Did consolidation cause traffic drop at midsize airports?

Memphis Airport was once a Northwest Airlines hub, but Delta scaled back flights after it acquired Northwest.
Memphis Airport was once a Northwest Airlines hub, but Delta scaled back flights after it acquired Northwest.

While air service has increased and prices have dropped at large airports over the past 15 years, the picture has been more mixed for medium-size airports, according to a recent analysis by the Eno Center for Transportation.

Some 853 million domestic travelers flew from large airports in 2005, the year in which the US Airways purchase of America West touched off a consolidation boom that saw five major U.S. airline mergers in eight years, the Eno Center, a Washington-based think tank, noted in its new blog, Aviation Insights. By 2016, the number of domestic passengers at large airports had risen to 985 million.

Conversely, medium-size airports, roughly defined by the Department of Transportation as those that handle between 5 million and 15 million passengers per year, saw their aggregate domestic traffic shrink from 284 million passengers in 2005 to 274 million in 2016.

As traffic has risen at large airports, prices have gone down. In 2001, the average one-way domestic fare out of a large airport was $256 while one-way flights from medium-size airports were priced at an average of $213.

By 2016, those figures had nearly converged, with one-way tickets from large airports costing $207 on average, compared with $206 for medium-size airports.

But despite the trend lines, analysts said last week that they were not certain about the cause, or even if the trends are relevant.

"There is going to be a lot of variation around this data," said Vikrant Vaze, an assistant professor of engineering at Dartmouth's Thayer School who specializes in airport system operations.

Indeed, the Eno Center notes that the dynamics of each airport are different and that fluctuations in passenger traffic and ticket prices can be driven by many factors, including the economics of a region, regulatory changes, specific business decisions made by airlines and by consolidation.

For example, on average, large hubs saw passenger growth of 15% between 2005 and 2016, but Washington Dulles saw a 34% decline in traffic, due at least in part to strong growth at nearby Washington Reagan National and Baltimore-Washington airports. Conversely, San Francisco saw its passenger numbers grow 62% during those 11 years, driven largely by the Bay Area's robust economy, according to the Eno Center.

In aggregate, medium airports saw a 4% decline in passenger traffic between 2005 and 2016, but in that sector, too, fortunes varied widely by airport. At Dallas Love Field, for example, traffic grew 157% as its dominant carrier, Southwest, expanded operations after the repeal of the federal Wright Amendment, which had prohibited all but short-haul flights from the airport.

On the other hand, Cincinnati and Memphis saw respective passenger-count declines of 71% and 63% as a result of Delta's decision to close hubs that it inherited in its 2008 merger with Northwest.

Nevertheless, even looking airport-for-airport, it is mostly the users of large U.S. airports who have come up winners. Of the 30 airports that saw both a drop in domestic fares and an increase in domestic traffic since 2001, 23 are large airports. Of the eight airports in which traffic went down and ticket prices rose, only Tampa falls in the FAA's large category.

Still, said Peter Belobaba, the airline industry program director at the Massachusetts Institute of Technology, it is important to be circumspect when looking at such figures. Notably, he said, the analysis doesn't account for increases or decreases in the average length of flights at various airports. Belobaba cited Love Field, where flight lengths have gotten longer, as an example. Fares from the central Dallas airport have risen 22% since 2001.

In its own summation, the Eno Center noted that more research needs to be done to understand the trends that affect air service in individual metropolitan areas. The economic crash of 2008, low fuel prices, a nationwide regional airline pilot shortage and consolidation have all impacted the U.S. airline industry over the past decade.

One person who has delved deeper into the impact that consolidation, in particular, has had on airline service across the U.S. is Dartmouth's Vaze.

In a peer-reviewed study titled "Impact of airline mergers on passenger welfare," which was published in May by the journal Transportation Research, Vaze and two other scientists used a mathematical formula to assess the impact that each of the five major airline mergers between 2005 and 2013 have had on passengers.

Included in the measure of passenger welfare were such factors as prices, flight frequencies, the number of nonstop and one-stop markets served and the time it takes to complete itineraries.

The researchers found that the Delta-Northwest merger of 2008 and the United-Continental merger of 2010 had an overall positive impact on U.S. flyers, while the 2005 US Airways-America West merger, the 2011 Southwest-AirTran merger and the 2013 American-US Airways merger were neutral for consumers.

More significant than the nationwide findings, though, were regional trends, Vaze said. The researchers found that after a merger, the passengers in the home region of the surviving carrier see gains in passenger welfare, while those in the region where the subsumed carrier had its larger network either gain less or lose.

For example, after the United merger with Continental, people flying within the western region, where United had hubs in Denver and San Francisco, saw drops in airfare and gains in connectivity, while people flying within the southern region, where United assumed the Houston hub that had been run by Continental, experienced the opposite.

Though reducing the number of hubs nationwide -- Memphis and Cincinnati are again examples -- is one obvious result of consolidation, Vaze said that his study showed no broader discrepancy between the way consolidation has impacted big airports and medium ones.

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