smaller airplane, but most of these are already on pretty small jets. In the end, when you start whacking away at a hub like this, it generally hurts the chances of that hub sticking around.

This doesn’t mean it’s the wrong move. Smaller hubs simply don’t perform as well because there’s not enough of the higher-yielding local traffic in the market to make it work well. Delta really should be cutting back in Memphis if it can’t make money there.

Does this mean Delta will walk away from Memphis? Nah. We’ll still see flights to the other Delta hubs and sun destinations. It’s possible some of the large cities will keep service as well, but the way this looks right now, I’d be amazed if Memphis made it as a true hub in the long run.

48 Responses to Delta’s Dismantling of the Memphis Hub

  1. Sanjeev M says:

    So now it’s below 150 dailies? Meaning its smaller then the Cincy hublet. I think they would eventually go down to two banks.

    Brett, how would I go about finding out the schedule banks at a given airport? Is it just brute force looking at the schedule or is there some sort of indication?

    • CF says:

      It’s brute force for me. There are schedule databases out there, but I’m too cheap to pay the big bucks for those.

  2. Bob K. says:

    Brett,

    LOVE this kind of in-depth analysis. This is why I read Cranky Flier. More articles like this, please!

    Stupid question: How much, if any, do cargo revenues play into go/no go decisions on city pairs? I know cargo revenues are generally small by comparison for pax airlines, but are they big enough to make a route just profitable enough to hold on to?

    Figured I’d ask with FedEx in the area…

    • Dan says:

      Bob,

      I worked for a United Express carrier out of IAD about 10 years ago (gulp.) As a general statement, cargo is a non-factor for the smaller cities — especially the ones Express serves. How do I know? I loaded the planes, and it was rare to have any cargo at all. That said, specific markets may be exceptions — for instance, we sent a lot of blood to the blood bank in ORF via the small cargo operation.

      Small aircraft, and even narrow bodies, aren’t set up to carry cargo much larger than a big suit case. For instance, United’s small cargo program has a limit of 100 lbs. Even with narrow bodies, there isn’t the space to handle large shipments, for, say, some sort of assembly line facility.

      That said, small cargo shipments are hugely profitable. At the time, one United agent told me it cost $60 to ship a small box.

      • Fred says:

        I’d imagine that an airline would want an aircraft designed for carrying cargo if they were to do that seriously – which would mean a cargo airline. (Didn’t Northwest use to have some 747 freighters at one point though?)
        The only one I can think of is Alaska having a few cargo and a few combi 737s flying to or within Alaska where air cargo is much more important than in the rest of the country.

        • The cargo you mostly see being loaded is U.S. mail. It’s been a long time since all the majors had pure cargo planes. With Fedex and UPS so big it not really needed by the u.s. carriers. Alaska does fly some combi 737’s a some all cargo planes, but the state of Alaska is an exception since it has so few roads connecting cities.

          Do airlines still have/advertise small package delivery like they used to? They all had that, even small airlines. Pushing their flight schedules as a faster way to ship small packages faster.

          • I’m curious how much of the same day services from UPS, FedEx and others have eaten into small package service?

            On the other hand I’d theorize that those same day services really are just UPS/FedEx putting together local couriers and the airline’s small package delivery services. I talked to a few UPS folks once and they said the same day stuff never touched their trucks..

          • Dan says:

            I think so. Not to long ago, a general aviation maintenance shop I worked for would get aircraft parts from the manufacturing plant via AA’s small cargo operation.

            One of the differences between airline small cargo and FedEx/UPS is that with small cargo, you’re responsible for your delivery to/from the airport. That can mean using a courier service, which is just one more headache. I’d have to imagine that the all-in-one door-to-door services from FedEx/UPS is much more preferable.

            The only time I could see airline small cargo + courier to be preferable is if you need something delivered sooner than the integrators can do it. That is, if you need something somewhere by midnight, but the integrator can’t get it until their first flight in the morning, small cargo would be the way to go.

      • Bob K. says:

        Thanks. You make good points.

        I presume that everyone and their mother within 100 miles of MEM knows someone who knows someone who can get them an employee discount on FedEx (if there is such a thing), or is otherwise loyal to FedEx for their local presence & jobs… Similar to how just about everyone in the state of Michigan can get the “employee discount” (or, failing that, the “friends” discount) when buying a car from the Big Three.

  3. typo on Wichita: 3 -> 1 is not a drop of 1

  4. dave_dc says:

    Same typo for Grand Rapids.

  5. Dan says:

    Brett,

    Thanks for the post — it reminded me that I need to finish my Masters thesis. My thesis looks at exactly the factors you mention. By taking some data reported to the government (market fares and passenger counts) as well as taking a SWAG at operating costs, I attempt to design an “optimal” route network, with the end result showing the number of frequencies by aircraft type for each market.

  6. When the Amsterdam flight goes away that will be the sign that hub status is on the way out.

    MEM still makes sense as a hub for east/west travel when you think about it. Why would people traveling between the western and southern midwest states want to fly to ATL and double back. Having a MEM hub would keep those passengers from using DFW or IAH to connect. At least DL can still stay in the running for passenger dollars by keep MEM active. Same for upper/lower midwest travel.

  7. SEAN says:

    I recall an article here that stated that Delta was considering keeping MEM as an alternate hub for ATL & the commenters called BS. If MEM is dehubbed then CVG cant be to far behind.

  8. Dave says:

    Without a doubt, the DL “hub” at MEM is toast. It’s a fact that Memphis is a very weak city for O&D traffic due to it’s weak corporate and tourism market. All that matters at MEM is FedEx. DL is already about 80% regional jets at MEM and will keep getting smaller. The airport terminal is a vestige of the 1960’s when it was built with small narrow corridors, low ceilings and a very cluttered and dated design. DL will push everything via ATL or it’s other larger hubs and focus cities. The one flight to Amsterdam will be cancelled this fall/winter season.

  9. Tim says:

    Appleton (ATW), Cedar Rapids (CID) and Lincoln (LNK) are summer seasonal service operating for the first time this year so I don’t think those count as being “discontinued” when they don’t operate in November.

    Also, I believe “Columbus, MO” is referring to Columbus, MS (also know as Golden Triangle).

    • CF says:

      They may have been seasonal, but I’d be amazed if we ever saw them come back again. I’ll consider them discontinued for now, though ultimately that’s a pretty tiny piece of this whole thing anyway.

      Thanks for the catch on Columbus. It is indeed MS, and I fixed it. I must have been thinking MO since Columbia was right above.

  10. Paul says:

    It is sort of an old airport, but sure is a better option than swithching in Atlanta as long as the planes aren’t regional jets.

  11. JayB says:

    Cranky,

    Personally, I could care less about the DL Memphis hub. But, your write-up is interesting. A wonderful read!

    As to any errors, amazing how they can slip by, edit after edit, a luxury you probably don’t have, or really care about that much anyway. Having authored a pretty important official report in some prevous life, I still laugh over having had to issue an errata sheet correcting a previous errata sheet! But, life goes on!

  12. Going back to a discussion on another entry:
    I spot checked a few of the smallest airports that are losing flights all together, in every case they still have Delta service to other hubs. So Delta isn’t abandoning the airport.

    (I checked Evansville, IN, Lincoln, NE and Quad City Intl.)

  13. Just a few observations (I’m a native Memphian, but currenrtly live and work in D.C.)
    Two days after annoucing this, the Delta CEO was in Memphis for the Airport International Convention. He praised MEM as the type of airport Delta loves, for the great facilities, low cost, etc. He slammed another airport, which he would not name as being way over cost, and not all that good.
    The flight cuts are yes, about 25 per cent, but Delta swears up and down, seats are only going down by about 8-10 percent. If that is really true, then Delta is going to have to put some bigger planes in MEM.
    Finally, if you really believe the reasons Delta said they are doing this, then MEM is the first, but not last of the Delta hubs to be shrunk. My guess for the next hub shrinking-MSP.
    Finally on O&D MEM is about 40 percent O&D-that’s about 4 million per year-doesn’t look all that weak to me. The 40 per cent figure is from the US Commerce Dept

    • DGS says:

      I haven’t looked through the timetable that closely, but I think a lot of the stuff getting whacked is regional flying.

      Delta is trying to shed 50-seaters just as quickly as those contracts will allow. There’s just no way to make those profitable with the way oil is trading these days.

      I believe there are some markets that are losing frequency, but are getting an upgauge to a 700/900 or even a DC-9.

    • CF says:

      Yep, they are saying 8% capacity reduction with 25% of flights going away. It is, as GDS says, mostly because the flights getting whacked are regional jets while the larger airplanes stick around. There might be some shifting of capacity in terms of using some larger airplanes on some routes but that’s pretty minor.

  14. Graham says:

    I see that Columbia, MO is keeping its 3 flights. I actually went there for business last fall and DL is the only airline to serve them and only from Memphis. I believe its an EAS thing. Any idea how many other of those small cities are EAS pairs?

    • CF says:

      Without looking it up, the only other ones that could be EAS are Greenville, Hattiesburg, and Tupelo. Not sure if they are or not.

  15. jason says:

    Love MEM. I’m an F/A and an airline nerd and enjoy roaming around that airport. No fancy remodeling needed. Just grey brick walls and great barbecue.

  16. I concur w/ Nicholas and George, I don’t see this as a significant de-hubbing at all. If you look at it solely from the perspective of the small markets being reduced or dropped, which account for the vast majority of these changes, most simply do not need connectivity to multiple DL hubs.

    Why does it make sense for small spokes in the midwest and southeast to have multiple daily flights to ATL, MEM and, possibly, DTW? In most cases, the flights exist almost solely for connectivity to other cities and MEM makes the most sense to be dropped.

    Additionally, if we really want to study the smaller cities that lost service to MEM, we need to look further back. I know that TLH, VPS and GNV have already been dropped and each used to have 2x and 3x service to MEM. However, ECP has 3x to MEM but is not listed above.

    One final observation – it seems odd to me that they would reduce CLE by one flight since UACO does not fly nonstop to MEM at all.

    • One other thing – Baltimore is not the #7 MSA, Washington DC is and it is separate from Baltimore, which is 20th. If you are looking at CSAs, they are combined (in which case Washington/Baltimore is #4 overall nationally); however, MSAs were listed in all of the other comparisons. Sorry if overly picky, I’m a population stat geek and DC resident, I didn’t think that Balto was included in the DC MSA so I looked it up!

    • CF says:

      I don’t understand how you don’t see this as a de-hubbing. As you say, “the flights exist almost solely for connectivity to other cities and MEM makes the most sense to be dropped.” That defines de-hubbing to me.

      ECP (Panama City) isn’t listed because I included that under the sun destinations as opposed to being a small city. It’s definitely true that other destinations have lost Memphis service over the years as well. We’d have to go far back to see how much less service there is today.

      On Baltimore, good catch. It doesn’t change anything but that is true.

      • I think we agree in principle but an issue of semantics exists. This may reflect a “dehubbing” in the sense that some small spokes are being dropped, even if it is only eight at this time. As pointed out elsewhere, other spokes have already been dropped so some dehubbing is occurring, to be sure.

        But just because SOME dehubbing is occuring, does that mean MEM is no longer a hub? I consider a hub to be an airport where a much larger percentage of pxs are on connecting itineraries than those pxs who are embarking or deplaning at that airport. Smarter people than I (like Brett) could probably come up with that appropriate percentage.

        Regardless, since this announcement represents an 8-10% reduction in daily seats at MEM, it can only reduce the percentage of connecting pxs by the same margin (at most) which assumes every single px on a flight being discontinued was on a connecting itinerary (unlikely considering some flights like CLE, SDF and PIT would have likely contained a moderate percentage of people traveling to/from MEM).

        Finally, whether correct or not, so much baggage is associated with the word “dehubbing” that I don’t think it correctly reflects what is, at this time, only an 8-10% reduction of available daily seats in MEM. Dehubbing invokes the extreme situations of US at PIT (and BWI and LAS), AA at STL, and other similarly drastic reductions. Granted, this current reduction needs to be combined with other recent service reductions and the percentage of connecting pxs needs to be recalculated in order to correctly assess whether or not “dehubbing” is truly occurring in MEM.

        ps – sorry I missed the ECP mention!

        • CF says:

          I don’t see what’s happened as being a complete de-hubbing. As I said in the post, Delta has “begun taking the first big steps in what will ultimately likely result in the dismantling of the Memphis hub.” So is this move alone a death of the hub? No. But it’s a serious blow to an already weakened hub.

          • Agreed. Any thoughts on what the minimum “percentage” of connecting passengers is in order to denote an airport as a hub? My SWAG is at least 50-60%, probably closer to 60%. I would love to know what those percentages are for some of the shrinking hub airports such as CVG, MEM, CLE, etc., etc.

          • CF says:

            I don’t think there is a minimum percentage, because it’s really different depending on the dynamics of the hub city and surrounding area. Places like LA will have a lower connecting percentage because of its geographic location and strong local demand, but airlines still call it a hub.

            On the flip side, we have Charlotte with a much higher connecting percentage. It has a small local market, but it has a hinterland. In other words, there are a lot of small surrounding cities with minimal service that act as local markets from a pricing perspective but are actually connecting markets.

  17. Scott says:

    Memphis and Cincy will end up looking about the same, with service to other hubs and key business leisure destinations. The one thing Memphis has going for it, however, is that it is a very low cost airport to operate from and provides some relief for ATL. Thus, I expect it to stay slightly larger that Cincy.

    As to the suggestion that MSP will be cut, that is the dumbest thing I have ever read. MSP is the second most profitable hub in the system. Until that changes, MSP isn’t going anywhere.

    • Dan says:

      Scott,

      How are you defining profitable? CVG has/had the strongest O&D fares in the nation, but you can see where that got them.

      • To determine profitability requires looking not only at the revenue side (high fares) but also the expenses (specifically airport costs, landing fees, labor costs, etc.) at that location. I am not sure about the expense side for CVG compared to other DL hubs but others here might be.

    • As I said on MSP, that’s my guess. And whoever said Airlines are smart? And finally, just to show how you can manipulate statistics, the most profitable Hub in the US on a Unit basis (Whatever Unit Basis means) is MEM-that’s at least what Delta said a year ago.

  18. Jim says:

    I enjoy this type of analysis… keep it coming!!

  19. Gary says:

    Seems like Delta/Northwest have always cuts flights in Memphis in the Fall and Winter (especially in 2008-9)…they really never told the media…but they seem to always bring the flights back in the Spring.

  20. Reader says:

    Memphis has had surgery after surgery and closure prediction after closure prediction for YEARS! However, it always survives. You can’t compare it to CVG, STL, and PIT that don’t have histories like that or a similar population for that matter. Those cities closed and or shrunk as a result of loss of pax, while in MEM it is all about fuel prices. You can argue CVG was fuel with the regional jets but go back and look at an article in their local paper and it says otherwise, decline in pax and the proliferation of the regional jet making CVG no longer unique or conveinant is what got CVG to where it is today. The second issue there was fares and driving to Dayton. MEM has been a hub for Southern, Republic, NW, and Delta before too while it was still independent if you know your history well alongside Republic/NW. In several cases MEM has been a hub alongside ATL(Southern, briefly with Republic, and with the previous incarnation of the DL hub). Basically, the point that I am trying to make is that we’ve been here before and the predictions have been wrong and that MEM’s history is not the others so comparison is really apples and oranges. Call me wrong, but that is what I believe and I think a real good in depth level of research would support my view nicely.

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