What it Means When Southwest Says It Has De-Hubbed Atlanta

When Southwest bought AirTran way back in 2010, all eyes were on Atlanta to see what the airline would do there at AirTran’s homebase and biggest hub. What followed was months of shrinking, but now Southwest has moved on to phase two. It is de-hubbing Atlanta. That sounds radical, but, uh, what does it really mean? Let’s take a look.

The new de-hubbed schedule goes into effect in November, so I looked at a Monday in December and compared it to a similar day in December 2009, before the merger, to show what’s happening.

When Southwest took over AirTran, there was hope that this meant the combined airline was going to be able to use the AirTran 717s to serve smaller markets. Instead, Southwest shipped those off to Delta for cheap and shrunk the AirTran system dramatically. You can clearly see the results of that first phase in this chart:

I included one summer date in there just for comparison purposes. AirTran was always a highly seasonal airline, so I thought it was interesting to show. But if we look at the December before Southwest took over, AirTran was running 199 daily flights to 51 destinations from Atlanta. By this December, Southwest will have shrunk Atlanta departures by more than 20 percent, dropping the hub to only 156 daily departures.

At the same time, it has shed a net of 7 cities. But that destination count isn’t exactly telling the whole story. Most smaller cities in the US have been dropped while some growth has occurred in the existing Southwest network and to the Caribbean.

I thought the shrinking work was done, but I was wrong. In this new schedule, Southwest decided to end service to another three smaller cities from Atlanta: Buffalo, Pensacola, and very interestingly, Memphis. (They’ll still be in the Southwest network, just not from Atlanta.) Instead, Southwest has added nonstops to Hartford and Oklahoma City.

I was surprised to see Memphis lose that flight. It’s not so easy to compete against Delta when that airline’s costs have dropped while Southwest’s have risen. But that’s not the point here. The point is to talk about what this whole de-hubbing thing means. Let’s take a look at a cross-section of a day in Atlanta:

As you can see, the distribution of flights has changed dramatically. Previously, AirTran was set up to be able to fill more flights by flowing more people through Atlanta. That’s why nothing left before 8a; there needed to be time to get people from other cities into Atlanta to fill the flights out. (During the summer, there were earlier flights.)

You can see the big banks were in the morning and late at night. Southwest has changed that around. Now mornings are still busy, but you see a more even distribution through the day. However, that late night hub has basically been dismantled. AirTran used to have 24 flights departing after 930p. Now there will be 4.

That probably means reduced aircraft utilization, and that means costs will rise. Delta must love that. But it also means that Southwest is scheduling flights to be at times that are more attractive to travelers in Atlanta itself. And Delta doesn’t like that.

Keep in mind, this doesn’t mean Southwest is abandoning connecting traffic. When Southwest bought AirTran, 60 percent of Atlanta traffic was connecting. Southwest expects to see Atlanta connections drop to 40 percent of the total traffic in Atlanta, similar to what’s in Chicago and Baltimore. So Southwest is still going to take a huge amount of connecting traffic – it’s just not scheduling for it anymore.

It seems like that should make sense – local traffic has long been more lucrative than connections. Connecting traffic has become more valuable, however, thanks to consolidation and rising fares. But the valuable connecting traffic is coming from smaller cities for the most part. And those are the cities that Southwest abandoned when it bought AirTran.

So Southwest is focusing on local traffic and flight times in local market will generally get better. There are now early morning flights to places like Washington/National and New York/LaGuardia; that makes day trips for business easier to accomplish. In theory, it should mean business travelers in Atlanta will now be more likely to use Southwest if they like Southwest’s product offering, oh, and if they don’t need to fly to smaller cities that have now been abandoned.

Looking at the big picture, this whole “de-hubbing” means that Southwest took what AirTran had built in Atlanta and then dismantled it. It then rebuilt Atlanta to look like every other focus city in the Southwest network. So why did it need AirTran in the first place? Well, it’s a lot easier to build an operation with only one big competitor in town instead of two. It’s the same exact thing we would have seen in Denver if Southwest had succeeded in buying Frontier.

In Atlanta, Southwest saw opportunity, but it couldn’t make it work with a much lower cost carrier in the market. So it decided to buy it and effectively shut it down, making way for its own operation.