A Two-Horse Race Again: Denver’s seemingly sudden air service slowdown masks some key underlying strengths
Fast forward to the present, 2015, a great year for U.S. airlines and airports. This year, every major airport except one will have more seats than last year. That one exception? Denver. The No. 6 U.S. airport overall (by scheduled seats, according to an Airline Weekly analysis of Diio Mi data) is due to see a decline of nearly 1%. The next airport shrinking at all by that measure is the much smaller and more clearly beleaguered No. 24 Washington Dulles.
What’s suddenly wrong with Denver? Or is anything, in fact, wrong with Denver?
Relative to its own recent history, the numbers don’t lie: Denver is no longer a growth superstar. But by any other standard, the fact remains that in absolute terms, this airport serving a metropolitan area of fewer than three million people, not located at the crossroads of most major global traffic flows, somehow manages to rank as not only among the busiest U.S. airports but also among the busier in the world (No. 21 this year by scheduled seats, sandwiched between Amsterdam and Seoul Incheon).
That smallish metro area population ranks Denver behind, say, St. Louis, which long ago lost its American Airlines hub (a void Southwest partly backfilled). Denver, on the other hand, has been—until recently—not only an airline hub, but essentially a hub to not one, not two but three airlines. Alas, it’s “until recently” that explains this year’s decline.
Denver has gone through three broad phases during the past decade. In 2005, it was a two-horse race between United and Frontier, then a well-liked, upmarket hometown low-cost carrier. Frontier, like United, carried a lot of connecting traffic through Denver, although one of the many things making Denver unique among hubs serving relatively small metro areas is that a surprising percentage of passengers then as now—nearly 60%—actually begin or end their journeys in Denver. At Atlanta, for perspective, that’s about the percentage who connect; Charlotte, with Atlanta’s geography but Denver’s population size, has an even greater percentage of connecting traffic.
No hub, by definition, would exist without an enticing array of connecting itineraries. But airlines like hubs that have lots of passengers who don’t connect, because those passengers are cheaper to transport and actually pay premiums for convenient nonstop flights. What Denver perhaps lacked geographically, in terms of the most important global traffic flows key to airline fortunes, it more than made up for…
Also Inside this Issue:
There are airlines that make a lot of money. There are airlines that lose a lot of money. And there is Lufthansa, which grinds on with margins that neither embarrass nor excite. During the opening three months of 2015, the German giant held off-peak losses to manageable levels, such that it could affirm its forecast of earning a decent profit this year—but only with lots of help from Swiss, Lufthansa Technik and Lufthansa Cargo. The core Lufthansa-branded airline, more worryingly, is cracking under pressure from multiple economic and competitive forces.
One of those corrosive forces is Emirates, which faces some headwinds of its own, including significant revenue deterioration and the threat of political barriers to its expansion. But the Gulf carrier nevertheless enjoyed a good winter half thanks to enormous fuel savings.
In the Americas, two perennial success stories—WestJet and Copa—both produced way-above industry average margins as usual. For WestJet, despite some revenue pressure, times overall have never been better. For Copa, on the other hand, revenue pressures have never been worse. In the ASEAN region, meanwhile, Philippine Airlines and Tigerair showed further signs of a more stable regional supply and demand balance.
On Friday, the CEOs of American, Delta and United will again plead their case against Gulf carriers, this time at the National Press Club in Washington. Also this week: a BofA/Merrill Lynch conference in Boston, where the Big Three can further spread their word. Qatar Airways, undeterred, kept the pressure on with three new U.S. routes starting next year: L.A., Boston and Atlanta.
This issue is not currently online. To inquire about purchasing a copy, please email email@example.com.