Don’t kill the short hop

Ryan Avent writes:

I like the comment that short flights congest airports as much as long ones. I’m of the opinion that a carbon pricing scheme would give a boost to rail travel over both driving and short-haul flying. But a potentially more important factor in some regions might be the runway congestion charges under consideration. I suspect that auctioned spots would tend to go toward long-distance flights, for which there are few good substitutes (question to the gallery: what are the high margin flights — where do airlines make their money?). Were that the case, demand for regional rail should significantly increase.

You’ve read a lot in the past few years about airlines “shifting” to “more profitable” overseas routes, but that doesn’t quite express what’s going on. Airlines are maximizing their yields, and business-traveler-oriented long-haul international flights often have better yields than leisure-class runs to Vegas or Orlando. But the long-hauls are not necessarily high-yielding on their own, but because they access feed traffic from lots of smaller markets.

Imagine that there are 100 passengers in Washington, DC, who want to fly to Paris. These passengers may not yield enough to warrant operating a 250-seat aircraft on the DC-Paris route. But if the airline can feed 150 people onto the flight from other cities, it can operate the route. This is how a hub works. A few people from Cleveland, another couple from Winston-Salem, and a guy from Huntington, W.Va., can help fill up that Paris flight, and the other people on the flight from Cleveland will disperse to other destinations. Far fewer airline passengers would take the Huntington-Washington flight with Washington as their final destination than would transfer to another flight. An airline hub offers positive network effects up to the point of congestion, which varies by airport.

Without the network effects of hubbing, few cities could support much air service on their own — especially long-haul international service. Sure, New York, Chicago, Los Angeles, Boston, and Miami might be OK, but even they would see cuts. Without sufficient short hops to feed the hub, marginal international destinations would face the axe. Therefore, you can’t simply limit short-hops without seeing network effects. With Jet A fuel spot prices around $4/gallon, the regional jets that provide most of the small-market feed are becoming less economical, and airlines are weighing cuts to their small-market service against the danger of losing too much feed traffic.

Furthermore, look at the route networks of airlines in Europe, where rail service is far superior and penetrating than in the United States, and where major airports are included in the rail grid. Even with dense rail service, Lufthansa, BA, Air France, KLM, SAS, and others rely on thick nests of domestic and regional short-hops to feed their far-flung international routes. In the United States, the Washington-New York route is commonly cited as an example of a place where trains are competitive with other transport modes. There are many European examples of routes of this length or less being served by airlines — not because passengers want to fly that route but because they feed the network.

As a result of route deregulation and sophisticated yield-management software, airlines have gradually centered themselves around hubs. (See the pre- and post-1980s route maps in the Airchive.) This tends to be more efficient, even if some individual flights defy logic. A couple personal examples: whenever I go to New York, I take surface transportation. But last year I flew through JFK from DC (thirty minutes) to catch a flight to London. On a trip to New Orleans last month, I flew first from Baltimore to Philadelphia — a fifteen minute flight. Such options maximized efficiency and provided me with much cheaper options than had I relied on nonstops.

I love train travel and would be delighted to see greater investment where the mode makes sense (and a corresponding rollback of Amtrak’s frozen-in-time transcontinental routes), but policymakers must be cautious when tampering with the ability of airlines to take advantage of network effects in offering air service widely and efficiently.