WWWA airline hub

[SkyWestOKC]

Southwest isn't the only price factor airlines work with. If southwest goes up, other carriers will match, or possibly undercut. Leisure travelers are rarely loyal. Business travellers are.

[Kerry]

SkyWestOKC - do you think the leisure air travel industry is about to tank?

[SkyWestOKC]

You won't notice it until late summer or early all at the earliest. Most people have already booked summer plans. So there's no way to know until you catch up to where future bookings are happening.

Personally, I don't think it is about to tank, if it does, it won't be nearly as bad as in 2008.

[ljbab728]

SkyWestOKC - do you think the leisure air travel industry is about to tank?

Kerry, I deal with this every day. I see more support for leisure travel now than I've seen for at least the last 3 to 4 years. In the OKC area, at least, people are willing to travel and spend.

[Kerry]

Kerry, I deal with this every day. I see more support for leisure travel now than I've seen for at least the last 3 to 4 years. In the OKC area, at least, people are willing to travel and spend.

I hope you are right but I am afraid our national economic direction doesn't look good. I see a lot more staycations in our national future.

[ljbab728]

I hope you are right but I am afraid our national economic direction doesn't look good. I see a lot more staycations in our national future.

The people in the OKC area certainly aren't worrying about that right now. Most people I talk to feel like they've been limited for the last few years and are ready to spend and go.

[bombermwc]

I'm not sure what economic outlook you've been looking at Kerry, but everything is on the upswing now. Especially here in OKC. So not sure where that comes from.

[Kerry]

I'm not sure what economic outlook you've been looking at Kerry, but everything is on the upswing now. Especially here in OKC. So not sure where that comes from.

Remember this post in 6 months.

http://finance.yahoo.com/news/New-jo....html?x=0&.v=1

[bombermwc]

But aren't we talking about OKC here? Take a look around here (oh yeah, you don't live here). The city is passing projections for revenue. We're not laying off people, in fact we're in a state of influx from other states. Our unemployment rate is still low and our economy is doing well. Even our state cuts aren't impacting like they were projected to because of the economy swinging back. Even my own office had a record setting quarter. So as Oklahomans have more disposable income, things like flying become easier to absorb. Like usual, Oklahoma has proven more robust in it's economy because we never over blew the market with stupid numbers, broad based bad mortgage choices, etc. Even at a time when the big boys like Chesapeake had a loss, the state revenue is still higher. That also shows a diversification of the economy here away from being tied to energy so much.

[Kerry]

But aren't we talking about OKC here? Take a look around here (oh yeah, you don't live here). The city is passing projections for revenue. We're not laying off people, in fact we're in a state of influx from other states. Our unemployment rate is still low and our economy is doing well. Even our state cuts aren't impacting like they were projected to because of the economy swinging back. Even my own office had a record setting quarter. So as Oklahomans have more disposable income, things like flying become easier to absorb. Like usual, Oklahoma has proven more robust in it's economy because we never over blew the market with stupid numbers, broad based bad mortgage choices, etc. Even at a time when the big boys like Chesapeake had a loss, the state revenue is still higher. That also shows a diversification of the economy here away from being tied to energy so much.

Who do you think uses a hub? A vast majority are people changing planes. The Oklahoma economy might be doing great but the rest of the country is in trouble. Unless of course you want to join my "Would Oklahoma and Texas be better off forming their own country" thread.

[venture]

While connecting traffic is a big portion of a hub's success, it can also be the crutch that kills it. Cincinnati is a great example. Over 80% of traffic there was connecting...very little O&D (Origin & Destination) traffic was was starting or stopping their trip at CVG. In order for any new "hub" to be successful, it needs strong O&D. While I haven't really commented much on this thread so far, the prospects stated by the OP just aren't rational right now.

We have to look at O&D markets to really see where the strength and if there is any room for a startup. Keeping in a mind a start up is going to have to have a very deep pocketed sugar daddy. JetBlue launched with over $125 million in the bank over 10 years ago. Allegiant, the other recent successful startup, isn't a traditional airline in the sense. Yes it is a fully scheduled airline like all the rest, but it is first and foremost a travel company that is profitable when it sells its passengers vacation packages along with air fare. The market right now is trying to reduce capacity even more now to get a premium on yields and increase profitability to pay down debt. American is on the verge of Chapter 11 still. United Continental is still buried in debt, the same with Delta and US Airways. Southwest is even feeling the sting since their successful fuel hedging program of several years ago is mostly neutralized now.

However, that doesn't meant there isn't opportunity out of OKC for a regional or local-focused airline. A hub airline? Not a chance. Just take your money and burn it. You'll have more fun. So let's look at the last available O&D figures.

Our Top 10 Markets:

Houston, TX - Southwest Controlled with 62% market share.
Las Vegas, NV - Southwest Controlled with 69% market share, but United is the low fare leader (11% market share).
Denver, CO - Southwest controlled with 62% market share.
New York, NY - Served by United, but American has highest market share (32%) and Delta is low fare leader (26% market share).
Chicago, IL - American has 40% market share, but Southwest low fare leader (but only 26% market share).
Dallas, TX - Southwest controlled with 64% market share.
Baltimore, MD - Southwest controlled with 64% market share, but United is low fare leader (10% market share).
Orlando, FL - Not served nonstop, but Southwest has 40% market share.
Los Angeles, CA - United controlled with 60% market share, but Southwest is low fare leader (21% market share).
Seattle, WA - Not served nonstop, but Southwest has 32% market share.

So a couple things that jump out. 1) Southwest is going to be a pain in the neck. They aren't the low fare leader in some of the markets they serve, but they have such brand loyalty in Oklahoma that local travelers don't care that they could be paying $20 or $150 more for their flight by choosing Southwest. 2) All these top markets range from 553 passengers a day (Houston) down to 189 passengers a day (Seattle)...so most the primary markets that could be evaluated for nonstop service are already taken care of. When you get below 200 passengers a day you start to have to rely on connecting traffic unless you have the equipment to make it work at the right fare to cover the costs.

Orlando is a market not served nonstop but is in the Top 10. This route has been attempted too much and has proven to be a failure from OKC. Frontier, Delta, Southwest and others have tried it. Allegiant was going to, but decided against it and pulled out of OKC completely. Seattle could be a potential market for Alaska out of OKC, but it would also benefit from the ability to have a lot of connecting traffic. However, this route likely will never happen unless OKC is willing to pony up a couple million to subsidize the start up.

The next batch of cities really don't provide much more in the way of saying "Yes! That market will work." Phoenix, Washington, Atlanta, St. Louis, and Kansas City are all served nonstop now and are either very thin O&D routes (Washington) or require connecting traffic to support (the rest). San Antonio, San Diego, Tampa, San Francisco, and Philadelphia fill out the next batch of 10. San Antonio was tried...twice recently. Both Trans States (United) and ExpressJet couldn't make it work. Same with San Diego. Tampa is Orlando Part 2. SFO and PHL could work, but only operated by the hub airlines there (United and US Airways) to permit connecting traffic to support them.

So back to an OKC based airline. The prospects are not great. However, there are two scenarios that could work.
1) Establish or capture a local service airline that operates EAS (Essential Air Services) to build a regional network that feeds into OKC. This would be an airline that would operate aircraft with 9 to 19 seats to markets like Ada, Ardmore, Ponca City, Lawton, Altus, Enid, Dodge City, etc and feed into OKC. The goal would be to get these subsidized under the EAS system, but that would prove incredibly difficult with airlines working to serve these (with EAS subsidies) to hubs like Denver, St. Louis and Dallas.

2) Establish a Great Plains mk II. The concept was good, but the execution was horrible. I also feel the aircraft type wasn't good. While I really like the Dornier 328Jet, very fun to ride on, but it is a regional jet which means fuel costs are horrible. I would look at more of a 40-70 passenger turboprop such as the new generation Q400 or ATR-42/72. I would then look for regional business markets that are with in range of the aircraft where I can guarantee at least a half full plane (which is typically the break even on these) at fares that would greatly challenge established airline - while still being profitable. With the amount of consolidation in the market right now, it almost seems we may see an eventual return of having the major trunk airlines on the higher demand routes between medium and large cities. However, that means many smaller markets get axed. We've seen this a lot already from previously served EAS markets or just smaller airports with in 100 miles of larger hubs. I think at some point in the future, it would be good to revisit the local airlines of the past and bring in more point-to-point regional services. Say from OKC you do markets like Tulsa, Colorado Springs, Wichita, Lawton, Amarillo, Dallas, Little Rock, Nashville, Albuquerque, Omaha, San Antonio, Austin, El Paso, Lubbock, Midland, etc. Not saying all of these would work, but giving a rough sketch of what a route map could look like. Take these cities and start doing connect the dots between them as well. It is also taking what Southwest did in Texas and the South and revisiting it, but with smaller more efficient aircraft. Air Wisconsin is another airline that I like to look back on with the network they had in the 80s. They served many of the top markets in the Great Lakes well through this type of spider web network.

Either way...OKC and most of the country will continue to see their air service choices reduce. Consolidation is well under way and we'll likely see 1 or 2 more mergers take place in the next 3-5 years to further cut back competition. The next logical question is when is the right time to step into the market and with what plan. The airline industry can be fascinating at times, but it is also extremely risky. It is definitely an industry where you can be guaranteed to become a millionaire...if you start out a billionaire.

[Kerry]

I am not sure about the future of EAS. It seems to be on almost everyones chopping block. On a side note, this is why the State needs to look at a state-wide rail network. With my route shown in another thread alomst every town in Oklahoma with more than 1,000 people would be connected to WRWA and Tulsa International.

[OUman]

The routes that you mention venture where Southwest is often the higher priced airline are nonstop routes. Many a time there are cities like Austin (where I am headed in the summer), Ft. Lauderdale, Omaha, Milwaukee, San Francisco etc where we don't have nonstops. That's where Southwest is actually cheaper by fare alone, the others are actually more expensive (and even more so with bag fees and other fees which Southwest doesn't charge). That's the reason I am flying Southwest to Austin this summer, I checked both AA and CO, and both were about $40 higher than WN. Doesn't seem like much but when you're on a budget, $40 is a lot of savings.

I'm not saying that WN is a low fare airline, it's a low cost airline, it can keep fares lower on average by keeping its costs low. Neither am I saying that WN is always lower, but take out Southwest from markets it recently entered, and you'll see fare increases. All markets Southwest entered in the last year or two had fare decreases because other airlines started matching its fares.

On another note, another in-state airline based at OKC may not be such a good idea when airlines are trying to cut out competition. Let passenger traffic increase, focus on getting more people to use OKC instead of DFW, and once it gets to about 4 million/yr with good yields-not just loads, you'll have more of an advantage in getting more planes/types or starting an airline.

[venture]

The routes that you mention venture where Southwest is often the higher priced airline are nonstop routes. Many a time there are cities like Austin (where I am headed in the summer), Ft. Lauderdale, Omaha, Milawaukee, San Francisco etc where we don't have nonstops. That's where Southwest is actually cheaper by fare alone, the others are actually more expensive (and even more so with bag fees and other fees which Southwest doesn't charge). That's the reason I am flying Southwest to Austin this summer, I checked both AA and CO, and both were about $40 higher than WN. Doesn't seem like much but when you're on a budget, $40 is a lot of savings.

Right...and nonstop really should always include a fare premium over connecting/direct routes. The connecting network allows airlines to spread the costs out more so one market isn't having to sustain itself entirely.

I'm not saying that WN is a low fare airline, it's a low cost airline, it can keep fares lower on average by keeping its costs low. Neither am I saying that WN is always lower, but take out Southwest from markets it recently entered, and you'll see fare increases. All markets Southwest entered in the last year or two had fare decreases because other airlines started matching its fares.

I think it will be interesting to watch what happens to markets that had AirTran and Southwest in them and what the fares do. I won't be shocked to see fares come up quite a bit as Southwest eliminates competition. Not to mention the smaller AirTran markets that, contrary to the P.R. smokescreen coming from Southwest right now, will eventually get the ax.

On another note, another in-state airline based at OKC may not be such a good idea when airlines are trying to cut out competition. Let passenger traffic increase, focus on getting more people to use OKC instead of DFW, and once it gets to about 4 million/yr with good yields-not just loads, you'll have more of an advantage in getting more planes/types or starting an airline.

It would be interesting to see what the exact leakage figures are right now from the OKC market. I also suspect we are going to see increasing pressure on the catchment area of OKC as well if Southwest retains Wichita (from AirTran). They more than likely will add additional services there which will make it more suitable for people in Northern Oklahoma to drive there. Granted, their contributing numbers may not be all that big anyway. We also have to consider any passengers we might be getting from that area or Southern Kansas as well that will no longer need to drive to OKC for Southwest.