Thursday, June 27, 2013

Philadelphia's hub status once American and US Airways merge

A report issued by the Government Accountability Office (I wonder if these guys are certified geniuses) reports that Philadelphia could lose hub status in favor of New York's JFK International Airport.  This same report also stated how Charlotte could experience a reduction in service and eventually lose its hub to a larger Miami operation.  For now, I will focus on Philadelphia.

From the article at http://articles.philly.com/2013-06-26/business/40208489_1_american-airlines-gao-report-northwest-airlines#UmhBaOFrROIPb3Cq.99

The GAO report, released June 19, the day of a Senate subcommittee hearing on the merger, said: "New York could serve as a better hub and international gateway than Philadelphia in the Northeast, while Miami could be a better hub than Charlotte in the Southeast." The analysis offered no data to back up the statement.
Right here, the report pretty much loses credibility.  If there is no data to back it up, then this is merely just nothing more than speculation.  At least, both US Airways and American have stated pretty much that this is entirely just speculation and that the G.A.O. has no idea of how the new American will function.  Philadelphia will remain as a hub and will be a key market for this airline.

My opinion of this is Philadelphia is a massive market.  It ranks among the largest metropolitan areas and generates a large amount of originating and/or destinating traffic, which is necessary for an airline to successfully and profitably operate and maintain a hub.  New York City may be the largest origin-destination market in the country, but it does have some limit or threshold at which point the market becomes saturated, decreasing the overall profitability of an airline's hub operation.  This is especially given that Delta and Jet Blue Airways already maintain large hub operations at JFK, where this report is speculating that American could shift its Philadelphia ops to.

American does have a significant operation at JFK, but they essentially focus on local origin-destination traffic rather than connections.  In my opinion, this seems to work for the airline.  Delta and Jet blue have operations that cater to connecting traffic as well as origin-destination traffic.  Could American open a hub at this airport and run it profitably, especially considering that Delta and Jet Blue are already very much entrenched there?  I am not sure that it can.

While JFK may have a few connection opportunities courtesy of American Airlines, I am thinking it would be wiser for the airline to shift some of this through Philadelphia, especially some of the international traffic depending on the connections.  The JFK base should continue to focus on local traffic and leave Philadelphia to handle the bulk of the connecting traffic on the East Coast.