Reagan National Airport Has Become A Connecting Hub By Necessity

Reagan National Airport (DCA) is a real gem among the domestic U.S. airports. Its prime location just minutes from downtown DC have made it convenient for business travelers and leisure travelers alike. During the pandemic, the airport made two major customer-facing capital improvements that made a good facility even better. Now that the pandemic is over, for domestic travel, one might think that this airport, like others, would be humming along.

But the pandemic hurt DCA more than other airports. It is a great location for business going to DC, but with most government offices still working remotely there isn’t as much business. It is a great location for busloads of school children from around the country to come visit their nation’s capital, but those trips haven’t happened since early 2020. While other airports have returned to 2019 levels of volumes, DCA remains trapped in a pandemic-impacted traffic slump. American Airlines, the largest airline at DCA, had to change how they use the airport given these realities.

DCA Demand

The greater Washington, DC area is served by three airports – DCA, Dulles Airport west of the city (IAD), and Baltimore’s Marshall airport (BWI) north of the city. Together, these airports serve a wide range of global airlines and many destinations. DCA is unique among them in that is serves only domestic traffic, and its position so close to the city and size of facilities limits it to single-aisle, medium sized aircraft and no international flights. There are a few locations, like Toronto and Montreal, that pre-clear U.S. arrivals on boarding so those flights can operate to DCA.

In 2019, DCA served 23 million passengers. This was a larger than typical proportion of business travelers visiting DC-area government, contractor, and NGO offices. On the leisure side, DCA was a popular destination for schools that would fly middle or high schoolers in for field trips. In 2022, a year that saw a good rebound in air traffic nationally, DCA served only 16 million passengers, a drop of 30% compared to 2019. When you look at all the biggest airports in the U.S., traffic compared to 2019 was 16% off 2019. DCA is still seeing double the traffic loss of the rest of the country, as the business levels have not returned and there isn’t enough leisure traffic either.

O&D Versus Connecting

Airlines use the term “O&D” to mean origin and destination. It means the airports where a passenger first boards and ultimately disembarks for good. This would mean a single flight in the case of a nonstop trip, or multiple flights with one or more connections. Before the pandemic, DCA was principally an O&D airport. This means that most people flying there were going to the DC region. O&D flights tend to drive higher yields, or price paid per mile. It also means that since few people are connecting, planes can move in and out more quickly and this makes an O&D airport often more efficient. These are two reasons that DCA has been an airport that most airlines want to serve, along with the traditionally high business traffic share.

Connecting airports, like Dallas’ DFW and Atlanta’s ATL process a large number of connections. This is an effective way to serve many customers with smaller capital investment in airplanes, since a single flight into the hub can be carrying passengers with many different O&Ds. The downside of this is that a lot of real estate is needed so that many aircraft can be on the ground at the same time. It also requires many employees that have to rush while people are connecting but have much less to do once the planes depart, at least until the next wave arrives.

Slot Controls’ Ugly Side Force AA’s Hand

Three airports in the U.S. are regulated with slot controls. This means that the right to land or depart from the airport is governed by the Federal Aviation Authority (FAA) and these slots have been granted to specific airlines. The three airports with this regulatory constraint are DCA, New York’s LaGuardia (LGA) and New York’s Kennedy Airport (JFK). Over the past decades, the slots allocated to these airports have grown and at these times the Department of Transportation (DOT) has run processes to ostensibly award the slots in ways to promote the most consumer benefit. Once an airline is granted a slot, they have successfully sold and traded these with other airlines, and they have become an intangible asset on some balance sheets.

Owning a slot, or a lot of them, at one of these airports is a valuable thing since the slots limit competition in the name of total capacity control. The slot is not just the right to land or depart, though. It’s more like an obligation, since not using a slot sufficiently gives the DOT the right to take back the slot and reallocate it.

In 2011, Delta Airlines and USAirways entered into a major slot transaction that effectively gave Delta the lion’s share of slots at LGA and USAirways a majority at DCA. When USAirways and American Airlines merged in 2013, AA became the major carrier at DCA and benefited from that position until the pandemic. But even when traffic volumes plummeted and haven’t yet recovered at DCA, AA has been forced to use their slots or risk losing them for good. For a period of time just after the pandemic, the DOT paused the “use it or lose it” rule for slots allowing all airlines to cut back when there was little demand. But with that rule back in place, AA is facing the need to use their slots even while traffic to DCA is 30% off of 2019 levels. They have responded logically by turning DCA into more of a connecting facility, to fill the seats from the missing O&D traffic.

I recently visited family in Albany, NY, and my nephew flew in from Dallas. His flight connected in Charlotte on the way to Albany but through DCA on the way back. This routing was his lowest-price option when booking from Dallas to Albany.

Project Journey Upgrades

During the pandemic, DCA completed a major redesign that was called Project Journey. This had two major features that are interesting to view in light of the continued traffic pressure at the airport. One was to create a new regional jet terminal to replace the singular and much-maligned gate 35X. Regional jets need the same slot right as a larger jet, so more regional jet flying into DCA is one way that carriers, especially AA, can react to the reduced volumes. It also creates long walks to connect, however, especially if connecting from a regional jet to a full-size jet or vice-versa. When the new terminal was created, I don’t think the Project Journey designers were thinking about generating more connections at the airport.

The second big change was to move the security checkpoints to be before all of the gates. Before this, each pier of gates had its own security entrance. It also meant that it was easy for someone to fly in, have lunch with someone local at the airport, then fly out. Now that can’t happen since all of the concessions are inside security, but if connecting you can now do that almost all without having to leave the secure side of the facility. I say “almost all” because the original terminal at DCA, now called Terminal One, still has its own security screen since it is physically located far from the rest of the airport.

Overall, Project Journey greatly improved the customer experience at DCA and on balance makes it easier to use as a connecting facility. This wasn’t its intended purpose, but it works out to be good for this.

The Future Of DCA

When the country was attacked on 9/11/2001, DCA airport was closed for a month and some were suggesting it never reopen, given its proximity to so many important government buildings. It did reopen of course but not until security procedures had changed. Smaller corporate jets that had made up almost 20% of DCA’s operations before 9/11, didn’t return until 2005. DCA has been through the wringer but has come out standing strong, and the current lack of traffic at DCA will at some point return.

The House of Representatives has passed the Show Up Act, compelling Federal workers to return to their offices. While this act may not fly, eventually people will start flying to DC again to work with the government, contractors, and NGOs. The region is also diversifying somewhat with major hospitality (Hilton and Marriott), a new large Amazon facility, and movement of Boeing from Chicago. All of this bodes well for an eventual return of business traffic volumes, as IAD and BWI are not really suitable substitutes for this kind of traffic. It is likely that leisure trips will pick up as well, including school trips. What can replace the once-in-a-high-school experience of a trip to the nation’s capital?

This may all take a few years longer, but in the meantime connections on AA can fill in the blanks. If you get the chance to connect through, enjoy the good restaurants, retail, and awesome views of some beautiful monuments and the Potomac River while waiting for your next flight.

Source: https://www.forbes.com/sites/benbaldanza/2023/02/06/reagan-national-airport-has-become-a-connecting-hub-by-necessity/