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?

(Visited 105 times, 2 visits today)

Get Posts via Email When They Go Live or in a Weekly Digest

Leave a Reply

56 Comments on "Memphis Residents Should be Careful What They Wish For"

avatar
Sort by:   newest | oldest | most voted
Eric
Guest
Cranky – I like your post a lot; you do a great job describing hub dynamics and the domino effect that can quickly lead a reasonable-size hub of ~250 flights/day down to just another spoke. We’ve seen it play out so many times just in the last few years: PIT, LAS, STL, currently in progress in CVG, and perhaps just beginning in CLE. I’m curious for your conjecture on the role of PHL in a potential AA/US combination. I’ve read a lot of speculation on the internet but not much backed up with thoughtful analysis. I’m having trouble predicting how… Read more »
djsk
Guest

Not to drift the conversation already, but every time I’ve been through Detroit it seemed there were a ton of 50 seaters as far as the eye can see. I wonder how this will all shake out. Detroit is a nice facility with a ton of international flying but I always wondered if get would get reduced any.

David SF eastbay
Member
You would think Memphis would be a good choice to connect people between the west and south since who wants to fly to Atlanta to double back to Mississippi or other cities in that area. You would think DL would want to hold onto that to free up ATL for other service. I know I would rather use one of the hubs between California and the south if it meant having to double back to far from ATL. I thought the costs were low to operate at MEM because of the Fedex hub so that should help keep service even… Read more »
Bill Hough
Guest

I hope Air Elvis uses CV-880 Lisa Marie.

Bill from DC
Guest

CVG spent years courting LCCs too. Not only did they not get any LCCs but they watched DL’s hub withered into near nonexistence. Of course, much of that was due to the merger w/ NW and other economic issues but it is worth noting. Additionally, metro Memphis is a smaller O&D location than the metro Cincinnati area. I’m afraid that, no matter what happens, the end result is going to be the same.

DAB
Guest

Memphis has one small advantage, though, and that is that there is some demand for tourism there. Cincinnati, not so much… That may not keep hub service, but should attract the LCCs and maybe a little more variety than your ordinary de-hubbed city. Thinking logically, that is. I am not sure logic has much to do with airline schedules.

When Northwest invaded the south through Memphis, that was great. There was actually a viable choice compared to the lousy service and lousy fares from US and Delta in that day.

Carl S
Guest

I hope MEM’s costs are also lower than CVG

Upperdeck
Guest

There is not a large tourism base in Memphis….it’s mostly a drive-to city and the only tourist attraction is Graceland, home of the long-dead Elvis, which is located in a terrible part of town. Beale Street is downtown but there is a lot of crime in Memphis, and Tunica, Mississippi is 35 miles to the south for casinos.

Bob Beeman
Guest

As a traveler through both CVG and MEM, both seem to have about the same quality and quantity of tourist attractions. I have heard from several transportation sources that MEM passenger traffic breaks down into 20% local tourism and 80% flight connection. Those numbers predate the economic downturn. With the large flight reductions, I can’t imagine the financial draw to have improved for commercial flying into MEM.

Kilroy
Guest
To be fair, maybe CVG got the LCCs at other airports, as it was “island hopped” as a fortress hob. While the LCCs didn’t pick CVG, they did pick nearly all of the much smaller airports within a 2-hour drive of Cinci- Indy, Dayton, Columbus, Lexington, Louisville, etc. Any of those, especially Dayton (only a 1 hour drive from the wealthier ‘burbs north of the beltway, versus nearly as long of a drive from there through downtown traffic, across a major river, and over to CVG), are much cheaper options, easier to get in/out of the airport, and not that… Read more »
Bill from DC
Guest

Very good points on the LCCs surrounding CVG and the costs at MEM compared to CVG. The one thing I have noticed is that there does not appear to be much middle ground. Most airports are either full-blown hubs they just have service to each airline’s hubs.

SEAN
Guest

Maybe I’m off base here, but it semes as the few mega carriers consolidate, the MEM’s, CVG’s & Cle’s in the hub world will vanish driving traffic to the DTW’s, JFK’s & ORD’s. This will cause some passenger traffic to flow counter intuitively i, e you will need to fly east when you want to go west or something like that. This will cause travel time to increase & push some potential flyers away since they could get where they want to go faster if they drove instead.

Will
Guest
“Once the hub is dismantled, then what does Memphis air service look like?” . . . I can see the future, and it looks a lot like STL and CVG. If I’m a citizen of CLT (I’m not), I’d be looking very carefully at what’s playing out at hubs in mid-sized cities across the country and doing EVERYTHING I can to protect their excellent (and currently strong) hub. A potential topic of future exploration for Cranky: is there any correlation between massive infrastructure build and de-hubbing. Every time I fly through PIT (major new terminal), CVG or STL (new runways),… Read more »
Will
Guest

Oops. I hit “leave comment” fast. To finish . . .

And ? just as important ? how can other cities build the necessary capacity without undermining the long-term viability of their hub? Clearly a tough balance.

Joe_C
Guest
We’re sweating bullets in CLE over the same basic situation. Thanks to the United/Continental merger, what’s the long-term prognosis of the United mini-hub in CLE; where we’re surrounded by bigger hubs at EWR, ORD, and IAD? Flying through ORD or EWR is a nightmare already. All it takes is one thunderstorm or half an inch of snow and the schedule is pretty much shot for the rest of the day. Everyone I know has their share of O’Hare horror stories. If United closes down the Cleveland hub, a lot of us will look elsewhere rather than retain our allegiance to… Read more »
doug
Member

“The problem we?ve seen is that as airlines merge, there really isn?t a need to have as many hubs to serve regions.” Might PHX be in a similar situation should the USAir / AA merger occur or does PHX have enough local traffic to keep it viable?

BW
Guest

Where would the combined US/AA west coast traffic connect through? We already know LAX would not be a contender.

Jim
Guest

DFW

Nick Barnard
Member

This is a bit of a tangent, but while we’re talking about hubs, where does Alaska’s Seattle hub fall?

I’m thinking it’s like Charlotte as it has feed from small Pacific Northwest and Alaska cities that act price wise like local traffic, but there also are cheap flights to Denver, San Francisco, and elsewhere. What do you think CF?

BW
Guest

Seattle has boatloads (pun intended) of leisure traffic in the summer, lots of business travel, proximity to a large Canadian city, and a decent Asian gateway. I think it’s in better shape than CLT.

Fred
Guest

Seattle is a large enough city that it has significant O/D traffic, and there isn’t much alternative, especially when flying to Alaska.

davidp627
Member
I think that CLT has more local O&D traffic than MEM or some of the other mid-sized cities cited. CLT has quite a few Fortune 500 firms HQ’d there, not to mention BofA. DTW has a great hub airport and a lot of local traffic. It is easy to forget how HUGE the Big 3 are (even with cuts over the years) with vast international operations. Throw in a couple of other HQs and you have a fairly robust business environment. Don’t make the mistake of thinking that Detroit proper is DTW as far as airport traffic is concerned –… Read more »
Jim
Guest

The same can be said of Houston. A low-cost carrier came knocking, they accepted, and now they are losing service. Of course their hub is much larger than Memphis and not at risk of disappearing, but it’s the same concept. You can have either low fares or lots of nonstop service, but not both.

Bill Hough
Guest

Jim: “A low-cost carrier came knocking, they accepted, and now they are losing service.”

Me: Although the idiots at UA/CO want you to believe these two facts are related, it is more likely true that UA/CO is using Houston’s approval of an international facility at HOU as a pathetic attempt to make up a justification for cuts that were already in the works. How does WN’s operating HOU-Mexico flights affect UA/CO doing Auckland-IAH?

Al
Guest
“How does WN?s operating HOU-Mexico flights affect UA/CO doing Auckland-IAH?” NZ doesn’t currently have a direct link to Mexico or most of South America (Barring the LAN connection to SCL). IAH was probably the ideal hub for this sort of connection, however with competition to Mexico from WN, I there is less of an incentive for them to start this service. There are plenty of other routes that could profit from a 787, and the increased competition may well have tilted the scales away from this route. I don’t think its a stretch to say that nearly every international passenger… Read more »
DAB
Guest

That is actually a huge stretch. Southwest has a lot of flights going to and through Hobby. Those people aren’t looking exclusively, or at all, to UA through IAH to get to Mexico…

UA was being petulant.

Bill Hough
Guest

Petulant is an understatement. UA/CO won the coveted “Cranky Jackass” aware for trying to blame its IAH cutbacks on WN/HOU:

http://crankyflier.com/2012/06/04/united-blames-southwest-city-of-houston-for-its-own-problems-in-houston-earns-the-cranky-jackass-award/

Todd
Guest

So what you’re saying is that NZ has an excellent link to South America on its best carrier. Non-stop to SCL and one stop to most major cities on the continent.

Todd
Guest

And really, except for Mexico, it’s extremely inefficient routing to go from NZ to anywhere in Latin America via the United States.

Jim
Guest

I wonder if Delta will try to drive new entrants out of the market with predatory pricing, like they did in the past at CVG. My guess is no, they probably don’t care anymore.

RCL
Guest

STL is a slightly different story post hub. It has more passengers now than either Memphis, Cincinatti, or Cleveland even though it doesn’t have a hub anymore. It’s service with the help of southwest has drastically improved. True, one has to connect to go to far cities like Portland or San Diego or to small Midwest cities like sioux falls or des Moines. But to most major cities STL has good service and in fact often will overlap with the hub carriers to cities like EWR, LGA, DEN, MSP, PHL, DTW, and to cities like Houston and Dallas

freqflyercoll
Guest

I believe FedEx is based in and operates a major hub at Memphis. Obviously they don’t carry any passenger traffic, but does the presence of FedEx there create any cost or logistic benefits (or costs) for airlines that are operating in Memphis?

Kilroy
Guest

Great question, would love to hear Brett’s opinion on this and how FedEx & UPS affect the cost for pax airlines at their major cargo hubs. Surely they must pay a bit for runways etc, but is it enough to subsidize pax aircraft and to what extent?

Todd
Guest

I don’t see much connection. For example, Louisville has pretty sparse passenger service, mostly regional jets to hubs and a little WN; and UPS’s California hub, Ontario, has been losing service for years.

Eric A.
Member
Having worked for NWA in the early 2000s, I can attest that having FedEx on the property kept PFC and landing fees down. Major unskd mx issues were handled by FedEx…so the expense of having a major machine shop in MEM was not an issue. Even with those favorable financial metrics in place, the hub added little to the bottom line. In 1999/2000 (good economic times) we generated more revenue from the daily departures off the ratty old ‘C’ concourse at DTW than daily ops at MEM. It was Southern>Republic>NWA’s toehold in the southeast…that’s about it. ATL was not an… Read more »
Gary
Guest
Really?…Round trip fare from Memphis to Dallas…@$1200; from Nashville @$300 Round trip fare to Nashville…@$900…from Atlanta or Dallas… a whole lot less. The Delta hub’s high fares in Memphis are choking off convention and new business development…what good is it to have a hub where you can fly non-stop to most major US cities but you can’t afford the ticket? Delta is dismantling the Memphis hub with high fares and fewer flights and moving many of these flights to the over crowded and dysfunctional Atlanta hub…sure you need critical mass to have a successful hub…but in Atlanta, it is getting… Read more »
Dave
Guest
Memphis is a poor city that is seeing its population decline. It’s mostly a drive-to destination that lacks a big tourism or convention market. It also is not a big corporate city. With weak O&D, the writing is clearly on the wall for MEM. Delta will cut even more flights soon, especially with Pinnacle’s bankruptcy and the demise of the 50 seat regional jets that make up 75% of all DL flights from Memphis. The lone flight to Amsterdam is toast after this fall. Atlanta is far more efficient, so that is no real need for anything other than a… Read more »
Flightlevel
Guest

Memphis is just too small a city to support an airline hub. The o&d numbers are dismal. Delta is smart to move things to Atlanta where the connection possibilities are endless.

Upperdeck
Guest

Memphis and the surrounding areas of Arkansas and Miss. are actually losing population. Memphis is also facing a lot of crime and other problems, thus it is not a big destination of business, conventions or tourists. Not at all surprised that Delta is pulling flights from MEM.

Lucky777
Guest
Delta is definitely going to continue paring down MEM. The airport has dropped 1.3 million annual passengers over the past year due to the flight reductions already made. Most MEM flying is on 50 seat RJs, and DL is working hard to eliminate them. I honestly don’t see many other airlines looking at MEM, in spite of cash incentives for new service from the airport authority there. The O&D stats for MEM are anemic. AirTran has a few (maybe 4) daily flights to ATL, but Southwest has not even announced a start date for serving MEM. In a year, MEM… Read more »
Todd
Guest

Agreed. The metro area’s population is only 1.3 million. That’s 44th nationally, behind metro areas like Sacramento, Grand Rapids, OKC, Greensboro, Virginia Beach, Jacksonville, Louisville, Raleigh, KC, Indy, etc.

Memphis is by far the smallest metro area that has an airline hub in the US. Salt Lake City is the second smallest (1.75 million in region), but at least it has a geographic advantage, being a good place to connect to the west coast from anywhere further east.

Lucky777
Guest
Nashville is a great example of a former hub (AA) that is stronger today than ever. Southwest quickly filled the AA void and today offers about 85 nonstops from BNA. Of course, times are different than the early 1990’s. Compared to MEM, Nashville and middle Tennessee have a much larger population, plus a more vibrant economy based on strong corporate, and a large tourism and convention market thanks to the large entertainment industry in Nashville. Memphis flyers routinely drive the 200 miles to BNA to take advantage of Southwest flights and the much better airfares at BNA compared to MEM.
George
Guest
Ok being a native Memphian let me add and correct a few facts. As Cranky said-the costs or low in MEM $5.00 per passenger and no PFC. O&D is about the same as CVG-7500 per day, with a potential O&D pax going to BNA or LIT to catch SW, or ironically Delta and the connecting in MEM! Tourism Number 1 tourist attraction in TN is Beale Street, number 2 the Smokies, number 3 Graceland. Crime-if Memphis reported crime like most other cities, it ranking would drop into about 20th place-lower than Nashville. Finally, and I know you’ll disagree on this… Read more »
Tom Jones
Guest
I started the Delta Does Memphis group on Facebook. I’m in a business where I sell my time. You act as if our options are to pay more for what we have or complain about fewer flights. A large percentage of us are already driving to Little Rock, and even to Nashville, so I don’t think we’re just complaining to be complaining. We’re complaining because we’re being price gouged in a fortress hub by an airline doing it because they can. We also see that while we get happy talk from Delta and our Airport Authority, we are repeating the… Read more »
Bob Beeman
Guest

The airlines have been artificially propping up low fares by reducing employee pay and eliminating/reducing benefits also.

trackback

[…] foreseen. One thing is clear; this should make the Delta Does Memphis Facebook group happy. They love to hate Delta for its high fares in the market. These latest cuts should open the door even further for someone […]

trackback

[…] etc.  But in general, it just seems like a poor plan to live near an airport. Another post at Cranky Flier covered how people in Memphis are clamoring for a low cost entrant to bring down the fa…y.  Memphis is a major Delta hub (inherited from the Northwest days),  but it just barely seems to […]

wpDiscuz