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The Future of Dulles Airport [and Metro line]

The Future of Dulles Airport [and Metro line]

Old Jul 21, 21, 12:26 am
  #391  
 
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I like all of that as well! My comments would be as follows:

-I think AA has this problem as stated with PHL, and I'd add PHX as well; both seem to be in the shadow of the respective major coastal gateway hub just as IAD is, and there might be some fun exploring we could do to unpack that further.

-NYC I think is different, in that it seems to me that both AA and DL have done an excellent job over decades of satisficing the split-hub concept. Obviously disagrees vehemently with their "we're the only TRUE single, comprehensive connecting hub in NYC" marketing pitch, and that is what it is with EWR, but both AA and DL seem to have their (obviously different between the two of them) split hub NYC setup dialed in respectively. Much more so than the other examples I would wager.

-NYC sub-point: I think there is very much some merit to having another larger operation "just down the road" as it were from NYC purely for redundancy in the inevitable IRROPS snafu's from major Wx events (or even if NY Center crashes or something), so in concept, keeping PHL and IAD has some potential (given that both were inherited longstanding hubs, I'm arguing here that this sustainment/leveraging said infrastructure, not that it necessarily would work to build this from scratch anew). As in, I don't necessarily think they (and PHX) need to be folded up overnight, as there is still some value there to extract.

-LH Group to me seems like the poster child for dialing-in in each individual city. I think crossing borders helps massively with everything aside from FRA/MUC and ZRH/GVA, especially with the Africa-focused scissor hub at BRU, which just seems like a neat little flourish to maintain while it works for them. If each hub were in the U.S., it might present more problems, but as is, I see a good bit of specialization between them (IIRC you still see a decent bit more flow to Easter/SE Europe out the likes of VIE to leverage historical connections, as one example, and GVA maintains that financial/diplomatic niche to it that makes maintaining it as a gateway workable). I would probably focus more on comparisons with AF=KL's AMS/CDG bifurcation there, where there is a good bit of yield discrimination (at least historically), which is certainly reflected in DL's JV ops to AMS vs. CDG for whatever that is worth here. But the point I would make is that FRA/MUC is much healthier for both siblings even if one is the top dog.

-Also agree on the point that any discussion on NYC needs to remember that old joke about it being a bottomless pit of demand to basically anywhere you can get a plane, so you can make basically anything work once you toss even just a couple connecting butts in seats to flesh out plane rosters. That's just never going to be the case for IAD, and I would not pretend otherwise -- if anything, I think that's my "concern" with IAD, that UA's market cap is just much more constrained there.
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Old Jul 21, 21, 1:53 pm
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Originally Posted by LHCVG View Post
I've wondered from time to time if there is, really, anything IAD can "do" about that problem, as it seems kind of intractable. I can't come up with much that isn't just nibbling around the edges (Metro to IAD, for example), or otherwise just not addressing the actual problem of accessibility and convenience vs. DCA (and IMHO if the C/D Concourse were transplanted to be the Terminal for Everybody at DCA, I think most demand would still go there just for logistical reasons). A few things offhand that seem to be either UA blindspots or simply beyond feasibility to remedy:

-To what extent do people choose airports for the terminal? Sure C/D is a dump, but I wonder if even a world-class UA concourse setup would draw much (any, frankly) traffic from DCA. Like the Metro, I could see a bit of traffic shifting for that reason, just not enough to be of consequence. Alternatively, I suppose your connecting pax experience is also significant for any connecting hub, so maybe there is a component of that going into the analysis as well, but I couldn't speak to that either. Just wondering.

-Even a perfect schedule of 10x/day to every single DCA destination on the best possible a/c for each route/timing would not draw those who just don't want to bother with the trip out to IAD. Point being, I would guess that IAD is screwed on this point as long as there isn't a truly revolutionary access option, such as a Heathrow/Narita Express-type setup (just for example). UA can probably always beef up this or that to make sure they do present the best possible offering to those cross-shopping DCA vs. IAD, but I still don't see that much potentially gettable traffic.

-Pricing as long stuck out to me whenever cross-shopping DCA vs. IAD: not saying my experience is dispositive, but I don't recall many times when the price difference is even a few tens of dollars, let alone $100+. Often, it seems like UA's ex-IAD rates are comparable to DCA prices, even if the IAD option gives you a n/s somewhere that the UA DCA fare would require a connection on. So I have to throw that out there as a thought experiment that would be interesting to see play out over time. Obviously UA's route planning and yield management teams are well aware of all of these dynamics, but it does seem like one approach that they haven't "tried" as it were (unless I just missed it): undercut basically any ex-DCA fare for an equivalent destination by say $100+ across the board, and more where possible.

-We can probably pencil in over time that DCA will gradually continue to add beyond-perimeter slot exemptions, such as that, in general, over time IAD will only be able to rely on it's scale and flexibility of beyond-perimeter flight options for those who don't just want "a" n/s option from the closest possible airport (back to where DCA wins by default), time/airline/cabin agnostic.

Setting aside the physical plant issue itself of the aging C/D setup eventually just becoming too expensive as it deteriorates, is it possible that UA has just seen the writing on the wall the whole time and known that doing much substantively to try and invest in IAD to compete more with DCA just doesn't pay for them? Back to their people clearly knowing much more than me, I have to assume they know what they're doing despite these points like I raise here. It just appears like they don't play this as aggressively as they could from outside.
There are things that MWAA can change, and things they cannot. They can't change IAD's location - it's never going to be as convenient of a location for local passengers as DCA is. But it doesn't need to be.

The strategy for improving IAD is to increase connecting traffic. And that's going to rely on UA. The good news is that United has similar plans - they're emphasizing the midcontinent hubs they have (ORD, DEN, IAH) and the coastal gateways (SFO, LAX, EWR) and IAD has a chance to be a hybrid between the two - it has the capacity to do a lot more domestic hub connections than it does today, meaning they can shift that traffic away from EWR and free Newark up to focus on local O/D - and IAD has very strong long haul international demand in its own right.

IAD pre-pandemic captured 80-85% of the international flying in the DC region - very lucrative. And also pre-pandemic, the airport was attracting all sorts of new service, putting nice dots on the map and helping push the virtuous cycle of connectivity. It's not at all hard to imagine a scenario where IAD is the busiest of the three airports in the region in total traffic while being the least popular with local O&D... the growth strategy is all about hub connections.

So, then the question is: what does UA need to grow IAD as a hub? They need lower costs. They don't really need new facilities yet. They need to fill up the facilities they have (e.g. have large connecting banks of flights all day long, not just for the two big Intl banks in the evening). And once you do that, the volume of traffic both makes the investment in a new concourse necessary and also provides the means to help pay for it with additional traffic.

I also would not assume that DCA continues to get more perimeter exemptions. MWAA fought hard against that in the last FAA bill. And they recruited lots of support - United chimed in, and (as a condition of their new concourse at DCA) AA was basically silent. Most importantly, they got the entire DC regional congressional delegation on board with keeping the perimeter rule as-is.

Anyway, none of this is a secret - United has made plenty of public statements that they need to have more traffic to justify a new facility at IAD, and the existing one works fine for what they ask of it. And its cheap. MWAA knows all this as well. They've worked to control costs and make incremental moves to improve IAD.
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Old Jul 21, 21, 2:02 pm
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Originally Posted by futuramadramallama View Post
You bring up some great points... what can IAD (or MWAA, rather) or UA do about this? Just to add one more into the fray:

-It's been argued by both armchair-analysts and actual-analysts alike, that IAD may very well be a superfluous hub for UA. It made some sense when UA and CO were separate airlines: perhaps each wanted an east coast hub. Post-merger, some find it challenging to justify two hubs just a few hundred miles apart (IAD vs. EWR). Especially when one is potentially superior across certain metrics (e.g. population of catchment area, aggregate economic activity of metropolitan area, ticket sales/yields, etc.).

Personally, I'm not suggesting it's a foregone conclusion that IAD (as a hub, as an operation of its size) is redundant for UA. It seems like every so often, UA comes up with a plan to make sense of IAD within its network. But I do also see how their IAD operation will "always" be second-fiddle to EWR, and this in turn limits IAD's (the airport) trajectory. Might even be a Catch-22.

One thing, which I think makes it difficult for UA to back away, is that its the capital of the US: it's a nice feather in its hat, and maybe UA's international partners like flying there for the prestige. (I'm just guessing)
On the UA hub strategy, all of those analysts have been awfully quiet ever since Scott Kirby joined UA. Back when UA was trying to shrink to profitability, of course cutting IAD was on the table. But that strategy never made much sense.

The new approach makes a lot more sense. United is too big of an airline to put all their East Coast chips into one basket at EWR - it's a lucrative market, but also delay prone and hard to run a large hub out of. Likewise, IAD has a lot of flaws, but it's got a core set of business that is also too lucrative to just walk away from.

United's been clear that their hub strategy is for each mid-continent hub (ORD, IAH, and DEN) to move tons of people; their coastal gateway hubs (SFO, LAX, EWR) will cater to local and international traffic - and IAD is suited to do a bit of both.
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Old Jul 22, 21, 2:51 am
  #394  
 
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I should clarify that I didn't mean to be prescriptive about future DCA perimeter exemptions, but merely to underscore the negative reputation of IAD insofar as people aren't content with an MDW/HOU/DAL setup juxtaposed with the big hub out in the suburbs to handle everything else when they need that travel beyond. I presume LGA would experience a slight bump in parallel fashion if similar exemptions were allowed, but to a lesser degree given the positioning of NYC airports (e.g., EWR actually being the quickest trip from Lower Manhattan if you're down that way).

In other words, my perception from FT-type chatter is that DCA would see a bunch more beyond-perimeter traffic if those rules were lifted, and you don't have that premium JFK thing going on with pax (though if LGA allowed transcons that would be an interesting experiment to see if UA PS/DL One/Mint/AA FF garnered better yields and traffic than vs. JFK for the same services where the a/c can be kept the same).
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Old Jul 22, 21, 11:32 am
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Originally Posted by LHCVG View Post
I should clarify that I didn't mean to be prescriptive about future DCA perimeter exemptions, but merely to underscore the negative reputation of IAD insofar as people aren't content with an MDW/HOU/DAL setup juxtaposed with the big hub out in the suburbs to handle everything else when they need that travel beyond. I presume LGA would experience a slight bump in parallel fashion if similar exemptions were allowed, but to a lesser degree given the positioning of NYC airports (e.g., EWR actually being the quickest trip from Lower Manhattan if you're down that way).

In other words, my perception from FT-type chatter is that DCA would see a bunch more beyond-perimeter traffic if those rules were lifted, and you don't have that premium JFK thing going on with pax (though if LGA allowed transcons that would be an interesting experiment to see if UA PS/DL One/Mint/AA FF garnered better yields and traffic than vs. JFK for the same services where the a/c can be kept the same).
Yes, I think all of that is the right read - I'm just saying, there's no actual political constituency to change the DCA perimeter rule. Congress sets the rule; since they've added the various exemptions, they've relieved the pressure there. Now the DC delegation is hard against a change; Lots of other members of congress that rely on flights to small destinations from DCA that would be dropped in favor of transcons would also be whipped to vote against such a change. United is against a change; MWAA is explicitly against a change.

The one airline that would benefit would be American, but MWAA had a clause in the latest lease agreement for DCA and IAD that the airports authority reserves the right to blow up the use and lease agreement if Congress changes the perimeter rule. And I'd bet that MWAA would ask for additional revenue sharing (e.g. sending DCA revenue to pay for IAD infrastructure - or for AA passengers to pay for UA facilities) in that instance.
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Old Jul 22, 21, 12:35 pm
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Originally Posted by LHCVG View Post

In other words, my perception from FT-type chatter is that DCA would see a bunch more beyond-perimeter traffic if those rules were lifted, and you don't have that premium JFK thing going on with pax (though if LGA allowed transcons that would be an interesting experiment to see if UA PS/DL One/Mint/AA FF garnered better yields and traffic than vs. JFK for the same services where the a/c can be kept the same).
I've never flown to NY via LGA because of the perimeter rule. For JFK and EWR, I prefer EWR since I can take the train from there to Manhattan.

That said, my viewpoint is that NYC is a pick-your-poison situation where none of the three airports is clearly better for O & D traffic. That is not the case with DCA. It is clearly better than IAD or BWI for everyone who is traveling to or from DC itself. Since SLC already has a perimeter exception, I am fine with no more exceptions being added.
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Old Jul 22, 21, 12:55 pm
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MWAA has to get special permission from the airline signatories to the lease agreement to put DCA money to IAD - which they have gotten in the recent past - but it would be only a relatively small amount. At the same time, anything that gets the enplanement costs down, which has gone down significantly over the last 8 years or so, makes a difference.

MWAA recently sold the western lands that really have no use for air operations and that money is being used to finance several improvements and bring in interest/investment income. In addition, MWAA will be developing at least one new hotel on the property. There are other ideas/plans being discussed (a professional sports stadium was for a short, very short, while).

There is a ginormous, untapped cash cow at IAD, that would make the place super cost-competitive, and that is commercializing the completely unused historic tower. I was recently up in it, and it has so much potential (for restaurant, bar, observation lounge, etc.). Unfortunately, the existing elevator is not ADA compliant and making it compliant would require substantial alteration in violation of historic preservation regulations. Various ideas have been batted about, but pretty much, without an act of Congress (who also actually owns the place) nothing can/will ever happen. It's a huge shame.
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Old Jul 22, 21, 10:37 pm
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Originally Posted by blockski View Post
I have the same view about small destinations if the perimeter rule is lifted/expanded -- lots of those will disappear I would think, and DCA would be (to oversimplify) a West Coast gateway while numerous towns in the East lost out.
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Old Jul 23, 21, 8:59 am
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Originally Posted by blockski View Post
Yes, I think all of that is the right read - I'm just saying, there's no actual political constituency to change the DCA perimeter rule. Congress sets the rule; since they've added the various exemptions, they've relieved the pressure there. Now the DC delegation is hard against a change; Lots of other members of congress that rely on flights to small destinations from DCA that would be dropped in favor of transcons would also be whipped to vote against such a change. United is against a change; MWAA is explicitly against a change.

The one airline that would benefit would be American, but MWAA had a clause in the latest lease agreement for DCA and IAD that the airports authority reserves the right to blow up the use and lease agreement if Congress changes the perimeter rule. And I'd bet that MWAA would ask for additional revenue sharing (e.g. sending DCA revenue to pay for IAD infrastructure - or for AA passengers to pay for UA facilities) in that instance.
I don't agree there is "no" political constituency for changing or even eliminating the rule, at least for DCA, as there are plenty of self-important folks on the Hill from the western lands that would love to have a more convenient travel options for DCA, In addition, with the state of engine reliability, expansion of ETOPS limits, and the distances the midsize planes can go, DCA could be opened up to an enormous range of international options - so airlines are a big proponent of changing the perimeter rule. However, that would cause a death spiral for IAD and fortunately, there are plenty of rational and powerful enough legislative critters on the hill that such changes will not happen anytime soon.
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Old Jul 23, 21, 9:25 am
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Originally Posted by Section 107 View Post
I don't agree there is "no" political constituency for changing or even eliminating the rule, at least for DCA, as there are plenty of self-important folks on the Hill from the western lands that would love to have a more convenient travel options for DCA, In addition, with the state of engine reliability, expansion of ETOPS limits, and the distances the midsize planes can go, DCA could be opened up to an enormous range of international options - so airlines are a big proponent of changing the perimeter rule. However, that would cause a death spiral for IAD and fortunately, there are plenty of rational and powerful enough legislative critters on the hill that such changes will not happen anytime soon.
Yeah, I don't mean that there's literally no one who wants more DCA beyond perimeter flights, but that there's not a sufficient coalition to make that happen. And while I'm sure AA would love to change the perimeter rule, they're unlikely to advocate for it because of the likely downstream impacts that would fall out from that.

International arrivals at DCA will not and should not happen (beyond the existing pre-clearance arrivals). There's absolutely no policy reason to build FIS facilities at DCA.

As for the lease agreement, MWAA has a clause in the lease that basically allows them to void the terms if the perimeter rule is repealed. Airlines could be non-signatories, but they would pay more. I'm sure that MWAA will continue to press for similar language in future agreements.
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Old Jul 23, 21, 9:45 am
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My own armchair proposal for that problem is to relax the perimeter rule in some fashion, but tie any additional beyond-perimeter flights to maintenance/addition of flying to small markets, and/or mainline aircraft (for slot efficiency at the constrained airport) to medium-to-large markets (e.g., tell UA they have go to all-mainline at DCA if they aren't going to add more diverse service like say DL does). Not saying that is perfect in any way, but it seems to me to be a logical starting point that covers all the bases between access for beyond-perimeter cities*, while maintaining small-market services, and as well trying to entice the airlines to maximize total available seats per slot pair for efficiency's sake (understanding that from the airline's POV, some markets only work with 76-seaters or below without some sweetener somewhere).

*: Part of my thinking is that the beyond-perimeter program does face the risk of everybody jumping onto say LAX, and likewise say WN being able to presumably garner a tasty premium on the AUS flight. As such, incentivizing new service (resumption of SAN seems like a no-brainer, SAT seems logical, maybe an SMF or an SNA or something, LGA-style weekend service to BZN in the summer) is of course always on the agenda with any new exemptions, but likewise, you want to also encourage competition on the likes of AUS or LAS (SLC and PDX for instance might not make sense for anyone else, as opposed to LAX as it is now, and maybe SEA or DEN too down the line).
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Old Jul 23, 21, 10:08 am
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Originally Posted by futuramadramallama View Post
Thanks!

I guess its also worth mentioning that UA isn't the only carrier which has to contend with this. For example, I wonder how AA deals with its "DCA, PHL, JFK/LGA" situation. They have a successful operation going (and are the largest carrier) at DCA, they have deemed PHL one of their major US-East hubs and conduct most TATL long-hauls from there, and it's "impossible" to back too far away from a city like NYC.
Interesting point about AA. I would suggest that AA's NYC operations function differently than its operations at its main hubs in DFW/MIA/ORD. From my admittedly outside viewpoint, NYC isn't a hub per se - its purpose is not a connection point for transiting passengers but rather a key destination/origin point. Given NYC's huge size and importance as both a business and leisure travel destination, that makes sense. LGA seems to me to be AA's main focus, with lots of connections to the main hubs as well as other big O/D points on or near the East Coast. JFK to me seems more geared to bringing NYers to key business and vacation destinations via nonstops (the Hollywood jet set doesn't want to connect in DFW, and AA kind of needs a nonstop LON-NYC service) and to connecting AA passengers to foreign OW carriers for onward international travel.

I confess I have absolutely no idea what the idea behind PHL is, though.
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Old Jul 23, 21, 10:19 am
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Originally Posted by M60_to_LGA View Post
Interesting point about AA. I would suggest that AA's NYC operations function differently than its operations at its main hubs in DFW/MIA/ORD. From my admittedly outside viewpoint, NYC isn't a hub per se - its purpose is not a connection point for transiting passengers but rather a key destination/origin point. Given NYC's huge size and importance as both a business and leisure travel destination, that makes sense. LGA seems to me to be AA's main focus, with lots of connections to the main hubs as well as other big O/D points on or near the East Coast. JFK to me seems more geared to bringing NYers to key business and vacation destinations via nonstops (the Hollywood jet set doesn't want to connect in DFW, and AA kind of needs a nonstop LON-NYC service) and to connecting AA passengers to foreign OW carriers for onward international travel.

I confess I have absolutely no idea what the idea behind PHL is, though.
I don't know if this still holds, but I read a few years ago that AA's explicit NYC strategy is to bring people TO New York (the evidence used was flight timings and the like), which I find interesting because that is very much distinct from the UA/DL/B6 battle to be the Hometown Airline of NYC. Neither fish nor fowl, but an interesting comment on their strategy.
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Old Jul 23, 21, 10:21 am
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Originally Posted by amanuensis View Post
I've never flown to NY via LGA because of the perimeter rule. For JFK and EWR, I prefer EWR since I can take the train from there to Manhattan.
You can also take the train from JFK to Manhattan. LIRR goes from Jamaica Station to Grand Central.
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Old Jul 23, 21, 10:29 am
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Originally Posted by LHCVG View Post
I don't know if this still holds, but I read a few years ago that AA's explicit NYC strategy is to bring people TO New York (the evidence used was flight timings and the like), which I find interesting because that is very much distinct from the UA/DL/B6 battle to be the Hometown Airline of NYC. Neither fish nor fowl, but an interesting comment on their strategy.
Well, if you're bringing people to NY, then you presumably have to take them back FROM NY.

I don't think AA will ever try to be NYC's "hometown airline," and indeed as far as I can recall they've never really advertised that as a goal (unlike B6, where that's literally their main message, and DL/UA, which in the past have run massive local ad campaigns touting their destination networks via billboards, ads on the top of taxis, etc. I can't recall any similar AA marketing within the city at all.)

That said, AA is clearly trying to capture rich locals' money. They have lots of nonstops from JFK to Caribbean destinations - just looking at today's departures, there's Montego Bay, Punta Cana, St. Thomas, Antigua, Cancn... And during normal, non-pandemic times, they have a lot more flights to luxury resort destinations and the like.
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