The Hub-and-Spoke Model
Upon discovering this data, it could seem confusing that DL decided to launch a flight on a route only flown by 2,300 people every year. Indeed, with an average of 50 passengers per week, it would be impossible to fill up the aircraft and make the route profitable. However, this first impression doesn’t take into account the Hub-and-Spoke model, which is followed by every major airline, including DL.
The main idea is that instead of flying passengers directly from the origin airport to their destinations, the airline flies passengers to its hub for a short layover, and then connects them to a second flight to their final destination. This allows the airline to fly to many more destinations and increases the load factor on all of its flights. Every major airline has at least one hub where its passengers can connect. For example, DL has a major hub in ATL but also has New York JFK, Los Angeles (LAX), and airports in other major US cities.
The schedules, however, have to be planned accordingly. If DL wants to connect travelers to CPT, the carrier has to set the departure a little after most of the flights from when domestic destinations have already landed.
Passengers usually don’t want to wait for more than four hours at an airport. When there is high demand for a route from the airline’s hub, the carrier can decide to operate multiple flights, with some planned for business travelers especially, usually early in the morning and late in the evening, and others for connecting passengers during the day.
For example, on the flight from ATL to CPT, passengers starting their journey from ATL represent a very small percentage of the total load factor. Most people will fly from any DL destination, land in ATL, and then fly to CPT on a new flight. This is why DL can operate the route even if there are only a few passengers traveling between these airports.
Competing with Other Airlines
While airlines sometimes launch routes never operated before, it is pretty common for a carrier to launch a route already operated by one of its competitors. There are some routes with extremely high competition, and this makes it hard for newcomers to gain enough demand in order to make the route profitable.
In this case, the airline considering the route will study the competitor’s fares and passenger numbers to evaluate if the route is viable. Another important element is the load factor of other airlines operating the route. The load factor is the percentage of seats that are occupied by passengers during the flight. If the competitor has a high load factor, with many flights flying full, it means there may be enough demand for another airline to come in and take some of the load.
There are a few ways for an airline to get enough passenger demand even if multiple competitors already operate the route. The first one, of course, is the ticket price. Indeed, most passengers will look for a cheaper flight to their destination, so selling tickets at a lower price helps attract passengers. However, the margin for airlines is often very low, and it is hard to lower prices and keep the route profitable at the same time.
Another way to compete on an already-served route is to offer many connections with a hub-and-spoke network and partner airlines. For example, United Airlines (UA) decided to launch a new route from Denver (DEN) to Munich (MUC) this summer, but the airline does not fly to a lot of major European cities from this hub, to Paris, for example.
It can seem counterintuitive, but UA has a partnership with Lufthansa (LH), as they are both members of the Star Alliance and have codeshare agreements. This means passengers can fly to MUC with LH and then fly UA to DEN under the same reservation.
The last, and maybe the hardest way for a newcomer to attract passengers right away on a competitive route, is with an exceptional or brand new product. If the airline manages to create a different experience for passengers and aggressively advertises the new route, this will likely ensure there will be enough demand to sustain the route at first.
For example, US low-cost carrier jetBlue (B6) entered a brand new market: long-haul transatlantic flights between London and New York. It is one of the most competitive long-haul markets in the world.
Just today, six different airlines operated over 50 flights offering over 12,000 seats between the two cities, according to airlinedata.com. However, B6 managed to make the route work with its low-cost fares and its special Mint product and is now opening new flights from Boston (BOS).
Before opening a new route, and especially for international destinations, airlines often have to get special authorization from the local civil aviation authority. In the US, airlines have to get a special foreign air carrier permit from the Department of Transportation (DoT), which is sometimes not an easy task, as Wizz Air’s (W6)
DALLAS – If you often check our airline routes news, you may have noticed it is pretty common for airlines to stop flying to some destinations and to open new routes on a regular basis.
Last week, Delta Air Lines (DL) revealed new flights from Atlanta (ATL) to Cape Town (CPT). What happens behind the scenes before such an announcement is made?
We’ll take a look at the process of launching a new route, from market analysis to the inaugural flight.
It would seem pretty easy to pick a destination on the world map and start flying there. However, launching read more ⇒
Source:: “Airways Magazine”