Atlanta Hartsfield-Jackson International Airport

Southwest continues de-hubbing Atlanta as ROIC targets start to look murky

Southwest Airlines continues to refine the combined operations it has with AirTran in Atlanta as part of its overall strategy to put less emphasis on Atlanta as a connection point and more focus on creating a rolling schedule in the market that is more reflective of its other top focus cities.

All of the efforts that are designed to reach fruition in Nov-2013 are being undertaken to improve the overall performance of Atlanta in the combined AirTran-Southwest network as the integration of the two carriers continues.

But in the short-term Southwest is battling some revenue weakness as unit revenues during 1Q2013 increased just roughly 2% and fell 4% to 5% during Apr-2013. Some of the weakness in Apr-2013 resulted from the timing of the Easter holiday and system slowdowns triggered by budget cuts in the US. Moving forward, Southwest believes it should post unit revenue improvements during the last two months of 2Q2013, with the momentum continuing throughout the rest of the year.

Southwest Airlines presses to improve its fortunes in Atlanta by officially de-hubbing in Nov-2013

Southwest Airlines aims to realise its goal of dismantling AirTran’s hub in Atlanta in Nov-2013 as a means to bolster local passengers at the airport in the hopes of improving Atlanta’s performance. The declaration that Atlanta will officially become a point-to-point operation completes efforts by Southwest to eliminate unprofitable flow-through routes and concentrate on areas where it, along with AirTran, has relative strength.

After completing its acquisition of AirTran in May-2011, Southwest set its sights on network optimisation between the two carriers. The exercise essentially resulted in many small markets being eliminated from AirTran’s network and Southwest’s determination that Atlanta would perform more effectively in the combined network through the adoption of Southwest’s point-to-point route management strategy.

US carriers face a mixed outlook in Latin America as yields in the region weaken

US carriers are facing some weakness in their Latin American performance as significant capacity growth between the two regions appears to be pressuring unit revenue and yields. All three major US network carriers with a robust presence in the market – American, Delta and United – watched their yields plummet during 4Q2012 as they expanded capacity significantly to Latin America year-over-year. The weakness during the last three months of 2012 follows a somewhat lacklustre performance by those airlines during 3Q2012, which could indicate the US-Latin American market is reaching a certain level of maturity. 

During 4Q2012 American, Delta and United posted declines in unit revenue and yields on their routes between the US and Latin America. American recorded the greatest decline in unit revenues of 5.4% while United posted the largest slide in yields of 6.5%. Delta and American increased capacity to the region by 9.4% and 8.3%, respectively, while United’s capacity declined slightly by about 1%.

US Airways, which has a marginal presence between the US and South America and the Caribbean (and doesn't break out yield and unit revenue performance by region), recorded a 3% drop in unit revenues in the region. The carrier serves only one market in South America, Rio de Janeiro, and several leisure points in the Caribbean. US Ariways’ new service from its Charlotte hub to Sao Paulo begins in May-2013

Spirit Airlines broadens its focus to both legacy entrenchments and classic niche markets

Spirit Airlines executives have concluded consolidation in the US has created a prime opportunity for its ultra low-cost business model to allow the carrier to invade legacy strongholds like Dallas Fort Worth and introduce limited flights that will allow Spirit to grow the market with lower fares instead of poaching passengers and creating a structural shift in the competitive landscape. At the same time, Spirit is also developing its more typical niche markets to round out a network focus dominated by domestic growth during the past couple of years.

Spirit has turned its attention away from growing Caribbean and Central America services from its Fort Lauderdale hub to capitalise on some of the 300 non-stop markets between Canada and the northern region of South America that have more than 200 passengers per day each way. These markets, like northern New York state airports close to Canadian cities, can support the 18% annual seat growth Spirit aims to achieve through 2015.

Beijing briefly assumes title of world’s largest airport as Spring Festival traffic soars

Beijing Capital International Airport, the second busiest airport in 2011, has overtaken the world’s busiest airport by total passenger movements, Atlanta Hartsfield-Jackson International Airport, based on capacity (seats) data for the second week of Jan-2012, driven by increased traffic over the Spring Festival travel season, which commenced on 08-Jan-2012. CAAC has forecast a 7% year-on-year increase in passenger numbers to 34.9 million during the 40-day peak travel period, with domestic Chinese carriers' 8000 flights and capacity to transport one million passengers per day. However, Atlanta will regain its position once the Spring Festival traffic spike subsides, and will be the largest airport by passenger traffic in Jan-2012 as a whole. Beijing's temporary hold on the number one spot is a reminder that the title this year will return, and for the long term.