COVID-19 has forced an unexpected aviation crisis.

Airlines are rediscovering past operating models and the virtues of hubbing flights, or are they?

Many industry pundits said that the ‘Hub and Spoke’ model was dead, but COVID-19 is making industry experts re-access this model. Could the COVID-19 pandemic force the resurrection of the ‘Hub and Spoke’ model or will post COVID – 19 go back to ‘Point to Point’ travel.

Changes in the aviation industry such as new types of planes and passenger expectations of the new norm could be a changing point in all this.

Hub and Spoke

What is the ‘Hub and Spoke’ model?

In a nutshell: You fly from one airport into a hub airport and connect there for a flight to your final destination.

Until a generation ago, the ‘Hub and Spoke’ model was big. 

Delta Air Lines pioneered the idea in the mid-20th century. It was designed to benefit airlines and optimize network coverage. Under a ‘Hub and Spoke’ model, Delta could fly nine routes to connect ten destinations. If it offered ‘Point to Point’ flights between those destinations, it would require 45 routes.

In more recent times, the ‘Hub and Spoke’ model fell out of favour. But it still exists, particularly when it comes to international flights. Most airlines with both domestic and international operations will funnel passengers to key hubs to connect onto international flights.

Many international airlines have a single hub airport – the Gulf airlines, Singapore Airlines, and Cathay Pacific are good examples. In each case, the vast majority of their flights either arrive or depart from their hub. If you want to fly from Los Angeles to Laos on Singapore Airlines, you will connect in Singapore. If you’re going to fly from Auckland to Athens on Emirates, you will change planes in Dubai.

Airlines like Singapore and Emirates have always operated using the ‘Hub and Spoke’ model.

Point to Point model

The ‘Hub and Spoke’ model survived because it suited the times as it enabled airlines to operate efficiently while ensuring good network coverage.

But, new trends rose to challenge the old norm:

  • Airlines investing in new fuel-efficient aircraft reduced their operating costs, thus making flying marginal ‘Point to Point’ routes a more viable proposition.
  • Low-cost airlines arrived, and these airlines would prove good at reducing operating costs even further, as they didn’t have the inherited cost base that many legacy airlines have.
  • Lastly, passengers wanted ‘Point to Point’ travel. After all, who wants to spend two hours in a Hub airport when you can do it direct?

Mango is a low-cost airline operating in South Africa (Pic- Julian Smith)

Low-cost airlines played a significant role in busting open the ‘Hub and Spoke’ model. Their lower operating costs made flying previously marginal or unprofitable ‘Point to Point’ routes a workable idea, and passengers soon discovered the benefits.

But the trend was undeniable. The ‘Hub and Spoke’ model was declining at the expense of the ‘Point to Point’ model. At least it was until 2020 and the onset of COVID-19.

Is the trend now reversed?

The ‘Hub and Spoke’ model is on the rise once again at the expense of ‘Point to Point’ travel. The move is driven by economics and the need for efficiencies at the airlines.

Passenger numbers have declined everywhere, and that’s put pressure on airline revenues. Airlines have high levels of fixed costs, that is, money that still needs to get paid out, regardless of what’s coming in.

United Airlines aircraft waiting for passengers.

Until 2020, most airlines worldwide were growing.

In the five years to the end of 2019, American Airlines’ annual passenger numbers grew over 9%, United Airlines over 13%, while over the same period, passenger numbers at Delta Air Lines grew by nearly 20%.

The fact is that presently ‘Point to Point’, travel is on the decline.

At that same time, bumper profits were getting reported, but now the party is over in terms of growth and profit. Airlines are moving to rein in expenses.

Suddenly, flying more marginal ‘Point to Point’ routes with few passengers isn’t a viable idea anymore. That’s seeing a pivot back to the ‘Hub and Spoke’ model – at least for the short-term.

The years of growth and profits are now over for the airlines.

Airlines argue that it makes sense for them to get as many people on a plane as they can.

Kruger International Airport (KMI) is used for Point to Point travel.

Airlines are using COVID-19 as an opportunity to hit reset and create a network using the strength of strategic hubs to build and grow upon, and once again be profitable. 

So which model is best?

Airlines across the United States and worldwide are suddenly rediscovering the virtues of the ‘Hub and Spoke’ model. Those airlines that have always used it, even if by necessity rather than choice, are in the best position.

Qatar Airways, in particular, has capitalized on other airlines grounding their fleets and cancelling flights.

Qatar kept Hamad International Airport open to transit passengers, and the airline has kept flying passengers around the world throughout 2020. It hubbed them through Doha and effectively utilized the classic ‘Hub and Spoke’ operating model.

Hamad International Airport.

But, low-cost airlines like Southwest have been instrumental in opening up more ‘Point to Point’ travel.

It’s all a bit of a return to the past and very confusing. Fewer flight options mean passengers have little choice at the moment. However, post COVID-19, the re-emergence and growth of the ‘Hub and Spoke’ model is unlikely to continue. Once airlines get their mojo back, the ‘Point to Point’ travel trend should pop up again.

It’s not a perfect scenario for the airlines, but modern aircraft and lower operating costs can profitably facilitate ‘Point to Point’ travel. Most of all, passengers will demand it. In the airline industry as elsewhere, it’s passenger demand that will dictate where airlines fly. As airlines respond to declining demand now, they’ll respond to growing demand in the future.

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