Salt Lake City - a vulnerable hub?

A small, but dominated, hub

It did however, rate a mention in the overview of US hubs as being quite beholden to Delta, with nearly 75% of the operations and a seat share of about 73%. As shown in the chart, the carriers are few and there is no "other" category at all.

SLC seats by carrier (15-21 August, 2011)

Source: Centre for Asia Pacific Aviation and Innovata

Looming cutbacks

With this kind of dominance, Delta's recent announcement that it would cut its offer by 14% in the autumn could have a significant effect on the airport as well as its short - and perhaps - long-term prospects. If we use the above number for reference, over 50,000 weekly seats will disappear and SkyWest has already announced significant layoffs (150) due to the cutback.

And doubtless SkyWest will take the brunt of the reduction. Of the nearly 90 destinations served from SLC, only 18 have only Delta mainline service and another 18 have a mix of DL and OO flights.

That leaves about 60% of the destinations with only SkyWest RJ/commuter service and those flights also account for the majority of operations in the Delta schedule. Like Cincinnati and Memphis, Salt Lake is predominantly served by small capacity aircraft.

All DL	Mix DL/OO
Anchorage	Boise
Atlanta	Dallas
Baltimore	Las Vegas
Boston	Los Angeles
Cancun	Memphis
Cincinnati	Oakland
Detroit	Ontario
Indianapolis	Orange County
Los Cabos	Phoenix
Mexico City	Portland
Minneapolis	Reno
New York	Sacramento
Orlando	St. Louis
Paris	San Diego
Philadelphia	San Francisco
Puerto Vallarta	San Jose
Tokyo	Seattle
Washington	Spokane

Source: DL/OAG

Part of Delta's inheritance

Salt Lake City originally rose to prominence in 1982 when Western Airlines established SLC as a post-deregulation hub as it expanded eastwards. Salt Lake's location made it an ideal collection point for traffic to/from the intermountain/southwest states. At that time Denver was still using the rather constricted facilities at Stapleton and SLC was expanded to provide a less congested alternative.

Five years later, in 1987, Delta merged with Western and incorporated SLC as a hub in its expanded network. At that time, Delta also operated a hub at DFW, where it challenged American's dominance.

As with most US legacy carriers, the traffic declines following 9/11 resulted in operations that were both reduced and consolidated. However, by 2004 Delta was closing DFW and transferred the majority of its connecting traffic in the west to SLC, as shown by the passenger increases registered in 2005.

Generally stable

The boost that came to SLC in 2005 as Delta left DFW was rather short-lived and steady declines followed until 2010. But with a 14% reduction in seats pending, that stagnant trend will likely resume.

Salt Lake City--Snapshot of a Decade

	SCL Pax	SLC Pax Ops	DL Pax	OO pax	DL Total*	DL Share*	WN pax	WN share
2001	18819131	245568	11009554	2471975	13481529	71.64%	2288154	12.16%
2002	18662030	268388	10165301	3539354	13704655	73.44%	2053208	11.00%
2003	18446758	273976	9456043	3677426	13133469	71.20%	2125830	11.52%
2004	18367316	299168	7877006	4648978	12525984	68.20%	2244500	12.22%
2005	22237176	346986	9748143	5372251	15120394	68.00%	2344590	10.54%
2006	21557646	311382	8677951	5468309	14146260	65.62%	2827996	13.12%
2007	22043233	315502	8737391	6768464	15505855	70.34%	2960303	13.43%
2008	20790400	292112	8054006	6293159	14347165	69.01%	2685516	12.92%
2009	20432218	282132	7728619	6510958	14239577	69.69%	2612764	12.79%
2010	20901533	276512	8578378	6268114	14846492	71.03%	2584393	12.36%

Source: SLC Airport Statistics
* DL and SkyWest only

Salt Lake City is the smallest metro area in the US that serves as a legacy hub. According to the recent US census, it ranks as number 50 on the metro population charts with Memphis, another DL hub, being the next smallest at 41.

But with reductions

This is not the first paring that has taken place at SLC. The next chart lists all the cities that have lost nonstop service from Salt Lake City since the 2005 build-up. Especially noteworthy is the drawback from Fairbanks and two points in Hawaii, indicating that perhaps that the attempt to use SLC as a collection point for these flights was not sustainable.

Delta SLC dropped destinations 2006-2010

Aspen	Little Rock
Cleveland	Mazatlan
Columbus	Milwaukee
Des Moines	Monterey
Durango	Raleigh
Edmonton	Santa Barbara
El Paso	Sioux Falls
Fairbanks	Steamboat
Ft. Lauderdale	Tampa
Kahului	Toronto
Kona

Source: OAG

A great spot-for domestic feed

The city became a hub because of its location, situated roughly midway between the Canadian and Mexican borders; a real anchor in a rather sparsely populated region of the US. The city itself has grown only modestly in the past decade with most of the metro growth centered to the north around Ogden and in Provo to the south, each roughly 40 miles from SLC.

Only recently has Delta, spurred by community efforts and support, begun to fly intercontinental routes from SLC. It began service to Paris in conjunction with Air France in 2008 and started Tokyo in 2009. The Tokyo flight is seasonal and does not operate daily even in the summer. The Paris service is daily during the summer, dropping to 5X in the off-season.

Like its regional peers of Denver, Phoenix and Las Vegas, long-haul international links are few and far between-and usually vulnerable in weak markets. Only 2.3% of its seats cross a border.

Should they worry?

So is SLC destined to be another Cincinnati, continually cut and reduced to a shadow of its former self? Probably not. But is it destined to grow in Delta's network? Also a probable no.

Over the past decade, the traffic has fluctuated in a rather narrow band and that is likely to continue-with a gradual upward slope. There are a number of factors that lead to this conclusion.

• SLC has an excellent location and serves well as a collection and distribution point for communities in the intermountain West, providing an alternative to Denver, which is larger and a battleground between United, Southwest and Frontier.
• Unlike Cincinnati (or Memphis), SLC is far from any alternative connecting hub in the Delta network, again making the location an advantage.
• Southwest has a very strong presence at both Las Vegas and Phoenix (with US Airways), making those points dubious hubs for any other legacy carrier. But WN does not have the local service, small-aircraft capabilities that are required for small cities like Billings, MT or Fargo, ND. The feed traffic that Delta enjoys at SLC is probably dependable and may even grow-with little or no competition.
• Delta's major hubs are built around a complex domestic/international cross-feed. The absence of that at SLC will continue to limit the hub's expansion. While individual international flights may work, there is neither the synergy nor the customer base to support an extensive international network.
• With a 75% share, most frequent travelers are probably Delta/SkyTeam devotees, and when traveling over long distances most will likely opt for a Delta connection over one of its other, frequently-linked, hubs. Another international hub is unnecessary.

All in all, SLC may be the right size and in the right place to ensure its stability as a Delta hub, with a limited yet important role to play in the carrier's network.