Originally Posted by
cerealmarketer
This is exactly the point.
If you want the kind of margins they enjoy, you have to do that first, and build the base, before you can hope to compete at the same level in the fragmented markets.
What's missing from all these figures is the margin at each hub.
I'm implying it's highest at the ATL, MSP, DTW, SLC type hubs with 70%+ share. And lower for all airlines at NYC, Chicago, etc. So when you have more of those built out, you have a higher margin business, and more to reinvest.
For UA that means DEN and IAH need to be dominant - in the 70%+ range for the total market. HOU isn't doing any favors. DEN seems like it was lost 15 years ago.
For AA it means continuing to dominate PHX, CLT, PHL.
Fighting fires in ORD, IAD, SFO, LAX when you don't have that right is a lower margin game.
But, this didn't happen by luck for DL. It was strategy. The premise here has been "poor UA doesn't stand a chance, because of things beyond their control". HOU doesn't do much to IAH, it's tiny in terms of traffic and limited to WN destinations. UA doesn't do itself any favors by treating people like they have no other options, even though they do have 70%+ (including HOU) of that market. There is no one to blame that IAH isn't as profitable as DTW...except United.
ATL is a great position for DL to have, but only because they can route everyone in the SE through there and then on to somewhere else. O&D traffic at ATL isn't good, and that airport would have no reason to be as big as it is, if it weren't for an excellent feed operation.
DTW has good O&D with the presence of HVF base. Even though DL does push feed to DTW for some international flights to fill coach seats, on a per seat basis, I suspect DTW might be the most profitable hub for DL, and might be one of top performing airports nationally. Even so, it's a small and vulnerable.
MSP is mostly feed and connecting, traffic, small HVF base and I don't think the margins there blow SFO or LAX out of the water.
SLC is mostly O&D like DEN, but is much smaller than DEN, so small the competition just doesn't bother for the most part. It's not HVF, Dl desperately pushes feed there to fill the one international flight offered. If UA (or DL for that matter) can't make far more money at LAX than what can be made at SLC, neither of them deserve to be in business at all.