Cranky Flier argues that United has abandoned its Los Angeles hub in a piece entitled Should United De-Hub Los Angeles? It Already Has. The article is worth a read and presents some fascinating stats, but Cranky ultimately gets his analysis wrong: a more strategic and profitable flight schedule does not prove that United has de-hubbed Los Angeles.
Cranky starts with a flawed assumption, “Whether United wants to call Los Angeles a hub or not is irrelevant,” and then continues, “The reality is that over the last 10 years, United has dramatically shrunk its operation there and shed a lot of flights which were more attractive to connecting passengers.”
He then compares July 2006 traffic versus July 2016 traffic, presenting his primary evidence that United flew 45.7% fewer flights and 26.2% fewer seats than a decade ago and that United has eliminated 22 nonstop destinations from LAX while adding only 11.
Sounds convincing, doesn’t it?
But when you dig deeper you discover that the story is not as simple as United abandoning its Los Angeles hub.
During the Smisek era there was an effort to scale back Los Angeles. Los Angeles is a much more competitive market than San Francisco, with lower yields on many routes, and so the notion to cut less profitable routes and focus on the more high yield longhauls made sense in theory…but not always in practice. Think of LAX like a gas station. The lion-share of profits are made in the convenience store: the margin on fuel is very tight. But what happens if a gas station no longer sells gas? Will people still buy from the convenience store? Even Smisek figured this out.
Instead, a number of things happened that help to explain why we have seen a drop in United traffic at LAX that does not support the thesis that LAX has been de-hubbed.
Intra-California Traffic Lost Due to Aircraft Retirement
First, United shed many of its intra-California routes not as a basis of a decision to abandon them, but because it had no choice — Skywest, the regional subsidiary operating those flights on behalf of United, retired its fleet of 30-seat EMB-120 propeller powered aircraft, the heart of its fleet. With the retirement of the EMB-120, operating to tiny California cities went from being viable to not viable and service was cut swiftly and during a time of profitability.
Further, Skywest cut a number United codeshare routes due to a changing business model that guided the company away from doing “at risk” flying. While most United Express flights were operated with United bearing all the risk, Skywest had a handful of “at risk” routes in which it assumed responsibility for variable costs like fuel, helped to set tickets prices, still operated under the banner of United, but in return got to keep a greater share of revenue from the flights.
Finally, United (via Skywest) lost some Essential Air Service (EAS) routes (government subsidies to encourage air service to small communities) out of Los Angeles (with oddball carriers like Mokulele Airlines and SeaPort underbidding for the routes) that were nice lines on the route map but never represented a viable route absent subsidies.
United Airlines International Expansion at LAX
But while United has shrunk its domestic operations from LAX, internationally it has expanded, including a unique route that does not operate from any other hub.
Shanghai has been added, Melbourne has been added, and soon London will go from one flight per day to two. Tokyo and Sydney remain and no longhauls have been cut (LA to Frankfurt appeared briefly in 2007 but was redundant with two daily Lufthansa flights)
Look at the route map–
Flights from all over the country continue to feed into Los Angeles and examples can always be cherry-picked. Cranky cites the limited onward connections available after the arrival of the Tokyo Narita flight to argue that United is not treating LAX as a connection point, a fundamental component of a hub in a hub-and-spoke system.
But what about Melbourne and Sydney? I checked today’s flight schedule and the following flights are timed to connect with the Melbourne or Sydney flights:
- Honolulu – HNL
- Washington – IAD
- Newark – EWR
- Orlando – MCO
- Phoenix – PHX
- Fresno – FAT
- Cleveland – CLE
- Houston – IAH
- Denver – DEN
- Cancun – CUN
- Las Vegas – LAS
- Chicago – ORD
- San Francisco – SFO
- Sacramento – SMF
- Reno – RNO
- Seattle – SEA
- Maui – OGG
- Boston – BOS
- San Diego – SAN
- Kona – KOA
If you want to nit-pick, remove the three Hawaiian flights and you still have 17 flights timed to connect to Australia. That sounds like a hub to me…
Merger, Codeshares, and Alliance Partnerships
Cranky points to a drastic reduction in flights to Latin America as proof that LAX is no longer a hub. That’s wrong for two reasons.
Between 2006 and 2016 two big events occurred: a merger with Continental Airlines and Avianca-TACA joining Star Alliance. Continental had a strong existing Latin American route network from Houston and Avianca-TACA shared many of the same Latin America routes from LAX.
The reduction in connecting traffic to Latin America via Los Angeles is more attributable to codeshare agreements with TACA than abandoning LAX as a hub. You can still fly non-stop to Guatemala City, San Salvidor, and now San José from LAX on a UA flight number — it is just operated by TACA.
New United-operated nonstops from LAX to Puerto Vallarta and Cabo and a greater frequency to Cancun offer passengers more options than in 2006.
Houston remains a powerhouse for United Latin America flights and thus cutbacks due a better-placed hub also make sense.
United Airlines $573MN Investment at LAX
United is spending over $500MN to renovate its terminals at LAX. From the check-in lobby, to lounges, from gate areas to baggage claim, United is showing that it LA is not being abandoned.
Just last week United announced it would be converting its former Global First Lounge at LAX into a new Polaris Lounge, highlighting a long-term investment in international service from Los Angeles.
Los Angeles is certainly populous, but not large enough to support only local traffic. United’s investments demonstrate its commitment to LAX as a hub.
Finally, self-identification does matter and United chooses to label LAX a hub. Cranky argues, “Whether United wants to call Los Angeles a hub or not is irrelevant,” but here is why it is relevant — United’s conscious decision to label UA a hub reflects all that I have written above: that it is determined, even with fierce competitive pressure, to keep LAX as a hub airport.
Ultimately, Cranky writes, “There’s a lot of angst about me suggesting LAX is no longer a hub, but this is a game of semantics. If you consider something a hub because it has a fair number of flights, then fine, call LAX a hub. That’s not how I’d define a hub. A hub is something that’s built to handle connections.”
LAX is built to handle connections with a convenient immigration facility in T6, gate space consolidated into two terminals instead of three, and a remodel that will make United easier to navigate than ever before for connecting passengers.
I’ll stipulate this — LAX is certainly a “focus city” for United. But it is a hub as well, by all definitions. It may not be the connecting powerhouse it was in 2006, but blame that on Skywest and not United. Even with the reduction in intra-California flights, LAX continues to offer a convenient connection point with sufficient domestic and international flights to warrant its hub title.
I’d be interested to see (since Cranky has access to stats I do not) a separation of mainline and regional flights. It would not surprise me if mainline seats are actually higher today than in 2006.