Another Funeral for the Midsize Airline Hub

For the midsize airline hub, there’s been another death in the family. Just this week, news broke that Delta would shutter its hub operations in Memphis, Tenn. This marks the third time since 2000 that a metropolitan area smaller than 5 million people lost its official hub declaration, while other similar-sized hubs are barely hanging onto their status.

This is the new reality of commercial aviation in America—fewer hubs and fewer airlines, resulting in more concentrated operations across the country. In response, consumers need to understand the consequences of these business and logistical shifts.

The typical origin story for these lost hubs is upheaval in the airline industry. At the turn of the century, American boasted 10 major commercial airlines. But following a wave of bankruptcies and mergers, the number of major domestic carriers will drop to just four following the proposed American/US Airways merger. The theory goes that when two airlines merge, economies of scale allow the new single entity to cut hubs out of its network.

In many ways, Memphis fits this narrative perfectly. Originally the southern hub for Minneapolis-based Northwest Airlines, Memphis knew it was in a tough spot when Northwest and Delta merged in 2008. Delta’s hub in Atlanta was only about 350 miles away, making two southern hubs an unneeded luxury. So while this week’s announcement makes it official, the airport already lost roughly one-third of its departures between 2010 and 2012. The writing was on the wall.

Unfortunately, that origin story is a little too simple. The real impetus for these operational shifts is a more traditional market story: supply and demand.

Based on Brookings analysis of FAA data, domestic travel demand has hit the skids. Between 2005 and 2012, the number of domestic passengers actually dropped by 15 million passengers while international passengers jumped by 27 million. Domestic growth slows even further if you subtract the domestic legs of international journeys.

At the same time as demand stalled, airlines also reduced flights. To increase what the industry calls load factors—essentially the average share of seats filled on each flight—airlines reduced domestic flight levels by 10 percent between 2005 and 2012. This left travelers with fewer departure options, but it helped increase domestic load factors from 78.6 percent to 84.3 percent over the same period.

Such supply and demand shifts couldn’t exist in a locational vacuum. In an effort to consolidate domestic operations, airlines had to locate metro area airports with insufficient seat demand where they also oversupplied flights.

The midsize hubs answered this question a little too perfectly. Their economic and demographic bases were often too small to fill the higher-capacity planes on ocean-crossing journeys, meaning they were unfit to operate as international hubs, especially in comparison to metro areas like New York and Miami. The midsize hubs were also too small to support multiple flights between many of their domestic peers. For example, transfer passengers represented 63 percent of Cincinnati’s total volumes in 2003; take away all those forced transfers and there simply isn’t enough business left.

These market realities meant hubs located in metros with populations under 5 million people often experienced dramatic changes. As mentioned, Memphis will join the ranks of St. Louis, Pittsburgh, and Las Vegas as locations losing airline-assigned hub status since 2000. Other official hubs like Detroit, Minneapolis, Cleveland, Cincinnati, and Salt Lake City have all seen their total flights drop faster than the national average. These last five markets haven’t lost hub status—but that hasn’t insulated them from market forces beyond their control.

There is no question that these business shifts can dramatically inconvenience passengers, both in and outside of the former midsize hubs. Stories like this in the New York Times, where 700-mile travel takes all day, are becoming all too common.

But this kind of qualitative reporting doesn’t address a quantitative reality: How many people actually wanted to make the same trip? If the numbers aren’t enough to cover a flight’s operating costs, then airlines have no incentive to offer the trip.

Unless those travel demand numbers change, flyers will need to adjust. Traveling between midsize and smaller markets will often mean few direct connections. Itineraries may last longer as connections add unnecessary flight mileage. Effective prices—tickets plus fees—may rise due to industry consolidation and serious restrictions on international competition. Forced flight connections via regulation isn’t coming either—the country already tried that once and it meant even higher prices than today.

These are the cold realities of travel in America. So as markets like Cleveland, Cincinnati, and Salt Lake City look around the room at another demise, we should genuinely ask: Who’s next?