Is US Airways suffering because of bad hub location? Consider the following excerpt from the US Airways employee weekly newsletter, About US, dated March 19, 2009. The section is part of US Airways’ 2009 Company Goals:
Cost: Create a Cost per Average Seat Mile (CASM) advantage vs. Legacy Carriers
As much as we like our route network, our legacy airline peers have an advantage when it comes to the location of their hubs. Not surprisingly, hubs like Chicago, Dallas, Atlanta and Newark, NJ, are stronger markets than CLT, PHL and PHX. “We don’t have the same ability to generate revenue per available seat mile (RASM) as other legacy carriers. We have good hubs but we have to keep our costs low to maintain our competitive advantage. So cost management at every level of the operation is a key priority for US in 2009,” Doug explained.
So let me see if I understand this.
The CEO of US Airways is partially blaming its hubs on US Airways’ inability to keep up with other legacy airlines and has publicly shared his feelings with his entire employee base. While this may be true, instead of delivering the message in a such a way that would encourage his team to work with what they have to become better and stronger, he chose to say instead that they really aren’t competitive and has asked his team to lower the bar and their expectations.
This must be very discouraging, especially for those who work in the hubs.
On another level, what does this ultimately mean for US Airways, both its employees and customers? I found the tone and content of the message to be foreboding.
What say you?
{ 8 comments… read them below or add one }
The CEO is only just now waking up to the reality of his route network, having been in charge of this company for how many years? Perhaps he would prefer to go back in time and get involved with United or American instead, because Chicago and Denver or Miami and Dallas are better cities? (That was sarcastic.) Or maybe he needs to consider the fact that he was in charge while US Airways demoted Pittsburgh and Washington/Reagan and Las Vegas as focus cities for his carrier. CLT/PHX/PHL might not be as large by themselves as their competitors’s hubs, but at least they don’t have the overwhelming traffic problems that exist in ORD, ATL and the New York City airports.
Or maybe now that fuel prices are coming down, he’s simply looking for a newer scapegoat to blame instead of himself? What ever happened to “the buck stops here”, Mr. Parker?
Because of location? The hub and spoke design system means it shouldn’t really matter where a hub is located because everything feeds into that hub. However, I tend to agree with the traffic problems — never once have I had issues with traffic problems at PHX or CLT. Besides, why be a small fish competiting for slots with everyone else when you can practically have the run of the airport.
What makes Newark such a great hub? Two major airports within close proximity?
Part of the issue is cost of operations in those hubs, but the real issue might be location.
PHL/CLT are obviously east coast and PHX is west. Having no hub in the mid-us is a competitive disadvantage in terms of route flexibility, as it requires longer hub to hub flights (hence a higher CSM, even slightly).
Plus PHL suffers from the NJ/PA?NY traffic issues, which only ORD comes close to. And PHL is in desperate need of a capacity expansion.
EWRs advantage is it can really draw from two cities, thanks to easy connection via Amtrak. The reverse is not quite so true as NYC already has 3 airports to chose from, so there’s not as much need to look south.
I think that Jeff Linder is correct in that having hubs at the corners of the US sort of invalidates the entire concept of hub-and-spoke system, doesn’t it. So why doesn’t US Air switch to something that does may sense – like the point-to-point route system that Southwest uses? I guess they could always add a midwest hub, say at Memphis or St. Louis?
CLT, PHX, and PHL aren’t exactly next to tiny burgs. I don’t see any of those three as worse off than, say, DFW. What is this guy smoking? Way to inspire, moron.
I think they would be well served by moving into some of those empty former AA gates in STL for better Mid-West coverage, but other than that, I don’t see any major issues with their current hub system. Certainly the weather is better in STL than Chicago.
CLT and PHL (along with a strong presence in DCA) give them better east coast coverage than any other carrier… that has to be worth something. None of those hubs are on top of the NYC mess, CLT gives them enough coverage of the south, they have a strong Caribbean network (okay, in a depressed leisure market, maybe that isn’t so great.)
AA’s coverage in the northeast is poor, Delta and Jet Blue put too much in JFK, UA does not have enough in IAD.
I can see why they dropped PIT (whose idea was it to have two hubs on opposite ends of the same state?)
SirWired
While I am not a travel industry insider it seems in this postings comments from US Airways CEO and in my experience in flying their airline is that at every turn they look solely at reducing costs which usually translate into some poor or more expensive customer experience.
Why aren’t they looking at increasing value per seat mile. I sit exactly 85 miles from EWR and PHL and avoid US Air like the plague because its a guaranteed poor experience. If I were this CEO my message to PHL, CLT and PHX is demanding ever increasing quality and customer satisfaction every inch (let alone mile) of a passengers route.
Finally, why not use your hubs as a compeditive advantage? How about things like no baggage fees or free first baggage when traveling to/from hub where you already have a significant presence?
Bobby, that’s exactly what I was thinking when I wrote this!
I really appreciate everyone’s comments. I have learned so much from reading your perspectives.
I think a big issue is that Chicago, Dallas and Newark (ie NYC) are big-money cities, with lots of travelers and business. Sure, the hub-and-spoke system is designed so that it shouldn’t matter, but certainly someone from London would rather fly, nonstop, LHR-JFK or EWR (or ORD or DFW). What’s going on in PHL, PHX or CLT? Nothing (well, maybe Charlotte, a few years ago…). I’ve never understood US’s hubs, except that those airports have cheaper landing slots.
That said, I don’t really find the message that foreboding or discouraging; but I’m a pragmatic person, and I’d rather hear it straight, rather than some gushy, hackneyed CEO talk, “we’re all doing great!”.