Related posts:
–Smisek Lies Again: “Our hub in Cleveland hasn’t been profitable for over a decade”
-CLE Is Dehubbed; The Continental-United Merger Has Brought Nothing But Misery To All
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1. The state of Ohio will be auditing United’s claim that Cleveland was not profitable.
I ended off the “Smisek Lies” article asking Ohio’s attorney general to audit United’s profitability claim. And I tweeted OH AG Mike DeWine as well.
He will do just that, though unfortunately the full details will never become public. The Plain Dealer notes the inherent dilemma in defining profitability. The merger-era agreement with Ohio makes no mention on exactly how profitability is to be determined. Accountants are all too good at shifting around costs to get the result they want.
There’s no doubt that Cleveland is completely extraneous in the merged United system. It made sense as a Continental hub because Newark was at capacity and their only other hub was in Houston which is a poor connecting option for most the US.
As soon as the merger closed I said that Cleveland’s days as an airline hub would be numbered as there’s little point in maintaining a hub located right in between powerhouses Chicago, Newark, and Washington DC.
However I showed numerous examples from the past decade through 2012 that Cleveland was a profitable hub for United. And unfortunately for United they could not fully shut down hub operation in Cleveland until 2015 if it was profitable.
Over the past couple years United has made Cleveland one of the most expensive airports in the nation to fly out of and made connections in Cleveland very hard to come by so I don’t doubt that it’s no longer currently profitable, at least for 2013. But profitable or not I do agree that it makes little operational sense for Cleveland to exist as a hub.
So why shut it down now instead of waiting until late 2015 and avoiding government scrutiny?
As I said last time, I still believe that the real reason is the double whammy of:
-Pilot qualification rules made in late 2013 that have caused a massive pilot shortage.
And
-Minimum rest periods for pilots just instituted last month that have exacerbated the pilot shortage problem.
Cleveland, more than any other United hub, is heavily dependent on regional flights. Those airlines pay their pilots as little as $21,000 per year and rely on pilots fresh out of school hungry to make their way up the ranks.
Now that these new rules came into play the major airlines have been snapping up the experienced pilots at regional carriers to keep their schedules going even with the new pilot rest directives. Additionally pilots must retire by age 65, so the major airlines are going to face a long-term crunch to keep enough qualified pilots.
The regional carriers can no longer just hire more freshman pilots as they now need 1,500 hours of experience as opposed to just 250 hours that they used to need. That sixfold increase is causing a huge crisis.
This isn’t idle speculation. Republic/Chautauqua is about to quit all United flying due to these new rules. Great Lakes suspended service to several airports due to the pilot shortage. ExpressJet told United before they announced the Cleveland hub closure that it would not longer be able to fly all of its contracted routes for United.
So United had to slash lots of regional capacity quickly. And there was no more efficient place to do that than in Cleveland with gobs of low margin regional flights that wouldn’t majorly affect the global system due to the lack of international flights from Cleveland. Taking those regional flights out of other airports would cause much more pain for the system as a whole.
Cleveland’s mainline flights are all staying intact except for the 1 daily flight to Phoenix.
Oh and the small issue of Cleveland continually being told over the past decade that it was profitable? Let’s just add some fixed network costs onto Cleveland and say it wasn’t profitable in a decade so that we don’t wind up paying a fine for closing the hub before 2015…
Riiiiiiiight. Because the same airline that removed pillows from first class to increase their profits by a few bucks would run a hub for an entire decade while it bled money the whole time.
Smisek lies. There is no decade of losses and I would love to be a fly on the wall in Columbus as they look over United’s funny math. Though my guess is that with no defined profitability metric in the agreement there will be nothing that can be done to force United to pay up or even admit playing a number’s game.
————————————————————–
2. In the good news department other airlines see the blood in the water and are already starting to pick up the slack:
-Delta is adding nonstops to Indianapolis and Raleigh/Durham.
-Delta is upgrading the Cleveland-NYC route from 3 daily flights to a whopping 8 daily flights. Come June there will be 3 dailies to JFK and 5 dailies to LGA.
-Frontier just started flying between Cleveland and Trenton, NJ and must like what they’re seeing. They upgrading it from 2 flights per week to 4 in May.
-Southwest will upgrade Akron-LGA from 2 to 3 daily flights. 2 of those flights will be up-gauged from a 717 to a 737.
-Delta is upgrading Cleveland-Atlanta from regional to all mainline jets. Cleveland-Minneapolis is rumored to be upgraded to mainline as well.
-Frontier is increasing Cleveland-Denver flights from 5 to 12 weekly.
-Frontier will add 4 weekly Cleveland-Orlando flights, a new route for them. Intro pricing is just $69 each way.
-Frontier will add 3 weekly seasonal Cleveland-Seattle flights, a new route for them. Intro pricing is just $119 each way.
-Southwest is in talks to beef up CLE service. Don’t be surprised to see new flights to destinations like S. Louis, Tampa, or Phoenix.
-Other good possibilities include Jetblue service to Boston, JFK, Orlando, or Fort Lauderdale and Porter service to Toronto. There may even be a outside shot of landing Virgin America service to LAX or SFO, Sun Country service to Minneapolis, American launching Phoenix service, or Spirit service to Fort Lauderdale or Phoenix.
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3. Cleveland may be unique in being dehubbed twice by the same airline, but it’s only the latest in a long line of closed hubs.
Cleveland is now the most populous metropolitan area in the nation without hub operations and it’s the only metro area of at least 3 million people without a hub airport. No doubt CLE was hurt by having 2 major airports within the metro region. Competition from CAK has been a thorn in CLE’s side ever since Airtran made Akron a focus city.
Not too many airports can lay claim to being dehubbed twice by the same airline. United closed CLE in the 80s, Continental came in and hubbed it, and United has dehubbed it once again.
But just in this century AA has ditched S. Louis, USAirways left Pittsburgh, American West axed Columbus, Delta jettisoned Cincinnati, Dallas, and Memphis, etc.
So which hub will be next to go?
United still has hub operations in Chicago, Denver, Houston, Los Angeles, Newark, S. Francisco, and Washington DC.
-An “expert” claims that United only needs hubs in Chicago, Houston, and Newark, and that all of the rest are in jeopardy.
That seems a bit much as that means shrinking down to Continental’s size, but just switching out Cleveland for Chicago.
I do think that both Denver and Los Angeles may be at risk in the coming years.
-On the American/USAirways side it’s hard to see a bright future for Phoenix. It’s days are likely numbered due to being sandwiched between hubs in Dallas and LA.
Philadelphia may also be troubled. Hard to imagine it remaining an international hub with JFK so nearby. I see it being phased out as well with long-haul flights to places like Tel Aviv being shifted over to places like JFK and Miami.
-Delta seems perfectly content to eat everyone else’s lunch as they contract. Operationally Delta runs the best major airline operation today and is in a position of power vis-a-vis American and United. Their mileage program is atrocious but they sure do seem to know how to run an airline. With Cincinnati and Memphis gone they may just hang onto their niche hubs in Detroit, Minneapolis, and Salt Lake City along with their powerhouses in Atlanta and LGA/JFK. They’re even beefing up for a new hub in Seattle to either take down Alaska or force them to merge with them or American.
Which domestic hubs do you think are at risk of closure?
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47 Comments On "CLE News I Like To Cover And You Don’t Like Reading About: Ohio Attorney General Will Audit United, Regional Carriers Dropping United, Airlines Adding Flights To CLE, Which Hub Will Be Axed Next?"
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TMI
@umm if you don’t like it, feel free not to visit the site.
yeah! ok?
@Umm: hey, im frequantly flying outta CLE, and this info is very valuble to me so bug off u troll
Dan time to give up cle for nyc
If LAX gets de-hubbed, where will all the Asia-Pacific/Hawaii flights leave from? Houston? San Francisco? It would make sense to have at least one hub on the west coast to base those flights out of as 99.9% of the country needs to fly past LAX to get to these destinations.
@Umm:
Made the title just for you.
I blog about things that interest me.
@Hg:
If I gave up CLE it would be for somewhere that’s at least warm.
@Yehoshua:
SFO.
I think LAX actually had fewer total flights than CLE and it’s now the by far the smallest United hub.
If AA continues to beef up in LAX I can definitely see United bail. They face much less competition at fortress hubs like EWR, IAH, and SFO and those are natural gateways for Trans-Pacific, Central/South America, and Trans-Atlantic respectively.
Dan, i love you and your deals very much, but have to enjoy the irony of you being pissed off that United is shutting down CLE.
You have probably milked them for 6 billion miles of free flying out of CLE, and are kvetching that they dare close your hub because they claim to be flying flights at losses? I wonder why!
They are not stupid- if they make money, they do it. If they dont, they wont do it. Your conspiracy theories are nice, but arent ample excuse to shut down if it really is profitable for them. Simple equation to me…
@Ben:
Can you not read?
1. I never said that it’s not currently profitable. I proved in my last article that it was impossible that they were not profitable for the last decade. However I wrote in the post that I don’t doubt that it’s currently unprofitable. In fact all of United’s airline operations are currently completely unprofitable. Which brings me to point #2:
2. This is where you really look foolish.
United makes a bloody fortune TTTO billions of dollars annually selling miles to the banks and then they release limited award seats that mostly would have gone unsold anyway.
It’s a huge profit center and MileagePlus is worth far more than the airline itself today.
United loves when you open a new credit card as they get cold hard cash from the bank for those miles.
If anyone is losing out it’s the banks paying the billions of dollars to airlines. However the banks do it because Americans pay billions of dollars to them in interest payments and they also make billions in transaction/swipe fees from merchants. There’s a reason mileage programs have not just survived but thrived for decades and decades, because it’s a win-win-win situation for everyone involved.
Anyway if anyone should be mad at me it’s Airtran for buying me tens of thousands of dollars of free United flights over the past decade (good for United’s bottom line out of CLE at any rate and helping me keep 1K status until next year at least). But that’s another story for another day and they’re no longer around as a standalone company anyway having taken the big payday from Southwest.
@Ben:
A little reading comprehension would help you understand that United WAS profitable in the PAST, although they most likely won’t be in the future. These posts explain that United is lying about it’s previously profitable past, in order to forgo paying the penalties of closing down a currently profitable, soon-to-be-unprofitable hub.
No one cares about Cleveland … sorry
Noob question? Whats a hub? Whats the significance of it? If a plane goes from NYC to CLE, who cares if its a hub or not? For example, if you want to fly to tlv, you anyways need to first fly to EWR? So can you please explain what is a hub, and whats its major significance?
@Anonymous:
Good question.
A “hub” airport offers nonstop flights to many more destinations than a “spoke” airport.
If you live in a spoke city like Pittsburgh then you can fly nonstop to other hubs, but you generally can’t fly nonstop to other spoke cities.
As part of the dehubbing of CLE, United will no longer fly nonstop from Cleveland to:
Atlanta, Austin, Bradford, Pa., Buffalo, Burlington, Charlotte, Columbus, Dayton, Dubois, Pa., Erie, Flint, Franklin, Pa., Grand Rapids, Greenville/Spartanburg, Harrisburg, Hartford, Indianapolis, Jamestown, Kansas City, Louisville, Madison, Wis., Manchester, N.H., Miami, Minneapolis/St. Paul. Montreal, Nashville, New Orleans, Oklahoma City, Parkersburg, W.Va., Philadelphia, Phoenix, Pittsburgh, Portland, Me., Portland, OR., Providence, Raleigh/Durham, Richmond, Rochester, Seattle, Syracuse, Toronto, and West Palm Beach.
That means you’ll have to connect in other United hubs or fly other airlines to get to those cities. Obviously you can still get to Toronto on Air Canada. Charlotte, Miami, or Philadelphia on American. Atlanta, Detroit, and Minneapolis on Delta.
But for us to go to my in-laws in Kansas City we’ll have to connect in a hub like Chicago from now on.
United will continue flights from Cleveland to their hubs. Namely: Chicago O’Hare, Denver, Houston, Los Angeles, Newark, San Francisco, and Washington-Dulles.
For the time being United will also fly nonstop from Cleveland to the following spoke cities: Albany, Baltimore, Boston, Cancun (seasonal), Charleston (seasonal), Dallas/Fort Worth, Fort Lauderdale, Fort Myers, Las Vegas, Milwaukee, Nassau (seasonal), New York-LaGuardia, Orlando, San Juan (seasonal), St. Louis, Tampa, and Washington-Reagan.
It’s anyone’s guess how long those remaining spoke flights will stick around.
United currently has 199 departures that will drop to 72 peak-day departures by June.
Decline in peak-day seats is 51 percent, from 12,284 to 6,121 daily seats.
@Dan:
Nice answer!
So take you KC example, United was the only airline that flew to KC, since CLE was a hub, but now there is no airline that goes from CLE-KC, since other airlines never had a hub in either CLE or KC to begin with?
@Deal Guy:
Bingo.
Someone in NYC can still fly nonstop to KC thanks to Delta and United hubs in LGA and EWR respectively, but the final United flight from Cleveland-Kansas City is on June 4th and it may be the last commercial flight ever connecting those cities.
Pittsburgh lost their KC flight when USAirways dehubbed PIT several years ago. You can fly tomorrow from Pittsburgh to KC via CLE but in June CLE will no longer have flights to Pittsburgh or KC.
@Dan:
Ouch! I feel your pain. So I guess the only hope for such a route, is if a low carrier like spirit or frontier decide to take it, correct?
Also, what you wrote is not written in stone? Meaning if United decides even after they close the hub, that they still want to fly from CLE to KC, they are still permitted, regardless if there is no hub? (Im sure there has to be such examples out there.)
Whine Whine Whine! Lets stop this crying everytime something dies after we squeezed it to the max! With all due respect Dan, you have milked them badly and they are within their rights to do whatever they want. It was good while it lasted. Talk about Delta being run great as an airline, lets see you pull off shtick with their FF program, no Chance! Obviously they can afford eight flights a day.
I told you this dan again u milk this story already no 1 give 2 …… Abt cle and when lebron comes back united will come back
What’s a Cleveland? Is it contagious?
good stay in closerland
As a clevelander living in ny I gotta say one thing , the reason why Cleveland is awesome is because the arrogant peope posting on this don’t live there. We have affordable housing clean air clean water great schools and a great community. I find it funny you hate on us when your airports consist of lga and JFK. Hopkins in Cleveland looks like the ritz Carlton to your third world overcrowded delayed crap airports. So keep the hating and crawl back into your basement third world apartments costing you 2 grand a month. Your the ones looking stupid. And if you have extra time don’t forget to pay all your parking tickets !
Oooohhhh, a CEO issued misleading statements!! Seriously? This is news? They made a business decision, nothing more, nothing less. I’m sure another airline will fill the gap for you to take advantage of their mileage programs and enjoy free flying.
Another benefit of a hub is the availability of hidden city tickets to that city.
For instance, looking for NYC-CLE, you have the optoin of looking for flights from NYC to all the destinations that connect out of CLE.
I don’t really care about cleveland. Never been there and have no reason to think I will ever go there. Dan you need to move to southern california(LA, SD)
Just remember, accountants can take the data and make it look anyway they want.
As far as MSP goes, I believe DL is required to maintain their workforce at a certain level until 2016. This was part of the airport expansion deal that Northwest made with Minnesota that DL inherited.
I thought BOS was the largest metropolitan area without a hub.
Is all the kvetching for Mimi’s KC!
@clevelander well said
@dan excellent post as usual, these losers don’t know what they’re missing out on…
CELVELAND SUCKS! one of the most depressing cities in the USA
no one needs to worry about not living in cuyahogerland..just a mistake by the lake with perennial losers…just the fact jack
been there ..have some nice parks thats about it
https://www.youtube.com/watch?v=AN0WqSeCKW8&feature=youtube_gdata_player
Cleveland really sux. End of story.
@beech wood:
@zeke is rite:
Your IP address has now left 13 moronic comments, each under a different username.
Did Cleveland steal your firstborn son or are you just beyond incredibly bored?
Get a life, seriously. Or perhaps just step foot for once in your life outside metro NYC and MIA.
@Deal Guy:
It’s highly unlikely for anyone to pickup that route, but nothing would be stopping them.
Like I showed in my previous response, CLE is retaining nonstops to several spoke cities where United decided to keep service.
@WTH:
Nobody is whining.
Read comment 9.
@Cleveland:
Don’t tell them lest we have these guys snapping up our beautiful and safe suburbs where even newlyweds can afford to buy a house.
@Bagel:
How are people so ignorant about how mileage programs work??
They are profit centers, not cost centers for the airlines!
@anon:
True.
@Anonymous:
Right, I do need to pay insanely high tax rates, buy a house for 10 times the price they are in CLE, live with terrible smog and a looming water crisis. and deal with horrendous traffic and parking conditions.
Sounds like paradise.
Now if there was a jewish community on Maui or Kauai you’d have my interest.
@Jeremy:
Jetblue.
@Lol:
Harhar.
Was in the WSJ this week, US carriers are having issues with regional pilots getting certified because the FAA changed the hours needed for certification as a result Large carriers are facing a massive shortage of regional carriers and airports that service a lot of regional carrier flights are getting hid hardest such as Cleveland.
http://online.wsj.com/news/articles/SB10001424052702303650204579376853673678052
@Dan:
actually san diego has warm beautiful weather without the smog, parking, traffic etc…
house prices are more than CLE but can you really compare cold windy CLE to San Diego which may have the best weather in the US outside of Hawaii
and another thing I believe property taxes are capped in California
After all information that Dan has shared with us that does concern and benefit most of us do we really have to complain every time he posts something that we don’t see the relevance to ourselves ?? How about people just skip over it and keep their miserable comments to themselves !! Who are the real whiners??
@Anonymous:
True, San Diego doesn’t have those LA issues but the jewish community there is miniscule. And I’m talking about the ridiculously high CA income taxes.
Orthodox jews are just so limited in places we can live…
@Dan:
They have three orthodox shuls(adat yeshrun, beth jacob, young israel) plus around five chabad houses, a frum day school, a chabad day school and for now 2 kosher restaurants.
Is that small?
@Anonymous:
Yes.
There’s absolutely no way to please the huge gamut of the Orthodox community with just 1 day school.
CLE has 3 and I think that’s pretty much the minimum to keep different communities pleased.
Some want coed, others separate.
Some want zionist, others don’t.
Some want no TVs/internet in the house, others do.
Etc, etc.
What are the 2 restaurants in SAN now?
The bigger issue is CLE is ranked about 40th in passengers, and its population is going down, while the increasingly populated warmer weather hubs (LAX, IAH, DFW, ATL) are also the cities with some of the fastest population growth in the US. Even if the metro area has 3 million people (and falling), all the airline cares about is how many passengers it has. United is a business, a poorly run business, but I don’t doubt they are actually losing money– what airline would shut down a profitable hub? No one.
I feel bad that employees and passengers in Cleveland are having a tough time with this, but if you look at the map of hubs, CLE makes the most sense to go from a business standpoint, and while United may have many issues, this is not one of them and I don’t fault them at all.
Sorry left out links:
Passenger data:
http://en.wikipedia.org/wiki/List_of_the_busiest_airports_in_the_United_States
Cleveland is also 29th in MSA:
http://en.wikipedia.org/wiki/List_of_Metropolitan_Statistical_Areas#United_States
CSA, which you cite, is a meaningless construct because it leaves out major cities such as Phoenix, San Diego, Tampa and San Antonio:
http://en.wikipedia.org/wiki/List_of_United_States_combined_statistical_areas#United_States
@Anon:
Like I said, I don’t disagree with that.
CLE makes no sense in the UA network and they’ve been counting the days to ditch it since the merger.
I take issue with the last decade claim.
And the fact that other airlines are running in to fill the void means that they smell opportunity, even in a shrinking town.
@Anon:
CSA is the correct stat for an airport as an airport draws from an entire CSA, not just MSA.
When Goodyear (based in Akron) needs to get somewhere they flew from CLE even though they’re right next to CAK due to nonstops.
The reason PHX and those cities don’t have a CSA is because they don’t have a CSA to count or draw from. People live in PHX MSA and that’s it.
You are accusing united of using false stats to close CLE when you are quoting poor stats to make your claims.
CSA is a terrible measure of population and anyone can go to the Wikipedia links above to see tha discrepancy. It is convenient for your point to remove Phoenix, San Diego, Tampa, and San Antonio from being in the population rank list head of you, but they are all larger MSAs than Cleveland and none of them will be a hub in 2 years (PHX will lose out in the merger since LAX is next door). I haven’t met anyone who would argue that those 4 metros are smaller than Cleveland.
I hate that mergers lead to job loss and inconvenience as much as you, but mincing data to favor your point is something you are accusing united of doing, when in fact when you look back on this thread you’ll realize you have gone way too far out on a limb on this one
When would southwest/airtran be adding a flight?
Thank you Dan for a well written post. With the new pilot regulation and all the regional airlines that are contracted out, struggling to keep up, are more small cities in danger? Or at minimum to keep up with the regulation are we looking at major hikes in price for small town USA?
@Dan:
As you can see there is 2(The Grille and “The Place” in JCC) plus much more like supermarkets with takeout or sit down options in the supermarket! See Ralphs in la Jolla and a relatively new place North park Produce!
Dan you cant have it all in one city but for warm weather in mainland US can’t beat San Diego! you and your wife would love it here
The Place Catering
Shabbat Meals, Takeout. Delivery Available.
10785 Pomerado Rd
San Diego, CA 92131
(858) 549-7000
(858) 549-7010 FAX
(619) 254-4420 CELL
catering@sandiegokosher.com
http://www.sandiegokosher.com
North Park Produce
Produce, Butcher, Bakery, Grocery, Restaurant
4220 Balboa Ave.
San Diego, CA 92117
Tel: 858.810.8228
The “PLACE” at JCC
4126 Executive Drive
La Jolla, CA 92037
858-362-1353
The Grille Restaurant & Emet Kosher Market
6548 El Cajon Blvd
San Diego, CA 92115
888-418-1437
http://www.thegrillesd.com
Catering by Charles Rubin
Delivery Available Special Summer BBQ held at Beth Jacob 4855 College Ave.
(619) 583-1636
(619) 583-1635 FAX
http://www.shmoozers.com
Ralphs Kosher Experience
8657 Villa La Jolla Drive
La Jolla, CA 92037
(858)-597-1550
Lang’s Bakery (Wholesale)
5490 Complex St #601
San Diego, CA 92123
(858) 496-LANGS (5264)
(858) 565-6691 FAX
Ralph’s & Albertsons Downtown
Check out the kosher aisle and aisle 11 for a small selection of kosher products.