New Airline Competition: Facts, Myths & Misinformation

The current air transportation system represents some tough planning issues. The danger is when solutions are proposed based on lore, misinformation and lack of industry knowledge.

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There has been a lot of buzz about the “need” for more competition in the airline industry. Statistics are flying around like stray bullets, usually decrying the plight of the American consumer.

According to a lot of what is reported, the USA scheduled air transportation system is in need of major restructuring. Let’s take a look at several of the oft-mentioned problems facing consumers today. A very hard look.

There is the contention that just a few airlines “dominate” hub airports, and how we need a trust buster like a modern-day Teddy Roosevelt to take action.

One consumerist recently revealed to Congress that Charlotte, North Carolina is a prime example. He testified – accurately – that American Airlines carries well over 80% of the passengers going through there annually. The contention was that other airlines must be allowed to give consumers new competitive options at Charlotte to capture some of this business.

Similar stories have appeared, denouncing how Delta dominates Minneapolis/St. Paul. Or how United dominates Houston Intercontinental. The feeling is that the entire concept of a “fortress hub” must be challenged, based on the belief that it allows one airline to dominate air service and prevent new competition.

Another issue is the belief that in a deregulated environment, airlines are allowed to come and go at their whim, often leaving cities with devastated air service. A few years ago, a major Washington travel association advised me that their research showed that Memphis had suffered the loss of well over twenty nonstop destinations because airlines were allowed to drop service at their pleasure, thereby harming the economic future of that city.

Then, of course, we frequently hear about lack of airport capacity, and how big airlines are hogging gates at large airports, preventing smaller carriers or new airlines from entering the market. Airport facilities are extremely expensive and limited.

Rural and small communities are also suffering. There are lots of small communities that have seen airlines drop service at the local airport. The contention is that without scheduled flights at the local airport – no need to define what they might be or where they go – the community’s economy will atrophy.

These types of observations are postured as outrages on the consumer. Big time outrages.

They certainly are. That’s because they are simply not accurate, and because they embody trendy ignorance that misleads the consumer. Worse, if they are addressed like proponents want, it would decimate air access for millions of consumers.

Yes. Read it and weep, consumerists. The system in place isn’t perfect, but neither is it one that is gouging the public with robber baron service.

Let’s deal with each of these issues.

Airline Connecting Hubs: Efficiency & Air Access, Not Dominance

Here is a fact: no airport itself is a “hub.” An airline makes the independent decision to establish and operate a connecting hub operation at a specific airport in order to aggregate passengers to connect to multiple destinations.

At most airline connecting hubs, the majority of the passengers are being routed by the airline to basically walk across the hall and connect to the carrier’s other flights. Reported numbers show that over 70% of the passengers that American runs through Charlotte represent no local Charlotte demand. It is simply that American has determined to use Charlotte as a connect point.

At Charlotte, as at all airline hub operations, the majority of that traffic is created by American Airlines.

In 2024, published data shows that over 50 million passengers went into and out of Charlotte. But less than 20 million were actually starting at or destined for Charlotte itself. The additional traffic was made up of consumers connecting between American Airlines flights, and in the process supported a range of nonstop flights that local Charlotte demand could never support by itself. Contentions that another airline would be able to capture this traffic is misleading nonsense.

The benefit to the North Carolina economy is enormous – including a range of international flights that American’s hub makes possible. Take American’s hub away, and this “flow” traffic at Charlotte goes with it.

This hub value has been demonstrated in the other direction, too. Some consumerist entities decry what took place at Memphis when Delta’s hub became uneconomic for the airline. Memphis still has robust air service – but only to destinations that the local demand can support. The many destinations once made possible by Delta’s hub operation are gone. Point: a hub operation at an airport is a consumer benefit.

Small Communities: Think Air Access – Not Air Service

Let’s tackle the reduction in service to small community airports.

The truth here is that “air service” cannot always be supported at the local airport. The local population isn’t sufficient. The combination of the economic demise of small airliners, changing communication channels, shifting consumer preferences and the option of using other larger airports, represent an economic cocktail that cannot be reversed by government programs.

One of the misconceptions about rural air service is that local flights are essential to the commercial viability of the community itself. That is pure nonsense, because many communities often have better and more time-effective air access at other airports, even with some additional driving time to get there.

Let’s clear this up – lack of scheduled flights at the local airport does not mean economic isolation. There are small communities that have far superior air service access – and more time-effective air service – due to higher service levels at airports as much as 90 minutes away.

A poster-child example is the pathetic federally subsidized flights at Pueblo, Colorado. They have two departures a day to Denver via a small commuter airline, paid for by millions in tax dollars under the Essential Air Service program.

In the case of Pueblo, depending on where the consumer lives, it is only about 30 to 45 more drive minutes to get to Colorado Springs where there are approximately 33 daily departures. (By way of comparison, that’s way less than the drive time that must be allowed to get to LaGuardia from many points in Nassau County.) There, consumers have the option of seven major airlines, accessing 11 connecting hubs. Compare that to just two flights at Pueblo Memorial Airport.

Considering the time inconvenience of the local flights at Pueblo, and the vast range of options less than 45 minutes away, this community has excellent air service. It’s just not at the local airport.

A similar situation exists at Toledo, Ohio, which has lost all major airline service. There is a reason – the community has better air options elsewhere. Despite lots of expensive and continuing studies and research, there is economically no way that Toledo can attract network airline service that can compete with the almost 360 daily departures at Detroit, barely an hour away. Again, it is an issue of total travel time. Even with the drive to Metro Airport, Toledo cannot attract and support enough network carrier service that can compete.

_{Airport Facilities – Highest & Best Use Is The Metric}

Now, let’s talk about availability of airport facilities, particularly arrival and departure gates. Here is some heresy: there must be an honest review of the highest and best consumer impact of facility and gate usage. Just adding another airline brand does not necessarily increase competition.

As for the contention that the big airlines hog gates at their hubsite airports, I would point out that United is adding more gates at Chicago/O’Hare. Gates for their exclusive use.

The natural consumerist response is not supportive, to say the least. The ongoing position is that big airlines need to turn over some of these facilities to “low fare” and maybe even new carriers that will – according to the dogma narrative – bring more competition to O’Hare.

Looking at recent United route announcements, here are seven hard reasons why United actually represents a higher and better use of these gates:

Paducah, Lynchburg, Wausau, Marquette, Santa Barbara, St. George, Idaho Falls.

All of these smaller airports will in the near future be getting new United service to the carrier’s global hub at Chicago/O’Hare. Massive connectivity because United has the connecting flight horsepower, and the gate capacity.

Consumer sentiment tends to gravitate toward the position that turning over these gates to low-fare carriers will deliver more competition to United. What these folks miss is that airport gates have value, and it is how they are used to benefit consumers that counts. In this case, yes, Frontier, Breeze or another small entrant would eagerly take over a few gates.

The fly in that ointment is that while United and its hub operation are delivering access to smaller airports, these smaller “low fare” airlines have different operating strategies. They tend to generally avoid heavy head-to-head competition with majors. A few flights a week to a couple of major destinations, maybe. More likely, some service to distant leisure points where the traffic demand is based on fare and where it represents very little new competition.

But they certainly would not be bringing the connectivity and the massive economic impact to small communities like Wausau or any other of these regional airports that United is adding to its O’Hare network.

The point is that just taking gates from a major carrier to let new entrants in does not always – in fact usually won’t – increase meaningful competition.

Back to the important concept of highest and best use of airport facilities. It’s more than a jump ball to see that opening new access to regional airports is a lot more valuable than adding a couple of weekly flights to places already well-served and which have very low potential of lowering fares for the majority of passengers. Or to leisure destinations that serve a sliver of the total demand picture.

The truth is that opening Lynchburg to a global gateway such as Chicago/O’Hare has fare more beneficial economic impact compared to adding a couple of flights to Cancun which deliver zero new economic impact.

Air Transportation – Subject To Economics, Period

To be clear, the air transportation system in the USA is not perfect. That is mostly because the raw economics of air transportation – both from the consumer side and the operational aspects – have changed uncomfortably in many ways.

But one reality is paramount. The discussion of air service must be accomplished in an atmosphere of clear understanding of these realities, instead of wishful thinking to bring back the past.

New thinking – futurist thinking – is needed. Even if it’s not pleasant to hear.