Smaller Hubs, Large Hubs and the Interdependencies. Prepared by: David Dague InterVISTAS Senior Vice President

Transcription

1 Smaller Hubs, Large Hubs and the Interdependencies Prepared by: David Dague InterVISTAS Senior Vice President JANUARY 26, 2017

2 Why should we care about large hub airports 90 million reasons why large hub airports care 80 million passengers from small, non and EAS airports connect to domestic flights at large hub airports 10 million passengers from small, non and EAS airports connect to international flights at large hub airports 1

3 The importance of small community access to large hubs cannot be overstated - represents nearly 90% of service Small Community Departures by Destination Hub Type June 2017 Large 87.9% Medium 4.8% Small/Non 6.9% International 0.5% Source: Innovata Schedules, via Diio. 2

4 Small communities are also important to large hubs with nearly one-fourth of the departures from large hubs flown to small communities Large Hub Airport Departures by Destination Hub Type June 2017 Medium 18.7% Large 46.1% Small/Non 22.3% International 12.9% Source: Innovata Schedules, via Diio. 3

5 Nonstop departures in large hub small community markets declining at a faster rate than seats Change in Nonstop Service in Large Hub Small Community Markets (Index 2007 = 100) SEATS DEPARTURES Source: Innovata Schedules, via Diio. 4

6 Resulting in an increasing aircraft size Average Seats per Departure June 2007 June Source: Innovata Schedules, via Diio. 5

7 Large regional jets have become the most frequently used aircraft in the large hub-small community market Large Hub - Small Community Nonstop Service by Aircraft Type June 2007 June % 24% 25% 23% 20% 20% 17% 17% 16% 13% 13% 11% Turboprop 75% 27% 28% Small RJ s 50% 43% 43% 44% 46% 47% 50% 50% 48% 43% 37% 37% Large RJ s 25% 11% 11% 14% 14% 12% 12% 13% 14% 21% 22% 22% 19% 20% 20% 20% 20% 22% 23% 23% 24% Jet 0% Source: Innovata Schedules, via Diio. 6

8 Large hub markets account for over 65% of the total small community O&D passengers Small Community O&D by Hub Type Year Ended 2 nd Qtr 2016 Medium 21% Large 66% Small/Non 13% Source: USDOT, O&D Survey, via Diio.. 7

9 Since the recession, large hub - small community O&D has stabilized and is currently experiencing moderate growth 110 Large Hub - Small Community O&D Passengers (Millions) CY 2006 YE 2Q Source: USDOT, O&D Survey, via Diio.. 8

10 Large hubs build the bridge between small communities Large-Large 30% Percent Change in O&D Passengers by Market Type S/N-S/N 21% CY 2009 vs. YE 2Q 2016 Large-Medium Medium- Medium 7% 20% Large-S/N 3% Medium-S/N 0% Domestic Average 18% 0% 5% 10% 15% 20% 25% 30% 35% Source: USDOT, O&D Survey, via Diio.. 9

11 Passenger revenue in large hub - small communities has flourished, increasing 32% since 2009 $20 Large Hub - Small Community O&D Passenger Revenue ($ Billions) CY 2006 YE 2Q 2016 $18 $16 $14 $12 $ Source: USDOT, O&D Survey, via Diio.. 10

12 Frequency and capacity cuts have led to increased load factors is this sustainable? 85% Load Factors CY 2006 YE 2Q % 79.3% 79.9% 79.0% 75% 71.6% 72.1% 70.9% 71.8% 73.5% 74.9% 76.1% 76.6% 70% 65% 60% Source: USDOT, T100, via Diio. 11

13 Top 10 large hub airports based on nonstop small community service Weekly Seats June 2017 Rank Airport Weekly Seats Atlanta 312,352 Dallas/Fort Worth 178,983 Chicago O'Hare 165,132 Charlotte 152,111 Denver 115,600 Seattle/Tacoma 89,699 Detroit 78,750 Minneapolis 71,798 Honolulu 64,919 Phoenix 63,665 Source: Innovata Schedules, via Diio. 12

14 The Big 3 combine to carry 76% of the small community passengers in the U.S. On-Board Passenger Share Year Ended 2 nd Qtr 2016 United 18% American 28% All Other 24% Delta 30% Source: USDOT, T100, via Diio. 13

15 Large hub small community passenger revenue accounts for one-fourth of each of the Big 3 s total domestic revenue 30% Large Hub - Small Community Revenue as Pct. of Total Domestic Revenue Year Ended 2 nd Qtr % 24.5% 24.0% 20% 10% 0% Delta American United Source: Innovata Schedules, via Diio. 14

16 Delta s Atlanta hub has well over 50% more small community market capacity than the 2 nd ranked hub Average Daily Small Community Service June 2017 Rank Carrier Airport Depts Seats Markets Served DL ATL , AA DFW , AA CLT , UA ORD , UA DEN , DL DTW , DL MSP , AA ORD 168 9, UA IAH 154 8, AA PHL 145 7, Source: Innovata Schedules, via Diio. 15

17 Delta has four hubs ranked in the top 10 of small community domestic-domestic connecting passengers 25.0 Small Community Domestic-Domestic Connecting O&D Passengers YE 2Q DL/ATL AA/CLT AA/DFW UA/DEN UA/ORD DL/MSP DL/DTW AA/ORD UA/IAH DL/SLC Source: USDOT O&D Survey, via Diio. 16

18 American has four hubs ranked in the top 10 of small community domestic-international connecting passengers 3.0 Small Community Domestic-Intl Connecting O&D Passengers YE 2Q DL/ATL AA/DFW UA/IAH UA/ORD AA/CLT DL/DTW AA/MIA DL/MSP UA/EWR AA/PHL Source: USDOT O&D Survey, via Diio. 17

19 The Big 3 generate their highest market shares in their small community markets Big 3 Hub Airport Capacity Share by Market Type June % 73.0% 60% 45.0% 53.0% 51.0% 40% 20% 0% Large Medium Small/Non Total Source: Innovata Schedules, via Diio. 18

20 Resulting in strong yields in their large hub small community markets on average 20% higher than other fares Big 3 Stage Adjusted Domestic Average Fares Year Ended 2 nd Qtr 2016 $250 Large Medium Small/Non $223 $225 $219 $200 $168 $190 $182 $194 $179 $189 $150 $100 American Delta United Source: USDOT, O&D Survey, via Diio.. 19

21 $1.2 Billion 20

22 Top 10 large hub airports based on the economic impact of small community passengers Los Angeles 36.4M 10 Denver 72.8M 5 Minneapolis 61.5M 6 Dallas/Ft. Worth 128.2M 2 Chicago ORD 122.9M 3 Houston IAH 53.2M 8 Detroit 53.2M 7 Philadelphia 43.9M Atlanta 244.5M Charlotte 109.9M 21

23 Small community air service in the news "This isn't about carrying more passengers in nonstop markets, it's about competing for the sum of a whole bunch of small markets," Scott Kirby, President, United Airlines The only places with reasonable fares are the smaller cities. That s where the money is. Andrew Levy, United CFO 22