Memphis Residents Should be Careful What They Wish For

You would think that the people of Memphis would be thrilled that they have as much air service as they do. While mid-size city hubs like Pittsburgh and St Louis have seen their hubs gutted, Memphis remains. Oh sure, it has lost a lot of service over the last few years, but it still has a hub with flights to places it should be surprised it can support.

Memphis Has a Choice

But the residents of Memphis aren’t happy. They think fares are too high. Sure, everyone wants low fares, but I think the people of Memphis won’t like what accompanies those lower fares … a lot fewer flights to a lot fewer destinations. When that happens, they’ll just start complaining again at the lack of service.

Anatomy of a Hub
A hub works because of the mix of local and connecting traffic. You need a strong local base of travelers to pay good fares to fly places nonstop. Then you need connecting traffic to help fill out the rest of the flights. It’s the combination of the two that leads to profitability. Without connections, hubs don’t have enough demand to operate a frequent schedule to all those cities in order to appeal to the all-important business travelers in that town. Meanwhile, there’s never a shortage of connecting traffic, but that fills airplanes with low fares that aren’t profitable without that balance of higher fare local traffic.

In general, connecting traffic is pretty crappy on its own. That’s because there is a lot of competition to get people from one place to another with a stop, and that keeps fares lower. It also means people are paying one price for two flights instead of one, so the costs are higher.

There are some exceptions to this. Places like the US Airways Charlotte hub are well-served by having many connections from smaller cities in the area that act like local markets. Places like Jacksonville, NC or Florence, SC don’t have any other options. Fares are pretty high, even for connecting traffic. So when you have places like that, it can help offset the issue of having lower true local traffic.

Downfall of the Medium Hub
What we have in Memphis is neither a lot of local traffic nor a lot of high fare connecting opportunities. The latter is partially thanks to mergers.

The problem we’ve seen is that as airlines merge, there really isn’t a need to have as many hubs to serve regions. Before Delta and Northwest merged, Northwest had its only access to the south via its Memphis hub. Delta today can serve a lot of the nearby Memphis markets via its megahub in Atlanta. And Atlanta is a much better hub anyway with a lot more local traffic.

Because of that, Memphis, has slowly seen its service erode. With connections able to flow more often over Atlanta, there’s less to go through Memphis. The local traffic is really what should be holding the hub together at this point, because there isn’t much of a need for the operation simply from a connecting standpoint. And the local traffic needs relatively high fares to support the operation since there isn’t the same amount of volume you’d find elsewhere. The fares have to be even higher thanks to the high price of fuel, but that’s not a Memphis-specific issue.

We Want to Fly Nonstop for Cheap
So what we have now is plentiful, high fare service, and the locals don’t like that. They want everything to be cheap. So they’ve created a Facebook page called “Delta Does Memphis” and they’re trying to encourage JetBlue and Southwest to come on in and lower fares. Southwest is technically in the market now via AirTran to Atlanta, but maybe Southwest will do more. Still, that would hardly mean all sunshine and roses for the city.

If JetBlue comes in, it would fly to Boston and/or New York and that’s it. Delta’s Boston flights would probably disappear very quickly if that happened. If Southwest comes in with guns blazing, I’d expect to see flights to places like Baltimore, Chicago, Austin, Kansas City, St Louis, San Antonio, Houston, and Florida. You can say goodbye to Delta’s service in most of Texas and Missouri, and probably some of the marginal Florida flights. (Florida is still a strong draw so it’s not going to disappear until the end times.)

Maybe then you see flights to Phoenix and Vegas with one stop flights to the west coast. Even though Southwest isn’t exactly a super low fare carrier anymore, the additional capacity and resulting fare pressure (they will definitely go down) will probably be enough to kill Delta’s big jets heading west from Memphis.

At this point, the hub really starts to unravel. With the big jets gone from larger cities around the US, the mid-size cities that remain won’t have enough connections to keep going. Some of the closest cities that are going to be almost exclusively connections will fall away – places like Little Rock, Nashville, Birmingham, etc.

But that won’t be the end of it. The remaining mid-size cities will probably be pushed into the red as well. Cities like Indianapolis, Louisville, Oklahoma City, Des Moines, Milwaukee, Omaha and Pittsburgh won’t support flights. This may actually happen anyway as Delta moves to eliminate 50-seat regional jets and upgauge flights. Memphis has a lot of 50-seaters today, and when those go away, some of the remaining routes will have a tough time surviving.

Without connections, the other airline hub cities go away as well. If people in Memphis need to go to Charlotte, Chicago, Cleveland, Dallas/Ft Worth, Denver, Houston, or Philadelphia, they’ll end up with better options on other airlines and Delta’s service would whither.

With these cities gone, it’s hard to imagine how small cities would continue to see service. Bye, bye Baton Rouge. Farewell, Ft Smith. See ya, Shreveport. So long Springfield.

What are we left with? Well, Memphis would look much like any other city in the Delta network that isn’t a hub. There would still be service to other Delta hubs in Atlanta, Cincinnati, Detroit, Minneapolis, New York/LaGuardia and Salt Lake City. There might be a few legacy routes that hang around, similar to what we see in St Louis up the road with American. Some Florida flights would probably stay, Washington/National might still keep service, and maybe LA would be able to hang on to a flight if it’s lucky. But there won’t be much left.

Out of the Ashes
Once the hub is dismantled, then what does Memphis air service look like? Maybe Spirit comes in with a couple flights, JetBlue could as well. But it will be very minor stuff. The only airline that has the potential to be able to add substantial service is Southwest, but I wouldn’t expect a ton. With pretty good service in Nashville 200 miles east and St Louis 300 miles north, Southwest isn’t likely going to be looking to flow a lot of traffic through Memphis.

Maybe Memphis looks like Pittsburgh for Southwest, a city with flights to Baltimore, Chicago, Denver, Vegas, Orlando, Phoenix, and Tampa. I assume there would be Texas in there as well considering the geography of Memphis as compared to Pittsburgh, but you’ll be able to count the number of destinations without needing to use your toes.

For people who want to go to those cities, that’s great. But for those who wanted to fly everywhere else, nonstop service will be gone. And will the fares be that much lower anyway? Oh they’ll probably be somewhat lower in those markets which are still served, but Southwest is hardly the cheapest operator around these days.

There’s no guarantee that the Delta hub will stay even if this scenario doesn’t play out. With its plan to eliminate a ton of 50-seat aircraft and replace them with larger airplanes, Memphis may already be in jeopardy. But the fix isn’t going to be lower fares, so don’t expect Delta to spearhead that effort. Instead, if lower fares come from low cost carriers, that will probably just push the hub into the grave.

They say the grass is always greener, right? Yes, Memphis might be happy with lower fares, but will it feel that way when it has a lot fewer flights to a lot fewer places?

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