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Needed: Smaller Planes, Cheaper Flights

New airline industry trends spell even more trouble for hubs like Charlotte’s

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While Charlotte leaders chew their fingernails over US Airways' struggles to stay afloat, many industry analysts say a new trend in the airline industry could make hub airports like Charlotte's obsolete, or pretty darn close to it, over the next decade.Even if US Airways, which is losing over a billion dollars a year, gets the billion-dollar federal loan it's counting on, and even if it isn't swallowed up by some other airline that isn't interested in maintaining the Charlotte hub, there are changes in the airline industry that stand to pull business away from hubs across the nation -- including, and some say especially, hubs like Charlotte's.

What are these changes? Put simply, there are now small jet airplanes with incredible range that can fly from coast to coast. In the past, smaller jets serving smaller airports couldn't make it so far without stopping to refuel.

This technology has been around for at least five years, in some cases longer. But the difference now is that discount and smaller airlines, and in some cases major airlines are stockpiling hundreds of these planes and flying them out of locations once served by hubs. The result? Flights to the hubs from outlying cities are being choked off.

US Airways' competitors are doing this by offering cheaper flights on smaller planes that fly directly to a destination rather than stopping over at a hub to pick up more passengers. These discount service carriers, which made up six to seven percent of the market a decade ago, now dominate 20 percent of the market, says aviation consultant Robert Mark. This means that these discount service carriers now have enough power to compete with the bigger airlines and force a change in the market.

While financially frustrated US Airways execs sit back and watch, airlines like Jet Blue or Southwest, the only major airline to make a profit last year, are buying and running hundreds of smaller, long-range jets like Boeing 737s and Airbus A319s coast to coast and between smaller regional airports. In the past, the hubs sucked in a hefty share of this traffic.

Fifteen years ago, when Charlotte-Douglas become a hub airport, the logic was that you might not get hundreds of people flying to Charlotte from a mid-sized Midwestern city every day, but since the Charlotte hub offered hundreds of destinations -- aside from Charlotte -- you could fill the planes flying out of Charlotte with people from dozens of Midwestern cities. Each flight into a hub like Charlotte's could have exponential impact because folks flying in from all over could be added to it before it took off again, which filled large and small airplanes alike.

But if smaller, more efficient airlines offer flights out of, say, Oklahoma City on 50-to 70-seat jets with no stops, no meals, no movies and fares in some cases half those of the big airlines, those Oklahoma passengers have a more attractive choice they didn't have before. They wind up on a smaller jet that gets them to their destination two hours earlier than they would have had they sat around waiting at a hub. And somewhere, at a hub, a plane that could have been filled with connecting passengers from Oklahoma takes off half empty.

Since it purchased long-range Boeing 737-700s in 1997, Southwest Airlines, currently famed around the country for its short-flight regional service on small jets, has given larger airlines the jitters by introducing longer point-to-point flights that have pulled incoming flights away from the hubs, a phenomenon called "bleed off."

Can US Airways compete?The Washington Post reported with a fair amount of fanfare that starting in September, Southwest Airlines would be offering flights between Baltimore-Washington International Airport and Los Angeles, the first transcontinental flight for the short-range airline. Southwest's introductory fare for flights between BWI and Los Angeles? Only $200 round trip with a seven-day advance ticket purchase, the lowest fare in the industry. Given that the average round trip fare between BWI and Los Angeles is $420, it's not surprising that US Airways plans to eliminate its daily nonstop flights between BWI and Los Angeles in September.

"As we speak, there is bleed off from US Airways where Southwest flies," says US Airways spokesman David Castelveter. "It's really too early to determine what if any effect more point-to-point flights (by other airlines) will have on US Airways. We have been faced with competition with Southwest, AirTran Airways and Jet Blue and based on our company's exiting cost structure we have not been able to compete effectively."

Jerry Orr, Charlotte-Douglas International Airport's aviation director, says that one of US Airways' problems is that it hasn't gotten into the regional jet market like it should have.

That's partly due, he says, to the airline's current financial position and to a contractual agreement with its pilots that up until two months ago only allowed the airline to run a total of 70 regional or smaller-sized jets across its entire system. To pilots, who are paid according to the size of the planes they fly, the regional jets and smaller jets being used on cross-country point-to-point flights by US Airways' competitors are seen as a threat. They see US Airways' efforts to run smaller planes along routes formerly serviced by large planes as an effort to undercut them by replacing them with lower-cost crews on smaller planes. But, says US Airways' Castelveter, the airline must fly hundreds more regional jets that hold 50 to 90 passengers just to compete in the changing market.

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