Make connecting customers connect elsewhere - A solution for LHR capacity?

[sidest]

We know there is a lot of O/D traffic in the UK compared to the norm, particularly London. Then we come to the hub concept. Does it matter where a hub is? Dubai certainly isn't the holiday and business destination of the world.

If the connections are convenient, the ground service is good and most importantly the flights are well priced - surely it doesn't matter? So I think I have a solution. I suppose this mainly applies to BA, although other airlines may be able to make use of it with a focus on their alliances.

The idea is not to create a secondary hub in order to work independently of LHR, but rather one that would complement it. This hub would only comprise of existing routes and would have a focus on (but not limited to) connecting traffic - essentially diverting a portion of it from LHR and routing it through STN.

Considering the London-cenric view of premium airlines, the airport would have to be near(ish) London. LGW is a little inflexible because many of the 'good' slots are taken. So take I'll take STN for example. (Remember this is only an example).

There are as many as 14 BA/AA LHR-JFK flights a day. There are many other routes with a large number of frequencies. Cut some of them. Based upon customer data, select a small number of frequencies to cut and then move them to STN. These moves could also be bulked up for growth and flexibility. For example, cut 2 JFK frequencies and add 3 to STN, cut 2 FRA frequencies and add 3 to STN and so on. Time the flights to optimise connections.

Operating costs at STN would be notably cheaper than LHR. Creating a lean structure for the new devision, rather like the Mixed Fleet initiative, will help to keep costs down even further. Utilising aircraft such as the 787 on long haul sectors will also improve financial viability. The savings (or part of them) would then be passed on to the customers, offering an incentive to travel through the new hub. Highlight the cheaper prices. Let those who regularly connect know. Market the fact that is is cheaper and drive as much connecting traffic through the new hub rather than LHR.

• It creates and allows for growth on existing LHR routes.
• It offers many UK residents a more convenient choice.
• It offers customers both in the UK and abroad a cheaper choice.
• It frees up some slots at LHR for further growth in new markets.
• It builds the Stansted name internationally.

By having a comprehensive full service airline offering to key world cities, the Stansted airport name could be taken further and become more recognised in the international market. This potential could then be harnessed to initiate plans to improve links to London, particularly optimising and creating faster links with the Stansted Express. This in turn would make the airport even more marketable to non-connecting traffic. It must be noted that NRT is further away from Tokyo than Stansted is from London.

As I said this is only an example, but does the idea have weight?

[Tableview]

This is like many ideas, it's great in theory but unfortunately falls down in practice. It's something I've mulled over for a long time.

I'm not trying to pick holes in your sound and well expressed ideas, but rather playing Devil's Advocate here.

Can another London (or for that matter, PAR, FRA, AMS.......) airport survive with only connecting traffic, or with minimal O&D traffic? I fear the answer is no, because in order to achieve profitable loads, the airline(s) would need to route many flights from many destinations through it to attain the critical mass which could only be attained by serving a lot of destinations. The more limited the choice, the less likely it will be to attract premium connecting traffic. If it only served, for example, a subset of BA's destinations, it would probably fail.

DXB and other ME hubs have been successful because their creation did not divert traffic from existing airports. This is the problem with another London airport, that it will always weaken the revenue flows from the other airports. The single hub concept works, multiples won't.

[sidest]

Thanks for the reply! You make some interesting points...

Can another London (or for that matter, PAR, FRA, AMS.......) airport survive with only connecting traffic, or with minimal O&D traffic? I fear the answer is no, because in order to achieve profitable loads, the airline(s) would need to route many flights from many destinations through it to attain the critical mass which could only be attained by serving a lot of destinations. The more limited the choice, the less likely it will be to attract premium connecting traffic. If it only served, for example, a subset of BA's destinations, it would probably fail.

It would certainly have to be a robust operation for any chance of success, no doubt at all about that. However, if the second hub doesn't have all of the LHR routes, does it matter from a connections point of view? You just connect through LHR if STN doesn't offer it. It's not designed to rid LHR completely of connecting traffic, just offering flexibility where economically possible.

DXB and other ME hubs have been successful because their creation did not divert traffic from existing airports. This is the problem with another London airport, that it will always weaken the revenue flows from the other airports. The single hub concept works, multiples won't.

It may weaken the revenue flow by taking some traffic away, but surely that can be recouped by the new hub? Furthermore, if a credible hub can be built and becomes more popular with travellers, expansion is far more attainable than at LHR. Surely it doesn't matter where the money is, as long as it's still there in one way or another? The other plus is that in return they may reach out to new markets with the slots that they have 'gained'. I suppose it depends on how much the airlines will value the extra LHR slots.

[Skipness One Echo]

You have fundamentally not understood how the market behaves. You cannot make LHR better by taking what it does best elsewhere. Gatwick has been tried as a hub, understand why that, with arguably better facilities in the 90s and noughties failed, and you'll learn a lot.

You are re-regulating a market and so you will need to select winners in those who stay at LHR and losers, those whom you move to Essex. Each one would be illegal under the free market and Open Skies agreement and even if it weren't you would then have to favour one operator over another. Again, open to legal challenge. This is not the 1970s and Macavity Brown is no longer in No 10.

Take NYC-LON. Who decides who stays and goes? How do you decide?

[sidest]

You have fundamentally not understood how the market behaves. You cannot make LHR better by taking what it does best elsewhere. Gatwick has been tried as a hub, understand why that, with arguably better facilities in the 90s and noughties failed, and you'll learn a lot.

You are re-regulating a market and so you will need to select winners in those who stay at LHR and losers, those whom you move to Essex. Each one would be illegal under the free market and Open Skies agreement and even if it weren't you would then have to favour one operator over another. Again, open to legal challenge. This is not the 1970s and Macavity Brown is no longer in No 10.

Take NYC-LON. Who decides who stays and goes? How do you decide?

It's not about taking what LHR does and moving it elsewhere. LHR will still do what it does, just slightly less of it. In return it can then open up to more of what it currently does not, but arguably should do - serve more emerging and growing markets. This is not a fix of Heathrow, and maybe the title should have been better, however it is a solution to some of it's problems and the wider issue of capacity in the South East that could be in place more quickly than any runway capacity.

I'm not suggesting anyone be moved from LHR. It is just a strategy that could be utilised. Like I said, this is mainly a BA growth idea more than anything else.

[Heathrow Harry]

this is an open market at LHR where one operator will have around 50% of the slots?

Why not just hand the whole thing over to BA and tell the great unwashed to bugger off to Essex....................

[sidest]

It's not about taking what LHR does and moving it elsewhere. It's about replicating what LHR does elsewhere. Yes, there will be a small reduction of what LHR does - but in return it is designed to allow LHR to do more of what it currently doesn't and has arguably been said it should do, i.e. operate to emerging and developing markets.

Take BA and AA on JFK for example:

If BA and AA cut 2 of the 14 LHR rotations, there would still be 12. It doesn't for a second change what LHR does. Seasonal changes change frequencies all the time, and considering most of these 14 flights run within 30 minutes of each other, there would be little change. In return BA may choose to use the slots for new dailies to KIX and CTU for example

I'll admit that the title is a little off what I actually mean. Maybe I could get that changed? It's more of a short and medium term solution for capacity in the southeast, whilst allowing LHR to operate to more of the destinations that it should be able to operate. This would allow more key routes to fly into the UK's main airport, considering a 3rd runway is off the cards. Can I have that as a title?

Like I said, it's mainly a BA solution than anything else. I never mentioned forcibly moving anyone anywhere.

[Skipness One Echo]

Except BA make lots of money on LHR-JFK which is the point. Moving two rotations out of LHR-JFK is not sensible as Delta and United would just up frequency and steal the passengers. The traffic would remain at LHR, it would not move to STN simply because BA moved two rotations to Essex. This is what BA found when they built up LGW. For every rotation moves out of LHR, too many premium travellers elected to fly LHR-XYZ with the competition rather than jolly down Sussex way. Harsh but true.

[sidest]

Except BA make lots of money on LHR-JFK which is the point. Moving two rotations out of LHR-JFK is not sensible as Delta and United would just up frequency and steal the passengers. The traffic would remain at LHR, it would not move to STN simply because BA moved two rotations to Essex. This is what BA found when they built up LGW. For every rotation moves out of LHR, too many premium travellers elected to fly LHR-XYZ with the competition rather than jolly down Sussex way. Harsh but true.

My point is how much profit is being sacrificed due to a lack of exposure in other markets, and how much of existing revenue can still be held on to if a move to STN is made? BA do make a lot of money on LHR-JFK, but healthy chunk of that is down to connecting traffic.

STN should be a cheaper option, so flaunt that fact. Marketing has changed considerably since BA at LGW was in it's prime, as have consumer attitudes. Low price finding websites didn't exist and are far more flexible than any travel agent or phone line could ever have been. That's why many of the average fliers fly Emirates and Qatar airways, because the comparison site says they are cheaper. If a notable number of premium passengers won't budge, then operate aircraft with a higher number of premium seats. Not such a problem on short haul routes as converter seating is used.

LHR is a bit of a pain in the butt - especially T3-T5 connections. Heck, even T5 connections are more troublesome than they should be and regulars know this. I'm sure there would be an incentive to cater to BA's wishes for a brilliant connections facility when STN is sold, as the new operator would be hungry for more flights.

How would Delta and United up the frequency if there are no slots for them to do so? Other than cutting into their own slots on other routes, which I don't think they'd want to do.

Maybe I am living in an idealised world. But I can't help but think what if? I realise things have happened in the past, but situations change and there there is more than one way of going about something. For it to have any chance of success it would take a hefty investment, which I suppose counts against the idea.

[ConstantFlyer]

The market will dictate. It always does.

A few months ago, most passengers flying to the UK just booked to Heathrow because they didn't know otherwise. Now this publicity about terminal inertia has made people think - Is there an alternative? Once people realise that there may be a better/quicker/cheaper/more convenient way to get to their destination, they are empowered.

Some people will therefore change their behaviour. That affects demand. Airlines respond to passenger demand. Sometimes. It'll take a lot to prise some airlines out of Heathrow, but if enough passengers vote with their feet, it might work.

I live in hope.

[JSCL]

I think it can be evidenced in EI over the other side of the river, they have the feed to 'some' of Europe similar to BA (albeit not on the same scale), yet they don't see too many flights to the East Coast. The NYC commuter has gotten used to LHR being part of the travel plans for most of it. But I have made preference to using EI where possible, always found it a nicer travel experience.

[Dairyground]

The multi-hub concept seems to work reasonably well at the other end of the London-New York route, with several flights per day into Newark. Something similar might be made to work in the UK.

There was once an operation like that from Manchester, and several foreign airlines appear to get reasonable O/D loads from there now. Perhaps BA should try again, possibly diagramming a 777 or 767 to operate LHR-JFK(or EWR)-MAN-JFK-LHR. That would avoid the expense of basing an aircraft at MAN, and something similar could work for cabin and flight crews.

[AdamFrisch]

Hub thinking is a remnant from the 70's. It's on its way out. Today, people want to travel direct - and they're willing to pay extra to do so. I'm one of those - I fly intercontinental more than once a month, and I always go direct If I can. If that means less air points, so be it. Whatever it takes.

With travel as it's become with security, overcrowded, TSA, immigration etc, there's no way anyone would accept a new hub out of the way, add hours to their travel, just to stay loyal to an airline.

[Skipness One Echo]

My point is how much profit is being sacrificed due to a lack of exposure in other markets, and how much of existing revenue can still be held on to if a move to STN is made? BA do make a lot of money on LHR-JFK, but healthy chunk of that is down to connecting traffic.

Of course it is, that's why it makes money. It would be inept to take an existing money making route that depends on frequency and connectivity to remain profitable and competitive, and move a part of it to Stansted. No one does this for the main reason, that it would be commercially dumb. If BA drop frequency, the other ALLIANCES would make the strategic decision to poach the traffic that BA could no longer carry as they've just dropped capacity. Hence some short haul STAR would be rejiggged to allow UNITED to up frequency to Newark and poach some of BA's high yield passengers. Delta do the same with KLM and Air France and BA's yields on LHR-JFK, probably it's most important route, collapse.

Meanwhile BA, having walked away from a strong, profitable and dominant position on the North Atlantic now has the added costs of a fourth London airport and maintenance operation serving the same market from an airport known for Essex girls, Polish cabin crew and locos only. How many Gold Card holders do you seriously expect to see in with the Ryanair mob? Not much Exclusivity in there, so what the Hell, we need to duplicate all the lounge facilities that are already in place at LHR.

My point is how much profit is being sacrificed due to a lack of exposure in other markets, and how much of existing revenue can still be held on to if a move to STN is made?

A move to Stansted as you suggest would bankrupt BA in under two years. I am in no way overstating that for comic effect. LHR is intensely competitive as it can be very worthwhile. The market cares not one whit for Stansted, it has less chance than the existing BA base at LGW in Stockbroker-land Surrey/Sussex which has no BA long haul strategic business heavy routes.

New markets take 1-4 years to make a profit sometimes, your strategy not only sees the cost of opening up new routes but a policy of self harming existing revenue drivers to do so.

[sidest]

It is NOT a move to Stansted - it is a UK capacity expansion from Stansted. BA would still retain the same number of LHR slots and therefore number of flights as before.The operation model is not designed for fun, but rather to allow growth to emerging markets. This is to allow for overall BA growth. Yes, new lounges and facilities would be needed, but this is for growth.

• You will NOT get growth of any real size at LHR without a new runway.
• A new runway isn't going to happen.
• Nor will BA leave Heathrow for any new hub - as they have stated. (By this they mean move main operations from LHR - something this idea does not advocate in any way.)

Where does this leave them then? After BMI growth, is that about it for the rest of time? They will have to grow BA outside LHR.

Cutting frequency from LHR to JFK is exactly and only that. What is lost at LHR, will be replaced and added to at STN. Furthermore, capacity at LHR is seeing a very modest reduction, but as I say - the overall BA flying out of JFK capacity is still there. It's not about a flight to London, but a link to another destination through BA - that's all that really matters for connecting traffic. You need to encourage a portion of connecting passengers to use that capacity. It does not matter where the money is, as long as it is still there. This isn't to mention the money that isn't even being tapped into on the routes that BA can't currently serve due to a lack of slots.

As for the point about alliances rejigging to take advantaged of a drop in capacity: There is only a drop in LHR capacity on the route - not overall BA capacity. If alliances want to do this, then fine - but BA will have a cheaper option to fight them with, aside from 12 rotations from LHR. People are not going to switch alliances over this. If anything, customers would move to OW because of the extra flexability. Corporate customers are also more likely to favour a cheaper option. Connections at LHR are a pain anyway - any regular traveller knows this.

STN is only an example, although the cynical link to Essex is something only those in the domestic market - and not an important one at that. If the airport is near, then they will go to it. This is obviously the case for LTN, but for STN I do not see the problem. It isn't called Essex Airport. As with the Ryanair thinking, I don't suppose BA passengers would touch LGW with a bargepole if U2 has such a large presence there, then? Unnecessarily cynical thinking on this point.

[speed13ird]

Eurohub

Anyone remember the Eurohub?

At BHX?

Thought not....

[Skipness One Echo]

Cutting frequency from LHR to JFK is exactly and only that. What is lost at LHR, will be replaced and added to at STN

This is distorting the market, only in the ideal world would this happen. You put capacity where the market demands, the market demands LHR. Anyone moving capacity to Stansted in this example is a commercial virgin.

A new runway isn't going to happen.

We shall see on this one, reality is kicking in over politics, slowly but surely.

the overall BA flying out of JFK capacity is still there

Yes, except now it's losing money as you just moved it to Stansted. The laughing you hear is Delta and United trying not to pee their pants as they sign up the former BA Gold Card holders.

Your argument does not stand up to any commercial scrutiny and I assure you would not work. BA do not fight on "cheaper", they fight on "better" in premium cabins. This would again not fly from Essex.

As with the Ryanair thinking, I don't suppose BA passengers would touch LGW with a bargepole if U2 has such a large presence there, then? Unnecessarily cynical thinking on this point.

BA are withdrawing year on year from short haul at LGW as easyJet have won the battle for Gatwick. They have a much larger operation built from scratch in a decade that overtook BA as LGW's No 1. BA long haul leisure is at LGW mainly because there's no room at LHR.

Where does this leave them then? After BMI growth, is that about it for the rest of time?

IAG have stated that BA have no interest at STN or LTN and any future growth will be at Madrid Barajas. Remember KLM have a mature market at AMS and life still goes on, BA in LHR will be similar for the medium term.

This isn't to mention the money that isn't even being tapped into on the routes that BA can't currently serve due to a lack of slots.

Once you start listing them, there's not all that many. You are mixing up network size and equating it to profitability. They are not the same thing at all. Even the current BA wish list on the BMI takeover are pretty much kind of borderline. Seoul is not likely to be a profit maker for a few years I suspect even if it does come on line soon.

You need to encourage a portion of connecting passengers to use that capacity. It does not matter where the money is, as long as it is still there.

Given the market wouldn't use Gatwick, and hasn't done every time someone has tried since BUA / Caledonian / BCAL to Laker and latterly Virgin, what is your mechanism for getting people to use Stansted or Luton? I mean it's been tried and failed so many times, what's new now? I assure you that it DOES matter where the money is as time and time again, it stays at LHR and won't budge. No matter how good your product is, outside of LHR on scheduled business premium long haul, you're screwed.

People are not going to switch alliances over this. If anything, customers would move to OW because of the extra flexability. Corporate customers are also more likely to favour a cheaper option. Connections at LHR are a pain anyway - any regular traveller knows this.

Connections at STN are what exactly? When BA flew LGW-JFK, it was the weakest of all the London JFK flights and customers most certainly did not flock to it citing flexibility. Indeed Delta have just dropped LGW-ATL to build up LHR-ATL by one flight per day. Continental, US Airways and NWA all intended to maintain LGW ops when they got into LHR, within a year, all LGW ops were closed. Did customers want flexibility? Not enough to cover the extra costs and on any given asset / aircaft, it was more proftable at LHR. In this market, it's not about choice of London airport. Short haul is different where BA fly LHR/LGW/LCY-EDI, long haul is hub and spoke. Complimentary hubs do not work, I am struggling to think of one. Paris has two hubs but in different markets.

Just so we are clear, to feed the complimentary hub, you would need to feed it with short haul? Given that BA's short haul at LHR is borderline loss making anyway, the additional costs in BA competing with itself with a duplicated network from STN would be suicidal. You have to duplicate as exisiting capacity is needed at LHR to maintain frequency in the short haul market for the business traveller.

[willy wombat]

I'm not sure whether I detect some politics here, but I'm afraid, Sidest, majoring on LHR/JFK shows a distinct lack of commercial knowledge. LHR/JFK is almost unique in that it is a long haul route that has the characteristics of a short haul route. That is why frequency between the same airport pair (not city pair) is vital. I myself was, in the past, typical of many business pax on that route in that I would turn up in the evening at JFK with an open ticket and look for the next flight to LHR (where my car was parked) in the same way that you might turn up with an open ticket at a well served European point. I also detect a distinct lack of understanding of the balance required between connecting and point to point pax to manage yield and of how connecting pax can be vital to start and to maintain a thinnish long haul route e.g. to some of the currently unserved (from the UK) emerging markets.

[GayFriendly]

I think BHX management need to read some of the very valid and reasoned points made on this thread maybe then they will move on from their deluded ideas that capacity constraints at LHR will automatically mean huge, instant and magical long haul growth at BHX in the future.

I cannot see any airline at LHR giving up their slots to move to STN, BHX or indeed anywhere just to offer 'better' pax connections, LHR appears to be the holy grail for airlines operaating to/from the UK (rightly or wrongly, well that is another point) and they continue to pay millions for slots to fly there. I just can't see that changing in the short or even medium term, look at the way IAG snapped up BMI, it wasn't for the brand or the airframes, it was for the LHR slots.

[Groundloop]

Sidest is missing one massive point in his suggestion. In his exampe, if BA were to switch two JFK flights to STN purely for connecting traffic - just how many other routes would have to be operated from STN for these people to connect on to? Dozens and dozens probably - how would you fill them with only dribs and drabs on each one from the JFK connections. In order to operate a hub that provided enough in and out connections to be a profitable operation it would be approaching the size of Emirates at Dubai!