Hard Analytics - Advanced Data Intelligence
St. Louis - Life After The Hub
July 5, 2010. The AA hub at STL is now officially dead. But it has not left a lot of opportunities for other carriers. Southwest has added only a few spokes - such as MSY, SAN, and SEA. Alaska has some opportunities in grabbing some Boeing business in the SEA-STL market.
But for midsize and smaller airports in the region, access to the world via STL is a memory that isn't coming back to reality.
Now, according to lore, not to mention some consultants, this pull-down should have offered dozens of new markets for all those LCCs supposedly circling American like bull sharks. But that's not the case. We can look at how Southwest reacted when AA stopped flying to all those points from Lambert.
True, comparing 3Q 2004 with that of 2010, Southwest is up about 281,000 seats. But that's nowhere near the 785,000 seats eliminated by American over the same period. Despite the lore, Southwest is indeed operating a connecting hub at STL, but it does not replace the connectivity that the TW/AA hub provided places like South Bend, Waterloo, and Cedar Rapids.
What needs to be remembered is that AA pulled the STL hub down for a number of reasons, not the least of which was the post-9/11 downturn, and then fuel costs that made a lot RJ feed operations fountains of red-ink. They were not driven out of STL by any onslaught low fare carriers. American made a business decision and left.
Fares & Local O&D - STL Is Very Strong. Comparing traffic and average fares paid in the top ten 2004 STL markets with the same data for 2009 reveals that the STL consumer has not been hit in the pocketbook - at least overall - with the elimination of the AA connecting hub. Compared to the rest of the nation, it's quite the contrary.
Average fares in the top ten 2004 O&D markets have gone up by 9.7%, to $149.11 (including federal fees and taxes), but that's about 18% below the national average of $182.00. For the entire STL O&D, average fares have actually dropped by almost 2%. Note also the total O&D generation, even after losing the huge number of hub-supported nonstops (which tend to stimulate traffic at the hubsite city) is down just 1.1%.
Going forward, STL still has excellent connectivity to the rest of the world. The fact remains that it is a key commercial center, and as such will have strong air service. But it won't again likely have a major airline connecting operation that provides nonstops to 100+ destinations.
Is Cargo A Revenue Alternative? Furthermore, concepts such as Lambert becoming a major trans-shipment hub point for Asian and Chinese air cargo might sound promising, but regardless of the number of studies and commissions and trade missions sent to Beijing, they are not highly likely. Air cargo is cost-effective only for goods that demand fast transit... high value electronic components, perishables, even fashion clothing.
Furthermore, air cargo works best when it is near the source or near the final destination of the goods being shipped. Ypsilanti works because it is in the midst of the auto business. JFK is a strong entry point for clothing and other goods because it is in the middle of a huge, established distribution network. STL has neither the local size nor does it have a huge cargo-centric distribution network.
The point is that the benefit of fast transit becomes rapidly diluted when the goods must be trans-shipped any substantial distances by ground - particularly if it's by rail. And if it's by air, it gets even more costly. They usual consultant's throw-away factoids that STL (or Plattsburgh, or Muskegon, or wherever) is "3 days from 50% of the US population" or "96 hours from umpty-ump million people" sound compelling, but are by themselves meaningless when it comes to the viability of an air cargo operation.
Increasing air cargo is a valid objective for any airport. But it must be an objective that meets a market need, and is not a solution looking for a problem.
Going forward, St. Louis Lambert does face a strong future as a gateway to the region. But with the elimination of the AA hub, it is no longer a gateway to the world. That's real-world reality.
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