When America West and US Airways merged, one of the first jobs in the schedule planning department was to consolidate flying in and around the airline’s strong hubs. After all, it was the non-hub (and weak hub) flying that contributed the least to the bottom line. That may have served US Airways well, but Delta doesn’t see things the same way. In fact, Delta is taking a page out of Southwest’s playbook and doing a fair bit of point-to-point flying. But this isn’t simply copying Southwest’s strategy. It’s much more methodical than that.
US Airways didn’t really have a position of strength anywhere except where it had a real schedule advantage. That’s why it focused on building up its hub operations where it could provide the most utility. Southwest, as we all know, focuses more on point-to-point flying. It carries a lot of connecting traffic over those various points, but the route map looks like a true mesh across the US (if you ignore small cities). So are these latest moves a sign that Delta is moving away from the hub system more toward Southwest? No way.
What this really means is that Delta realizes that it will be competing with United and the new American for the high dollar business traveler not just in its hubs but in every spoke around the US. And if there’s a city where Delta sees opportunity, it will grow there.
Over the last few years, Delta has seen plenty of opportunities outside its hubs and tried to pounce on them. It made a run at St Louis after American shrunk to virtually nothing. That didn’t work. (I believe it’s back to flying only to its hubs from there.) But that hasn’t stopped Delta from trying this in more places.
Raleigh/Durham, another former American hub, has long been a pet project for the airline. Outside of its hubs, Delta surprisingly also flies to Baltimore, Boston, Columbus, Hartford, Indianapolis, Orlando, Philly, and Tampa. It has also recently revealed it will start flying to Vegas and to Ft Lauderdale. (I’m not even including the weekly seasonal flights to places like Cancun and Nassau.) That sounds like a concerted effort to blanket the big cities from Raleigh, but I think we’re actually seeing a couple strategies here.
Flights to Baltimore, Columbus, Hartford, etc are clearly business-oriented flights. They’re on 50-seat regional jets, so the yields must be pretty high for the routes to make sense at all. I would imagine Delta has some corporate deals that fill up traffic on these flights or they wouldn’t bother playing on these routes, some flown by Southwest with bigger, lower-cost airplanes.
But runs to places like Cancun, Orlando, and Tampa are going to be on bigger jets, aimed more at the leisure traveler. Southwest serves these well (not Cancun… yet) but Delta isn’t really competing with Southwest. It’s offering service in some of these markets as little as once a week. The idea, I have to assume, is to give those business travelers a good opportunity to stick with Delta when it comes time to take the family on vacation. Of course, the business and leisure traveler can often end up being the same person just on different trips. So the end result is that Delta can provide a ton of utility to people in that region.
This is the case in bigger cities as well. Look at Boston, for example. Outside of the Delta hubs, we already know Boston has flights to Raleigh/Durham. But it also has flights to Amsterdam, Bermuda, Columbus, Indianapolis, Norfolk, and Orlando. Now it’s adding Jacksonville, Nassau, Providenciales, Richmond, and Vegas to the mix. It’s that same mix of business and leisure destinations.
I don’t imagine Delta is going to be alone in using this strategy. United is still trying to untangle itself from the post-merger mess, but once that happens, I’d expect we’d see some opportunistic flying as well. And the same goes for the new American once that merger is done. Maybe Southwest will get creative as well and start trying to serve smaller cities in order to get them into the airline’s network. (I never said my dreams were likely to come true.)
This kind of thing is good news for medium to large-sized cities that aren’t hubs today. It could also trickle down into smaller cities going forward. For example, Delta is launching a weekly flight from Norfolk to Orlando that will go up against Southwest’s flight. If there are cities that are under-served today, each of the legacies will probably be interested in filling that void. It’s just that Delta is getting a jump on the others.
[Original bicycle photo via Shutterstock]
Well, I see Amsterdam as a Delta hub… They fly from Amsterdam to Mumbai too.
Certainly there is demand for “point-to-point” flying; both for business and leisure travelers. Having a connection easily adds two hours to the trip time (for a good connection) and the stress of missing it. The market has to be big enough though to sustain the operation; I don’t see “Rotterdam to St. Louis” become profitable soon.
Remember that all delta transatlantic flying is covered by a JV agreement with Air France / KLM. So you could also say, although it is not on their own metal, that they also fly to Paris from Boston …
And I don’t know how the JV works (each one commits some planes and they collectively think of the best routes to use them on ? Or each airline choose how to use its metal and they are just sharing sales and profits)
Christophe – I don’t know the specifics, but usually how it works is they round it up at the end of the period and see which airline flew a certain amount. Then revenue gets broken out that way, with some adjustments. So yes, Paris and Amsterdam should technically be considered hub flying from Boston. And you could say the same with London now thanks to Virgin Atlantic, I suppose. Though there aren’t many places you can connect beyond London on Virgin.
DL does fly their own metal to CDG in the summer season – they’re upgauging from a 757 to a 767 this coming summer.
Ya I’ve been noticing this with pittsburgh as well. Plus with these seasonal flights it looks more like a page out of allegiant’s book as some are only twice weekly. I hope it works out for them. It’s a really interesting strategy.
Interesting article, and it will be fun to see who tries what and where, like this article explains. I’m curious though as to Delta’s stance on DFW and if they’d be interested in re-expansion in the market, or if they’re holding that information back until they figure out what will happen with the Love Field situation, etc.
Joey – I don’t think you’ll see Delta expand in Dallas (other than the Love flying and possibly other hubs). It’s one thing to try to win business in a neutral market but it’s a lot tougher to do it in a hub. And with Spirit on the other end, there isn’t a ton of opportunity without a serious investment.
Boston historicly has had a fare amount of point to point service from DL & AA. Now with B6 in as a focus city, that trend will excelerate.
I think the legacy carriers are seeing that people really will fly nonstop between two cities two or three days a week, and not just to/from leisure destinations. Also since carriers like Allegiant are in a market today and gone tomorrow, the AA/DL/UA/US size carriers know they can take off from a nonstop (trial) market at anytime and people don’t seem to care. At least they have the advantage of rebooking people on connecting service unlike Allegiant who can just give a refund and leave people hanging.
Great points all around. When I was with NWA in the early-mid 00’s, RDU was one of the highest yield outstations in the network. To see new DL leverage that potential is not surprising. A key industry in the Triangle (after biotech) is insurance and financial services…hence the CMH (Nationwide), BDL (everyone) and BWI (Legg Mason, T. Rowe Price, techy Ciena Corp and lots of Fed traffic).
DL has always had a large footprint in BOS since the Northeast acquisition in 1972. It was a de facto regional hub well into the 00’s. It was grown and shrunk and grown and shrunk more times than I can count. The most recent pull-down coming with the build up of LGA as their northeast nexus. NWA also has a history of attempting to build BOS into a Euro hublett in the 1990s. To see new DL leverage it’s strength in the BOS market is not surprising.
The old DL did a fair amount of P2P flying but chased market share in black holes like MCO. New DL is using the old NWA ‘Heartland Strategy’ playbook and chasing business/leisure P2P yield in places like BOS,RDU,IND and CMH. It is a brilliant way to end run around WN’s (shrinking) P2P flying while leveraging assets and large FF bases in lucrative markets.
Eric – I actually had “Heartland Strategy” in my first draft of this post! This definitely has shades of the old NW strategy for sure.
It’s probably a reflection of people, especially biz travelers, being willing to pay more for nonstop vs. connecting service as much as anything else. As it sits today, if I want to go from DFW-MIA, and am looking at a choice between AA, DL, or UA, I’m disinclined to pick anyone other than AA, even if the fare was higher, because I don’t want to fool with connecting via ATL or IAH. If DL were to start a DFW-MIA nonstop, though, I’d be more willing to give them a try. I think it’s a smart idea on DL’s part, though we’ll see how well it works. In the bad old days, such a strategy would have instigated a nuclear fare war. Perhaps now that we’re down to three legacies, a targeted point-to-point approach is more likely to work.
MeanMeosh – I think the chances of a legacy airline starting a flight between two competing hubs is slim to none. That’s the last route that any legacy should want go into. With major strength by a competitor on both ends and little to none by Delta, it would be suicide.
Sorry, I used a really bad example there – should have used DFW-TPA or something like that instead. The hazards of trying to comment intelligently while trying to rush through your lunch break. The point I was trying to make was on semi-major point-to-point routes, DL must see an opportunity to extract a premium from nonstop service vs. a connection. In the days of Bob Crandall, even that kind of service by another legacy would have sparked nuclear war by AA. I’d be interested to see if that changes now that we’re in a world of three legacies.
MeanMeosh – I still think a move on other airline hubs would result in war even in a more minor spoke market. Look at Delta’s move into Seattle-SFO. Seattle is a Delta hub now, but United still retaliated with more service.
I do not know why Delta gave up there non stop Fll to Bos. They have plenty gates in Bos and it is not fun connecting through Atl.
Delta Don – I’m going to guess it has something to do with JetBlue’s 7 daily flights on that route.
Newer and quieter A319’s, leather seats, unlimited drinks and snacks, 34″ seat pitch, individual in-seat live satellite TV and crews that offer plenty of spirited service without the “I’m here for safety not passenger service attitude” don’t hurt their business model either.
DL enjoyed a near monopoly on BOS-Florida flying after the collapse of Eastern for almost 15 years. Other than AA’s spoke to hub MIA segment (and occasional stab at FLL), they profited from little (or no) competition to places like MCO,PBI,FLL,TPA,JAX and RSW. They also benefited from feed coming out of points around New England and upstate NY (on mainline or Connection) like BGR,PWM, BTV,ALB,YUL & the Canadian Maritimes. With B6 in the mix and and the aforementioned cities connected to LGA or ATL there is no point in trying to compete given DL’s cost structure. The $$$ is in unsexy places like RIC,IND,CMH,etc.
As a BOS based flyer, I have noticed Delta seems to target a lot of these random markets when they will have a monopoly. I frequently fly BOS>CMH and the fares are always over $300 and frequently close to $500. Similar situation with BOS>IND.
Long before the Virgin Atlantic tie-up, Delta has operated daily nonstop service between BOS & LHR.
Specifically, DL has been flying BOS-LHR since they got the LHR slots through the AA/BA divestiture when their joint venture was approved.
It’s interesting that Delta has shown little interest in jumbos at the same time it’s moving from 50 seaters. Anderson has been quoted as saying that they think frequency on smaller planes is preferable to larger planes with less flights and what the customer wants. I think that definitely plays in hubs and large cities like NY, Chicago and LA. But there seems to be a potentially brilliant possibility for them to dominate the midsize markets. With medium size planes across the whole domestic fleet it’s easy for them to use the equipment anywhere and deploy a series of mini hubs or focus cities if you prefer the term.
Here in Cincinnati it’s not really fair for to call us a hub anymore. But Delta still serves a lot of directs from here. Just not with the same frequency. And the planes are full.
Cincinnati may be small but it’s an important market being the home to P&G, Toyota North America, Kroger, Macys, Cintas and GE Aircraft Engines. GE’s freight is the primary reason we still have a daily direct to Paris. Cities like ours would of course like a lot of flights but we really just want a wide variety of directs. By making CVG and others like it mini hubs you help feed in traffic from the smaller markets but also offer direct flights out of the medium market to strategic smaller destinations.
Yes Delta has leases on their gates at CVG until 2015 but they didn’t have to leave the level of service where it is. I believe what they have in Cincinnati works for them now and wouldn’t be surprised if they start trying to replicate it in places like Raleigh and Dallas. The equipment is the key and by loading up the fleet with 76-160 passenger aircraft they have a lot of flexibility to go after the potentially lucrative and often spurned midsize markets.
Jason – I think you’re right about Cincinnati. There is a business market there and there’s a need for service, just not the 500+ daily flights that existed at one time. The point for Delta is to try to serve the local market needs instead of the connecting market. It has other hubs that can serve connections. In Cincinnati, it can just serve the markets that make the most sense. My guess is there’s still more cutting to be done there, actually. But it does seem to avoided the same fate as Memphis… so far.
Delta is FAR AND AWAY the best US carrier at the moment. They are thinking WAAAY outside the box (oil refinery as profit center and insurance marker; Flight Attendants with I-Pads for Customer Service functions; happy Pilots with an equity stake in the carrier; paying down debt and shareholder dividends; and smart aircraft acquisitions). Richard Anderson REALLY is making the airline perform without the ego-boosting so prevalent in the industry. Well done, sir!
Agree. I’ve cut down my flying on United/Lufthansa to zero this year, but been Platinum with Delta second year in a row now. Conscientious decision to go with the U.S. legacy with the best product by far.
Now do we see DL in the future run a BOS-ABQ or JFK-ABQ or like B9 is currently (ABQ-JFK) doing at a very strange time but that does not matter DL could easily drive B9 Nuts by flying from BOS or JFK to a city like ABQ even if seasonal
Jeremy – I would be surprised to see either of those, and I know that Delta’s primary goal isn’t to drive JetBlue nuts. JFK wouldn’t make sense because it’s slot restricted. Delta has a better use for those slots. Boston wouldn’t make sense, because I just can’t imagine there being much traffic in that market.
I’m no airline stategist but this just seems like common sense. If a route makes you money – do it, regardless of your hub and spoke models. Seems crazy that it’s almost 2014 and this is considered news or innovative.
So much for the DOJ’s concerns about the lack of competition. There’ll be plenty. If there’s an opportunity t make money, someone will seize it.
It struck me that this is also a potential cost savings mechanism. Lets say you only have 100 seat planes, and you have:
5 flights from ABC to HUB
9 flights from HUB to XYZ, a wonderful leisure destination.
If you’ve got 150 people on a day going from ABC to XYZ, it should be cheaper to fly:
4 flights from ABC to HUB
8 flights from HUB to XYZ
1 flight from ABC to XYZ.
You’ll likely get 90+ of those 150 people to switch to your non-stop and you can fill the remaining seats with new passengers you wouldn’t’ve gotten otherwise. In exchange, you’ve got one less landing and one less takeoff, which are a bit more expensive in direct costs, (Gotta slow down to get in line to land, taxi the plane, get people on and off, then do a takeoff, more labor required, etc.) and more contingent costs (Accommodations due to Missed connections, converging hotel stays in mechanical situations.)
Spoke to spoke flying is the best, presuming your plane is completely full at the same or better revenue situation as spoke-hub-spoke flying.
Covering Hotel stays! Although converging hotel stays sounds interesting..
Yes, on a small scale. But remember scheduling and routing that plane is a bit more tricky. It can’t just go back and forth between ABC and XYZ, it has to route via the HUB at some point to integrate with the network,so really you have a HUB-ABC-XYZ-ABC-HUB or a HUB-ABC-XYZ-HUB paired with a HUB-XYZ-ABC-HUB. And what happens when you have a maintenance problem? At the hub you just sub in your spare. On a point to point, you take a delay, or worse cancel the flight and reroute your now unhappy passengers via the hub.
Just today Delta announced they will be flying once a week on Saturday mornings from Lansing, Mich. to Atlanta with return flights making a connection thru Detroit. It will be interesting to see how well this is received, the airport manager regards it as a “test” of how much local support the flights will have.
Brett – do you think that with the last of the big legacy mergers about to start, do you think that DL/AA/UA will now focus on organic growth? Growth has been largely inorganic with the mergers. I think that in order to achieve growth, these carriers will have to expand outside of hub flying and we’ll see the legacies start to grow point to point flying focused around some cornerstone markets with BOS and RDU being primary examples for DL (and probably for AA).
BOS – Considering the level of profitability, I don’t expect organic growth to occur broadly. I mean, it should generally track the growth in GDP but not more than that. And sure, there could be some opportunistic plays. But, if you’re looking for big organic growth, the ULCC sector is the one to watch.
Somewhat unsure about this. Every few years when airlines have a good year, they start doing all kinds of ‘innovative’ stuff. Then the bad times return, all the innovative stuff gets cancelled, and the airline reverts to traditional form. Spoke-to-spoke sounds a bit innovative and I’m wondering whether it’ll really last.- sounds a bit like the people in charge of cost control have got a bit too friendly with some of the more imaginative network planners.
In Boston,, the thing is,, we HAD almost all of these routes,, and they pulled out. Take FLL, PBI, TPA for example,, we used to have 5x or so daily flights,,, and now none… LA, Vegas,, we used to have both those routes,, they pulled out of both.. When they had the Vegas route on a 757, it was hardly ever full,, but they switched it to a 737,, and it was ALWAYS full. Then,, a couple years ago,, they just completely took Boston out of the loop… but,, at least they’re slowly bringing things back.
Also,, after Delta pulled out,, JetBlue stepped in, and filled all those routes,, and guess what? They’re still flying them… with 80-90% loads
Hi, could someone help me understand a situation at Bangor International Airport. Delta used to have daily direct flights from Bangor to Boston and one stop flights BGR-PWM-BOS. These flights were always full.
Something changed about 4 years ago and there are no direct flights from BGR to BOS. If you want to get to Boston you have to go to PHL or DCA and change planes. This turns what used to be a pleasant 45 minute flight into a 5 hour, or longer nightmare. What happened? What caused Delta to make this change?
I’d appreciate any help with this question. Thanks
Janet – While I don’t know the specific answer here, there are three things to consider.
1) Shorter haul flights have generally suffered more than the rest over the last decade because of the increased hassle of security. So shorter haul flights have had a tougher time.
2) Just because and airplane is full doesn’t mean it’s making money.
3) Delta has made a lot of changes to its network over the last several years and it’s been more aggressive at cutting routes that don’t make money.