US Airways cancels Delta acquisition

[A2]

A nice article done some time ago which tends to quantify the economic impact of the Hub.

http://www.businessnc.com/archives/2003/03...commercial.html

Can you say $4-5 Billion per year (there are other sources that show 2x that amount of impact, see my post below)?! That is a lot of Hay!

Currently we fly out more planes than the airprots in Frankfurt, Rome, Amsterdam, and Toronto! If we lose our Hub, cut the economic impact in half (at minimum)

This is what we have to lose, if, in fact, we lost our Hub status

Quote from the article:

While hub status results in higher fares, he adds, that

[A2]

According to this:

http://www.charmeck.org/Departments/Airpor...nomic+Asset.htm

The Hub provides well over $10,000,000,000 in economic impact, plus over 100,000 jobs in the region that are directly or indirectly related to the airport and its services.

That in and of itself is a MAJOR reason to be concerned about Charlotte losing its Hub status.

A2

[A2]

http://www.slcatlanta.org/Publications/Eco...%20industry.pdf

(see pages 24-25)

^^^^^^^^^^^^^^^^^^^^^^

Another airport study that shows probably the biggest impact.

8,000 Plus jobs since 1982! Now granted that has not all been because of Hub status, but take that away, and I promise companies will look to move to Atlanta over Charlotte, if for no other reasons than logistics.

A2

[Lexy]

Hey gang,

First of all, I just want to wish all those directly and indirectly invovled with US Airways all the best regardless of what happens. It's my hope that whatever the outcome, you and your family are okay through it all. I also extend that to those in Charlotte and surrounding locales that are, and will be, affected by a merger with Delta. To all, I wish them the best as some of the most trying times may actually be ahead of you.

Now to my post.

As many of you know Nashville was once a hub for AA with 200 or so flights a day. During that time, the prices to fly were astronomical and outright wrong. But flyers kept flying through neccessity here. Then AA left and a void was formed. Enter a Southwest Focus City. Now, Southwest has between 90-95 flights a day from Nashville and they have developed this into one of the larger southeastern Focus Cities for them serving over 26 markets non-stop. Now, granted we don't have a London flight anymore, but MOST corporate execs don't seem to mind the 30 minute flight to ATL for a international flight to Europe and Asia. American still maintains a large presence here with a respectable amount of mainline flights still based here. Losing a hub may be the best thing for the consumer in the long run anyways. Not only does it open the market up for true competition, but it lowers the prices and increases the O&D. All of which are good in the long run. Tying yourself down to one airline is never a good thing in today's market place. Diversification is great and quite honestly, it really hasn't hurt Nashville's ability to grow and attract business. The same could be expected in CLT if they decide to close down that hub. The big question is "IF" though.

Just food for thought: Nashville still has twice daily flights to Canada and six daily flights to Mexico (with more on the way supposedly). So a total loss of international flights is hardly going to happen most likely. Main thing is just keep your heads up and prepare for the worst. Even if it doesn't happen (which for many workers I hope it doesn't) atleast you are ready for a major change. Also, despite being a Southwest city, Nashville still has service to 43 total cities non-stop and over 60 cities both domestic and international on same-plane service.

Regardless, all of us over on the Nashville forum wish all those affected the best.

If the hub was to shut down, I could seriously see someone coming in rather fast to re-open some of the lost markets without a doubt. Of course, it is unlikely it will be on the same scale as the US hub, but still. It would keep markets open for business that would otherwise be lost in transition.

You guys in Charlotte are tough, you'll get through this without a doubt. Best of luck!!

Michael

[uptownliving]

If USAirways were to dehub CLT then I would expect Southwest and maybe Fronteir airlines to start service here. The avg fare price would drop, but not by that much as fares have already been dropping all year here in CLT. If the fares here dropped to the levels at RDU, then that would be a couple $Billion in savings per year for CLT travellers. However the economic impact from the lost jobs in Charlotte would out weigh any ticket savings.

I think that the worst case for CLT is that we would become what PIT is today, with USAirways still the dominant carrier at about 160 flights a day.

What I think is most likely to happen is that USAirways will retain Charlotte as a major hub but reduce the number of daily flights down to close to 500 from today's current 541 dailys.

[TravisNC]

...six daily flights to Mexico (with more on the way supposedly)...

[monsoon]

According to this:

http://www.charmeck.org/Departments/Airpor...nomic+Asset.htm

The Hub provides well over $10,000,000,000 in economic impact, plus over 100,000 jobs in the region that are directly or indirectly related to the airport and its services.

That in and of itself is a MAJOR reason to be concerned about Charlotte losing its Hub status.

A2

[A2]

Given that is a Chamber of Commerce report, I am not sure how seriously it can be taken, but lets assume it's accurate. What you have posted is the economic impact of the airport, not the economic impact of having a hub in said airport.

The GDP of the entire metro is about $70B, so its hard to imagine the airport is worth about 15% of that. But assuming it was and they dehubbed the airport so that it only serves O/D traffic, then what is the economic impact then? It's that difference that we are talking about. Not the entire closure of the airport. ]

As I have said, I think the significance of the loss of hub status is way over stated because people attribute that to closing the airport and that won't be the case. I would say that once it is done, CLT may have somewhere between 125 and 200 flights/day.

[Lexy]

Do you mean six weekly flights to Mexico?

[kickazzz2000]

From what I remember, Charlotte was a coveted spot for United Airlines during its failed merger with US Airways in the early 2000's. Hard to say, admittedly, whether that was just a smokescreen to get DOJ approval or not.

I knew I wasn't completely imagining things when I finally scrounged this up.

http://www.house.gov/transportation/aviati...00/goodwin.html

-----QUOTE

I would like to share another example of how our merger will improve the competitive landscape for consumers. The transaction will strengthen Charlotte

[monsoon]

United does not have much of a presence in the SE that is why they would have left CLT open. It was a completely different situation than with Delta.

About the DOJ, I think the general conclusion is they will not oppose it since the combined airline will control less than 18% of the flights in the USA.

[kickazzz2000]

United does not have much of a presence in the SE that is why they would have left CLT open. It was a completely different situation than with Delta.

About the DOJ, I think the general conclusion is they will not oppose it since the combined airline will control less than 18% of the flights in the USA.

[monsoon]

^Gee. It only took me 20 words.

[dubone]

A question raised by the United merger plan is whether the competition that United wanted create in the Southeast is important enough to give the regulators concern.

Competition is inefficient from a gross cost point of view, as there is some redundancy. But the competition creates an environment where society benefits. If Delta and USAirways are making a play to monopolize the Southeast and restricting competition, then hopefully the regulators will do something.

[kickazzz2000]

But the competition creates an environment where society benefits. If Delta and USAirways are making a play to monopolize the Southeast and restricting competition, then hopefully the regulators will do something.

[monsoon]

Given that a commercial passenger jet can cost between $50M - $300M, each depending upon configuration and millions more each year in maintenance and fuel costs, it is unreasonable to assume that every community is going to get service from multiple airlines. The industry can't afford it though they have been trying to do it. This has been one of the big issues with the airline industry since deregulation.

Because most of you are not old enough to remember it, in the days during government regulation, the federal government treated air travel as a public utility and it set the prices, schedules and the routes that airlines had to follow. The goal was to ensure that communities had at least one carrier given the limited resources that were set above. There was no need for a hub and spoke system in those days as all airlines operated point to point service and there were a lot more airlines than there are now. This was how air travel operated in this country until the beginning of the 80s when the airlines were deregulated in 1978.

When they deregulated, it pretty much became a free for all. Airlines no longer had guaranteed profit or routes and were now completely free to set these in order to grab market share from their competitors. During the 80s the carriers moved to the hub and spoke system, and a large numbers of hubs were established in this country. Nashville, Raleigh and Charlotte all got hubs for example. Much of this infrastructure, planes and employees were not needed, but the free market dictated all of this happen. It was a house of cards built on cheap fuel, deals from equally troubled airline manufactures, unusual financing, and generous tax incentives from the feds, state and local governments.

As we know this house of cards came crashing down then the market corrected itself and the reality of what I said above, started to hit home. That is, this is an industry that has high capital, energy and labor costs (due to the skill level) and it isn't possible to provide every city with multiple carriers. Without regulation, the airline industry is, at best, an Oligopoly when you are talking about maintaining service to most cities. (The low cost airlines exist by cherry picking off the best routes but they don't provide service everywhere) The industry is still correcting itself after the heydays of the post deregulation 80s.

Delta has a 600+ plane/day system in the SE and USAir has a 600+ plane/day system in the SE and they serve pretty much the same cities. It's very wasteful given what I said above. If they can combine their system and drop the number of flights to 750 for the same service, then a huge, I mean huge amount of cost will be driven out of the system. This also means they don't need two hubs in the SE. ATL is light years ahead of CLT in its abilities and there is simply no way Tempe will give up their spot in that airport.

This is what is going to eventually occur regardless of whether this merger occurs or not.

[Durhamite]

Given that a commercial passenger jet can cost between $50M - $300M, each depending upon configuration and millions more each year in maintenance and fuel costs, it is unreasonable to assume that every community is going to get service from multiple airlines. The industry can't afford it though they have been trying to do it. This has been one of the big issues with the airline industry since deregulation.

Because most of you are not old enough to remember it, in the days during government regulation, the federal government treated air travel as a public utility and it set the prices, schedules and the routes that airlines had to follow. The goal was to ensure that communities had at least one carrier given the limited resources that were set above. There was no need for a hub and spoke system in those days as all airlines operated point to point service and there were a lot more airlines than there are now. This was how air travel operated in this country until the beginning of the 80s when the airlines were deregulated in 1978.

When they deregulated, it pretty much became a free for all. Airlines no longer had guaranteed profit or routes and were now completely free to set these in order to grab market share from their competitors. During the 80s the carriers moved to the hub and spoke system, and a large numbers of hubs were established in this country. Nashville, Raleigh and Charlotte all got hubs for example. Much of this infrastructure, planes and employees were not needed, but the free market dictated all of this happen. It was a house of cards built on cheap fuel, deals from equally troubled airline manufactures, unusual financing, and generous tax incentives from the feds, state and local governments.

As we know this house of cards came crashing down then the market corrected itself and the reality of what I said above, started to hit home. That is, this is an industry that has high capital, energy and labor costs (due to the skill level) and it isn't possible to provide every city with multiple carriers. Without regulation, the airline industry is, at best, an Oligopoly when you are talking about maintaining service to most cities. (The low cost airlines exist by cherry picking off the best routes but they don't provide service everywhere) The industry is still correcting itself after the heydays of the post deregulation 80s.

Delta has a 600+ plane/day system in the SE and USAir has a 600+ plane/day system in the SE and they serve pretty much the same cities. It's very wasteful given what I said above. If they can combine their system and drop the number of flights to 750 for the same service, then a huge, I mean huge amount of cost will be driven out of the system. This also means they don't need two hubs in the SE. ATL is light years ahead of CLT in its abilities and there is simply no way Tempe will give up their spot in that airport.

This is what is going to eventually occur regardless of whether this merger occurs or not.

[monsoon]

^There is a difference between Hub traffic and O/D traffic. Hubs can be located anywhere as the only purpose is to move people from plane A to plane B. They are located near cities because cities build the airports. Dallas & Houston have two airports because when they built their hub, they did not decide to close their original field. Charlotte converted its original facility (pre-hub) into the cargo airport. South Fla has a huge amount of O/D traffic as it is afterall a tourist destination. Thus Ft. Lauderdale and W. Palm built airports in order to take business from Miami, but they exist only because of the destination traffic there. None of this has much to do with the hub business.

It should be noted the new CEO of USAir, who is also the youngest in the industry, has already closed the hub in Columbus, OH. More of this is gonna happen.

[Durhamite]

^There is a difference between Hub traffic and O/D traffic. Hubs can be located anywhere as the only purpose is to move people from plane A to plane B.

[monsoon]

If that's the case, then why not put a hub in Hickory or Fayetteville.

[kickazzz2000]

There isn't a hub in Fayetteville or Hickory because they can't afford to build one.

[monsoon]

O/D traffic is a nice benefit of course to having a hub in a larger city, but not a requirement. If it was, there would have never been hubs built in places like the former USAir hub in Dayton, OH.

[Cybear]

O/D traffic is a nice benefit of course to having a hub in a larger city, but not a requirement. If it was, there would have never been hubs built in places like the former USAir hub in Dayton, OH.

[monsoon]

Metro? Can you conjure up any vaguely plausible scenario where, short of the DOJ intervention most seem to consider very unlikely, CLT comes out unscathed? .....

[SmellyCat]

I can: if Delta fends off the USAirways takeover and emerges from bankruptcy on its own.

A nice tidbit from today's Observer: "Though most of the creditors the Observer contacted said they were waiting to see what Delta offers, some tell the Observer they're more comfortable with the devil they know and are inclined to reject US Airways' overture".