Airline Weekly - June 6, 2011

Cover Story

Growing Like China in North Carolina: Charlotte, surprisingly, is the fastest growing major airport in the U.S. Can this continue?

Forget even its current growth statistics, which rank it as the fastest growing major airport in the U.S.

No, what’s perhaps most amazing about Charlotte is that—far more than any other U.S. hub—it was completely irrelevant before the industry deregulated in 1978, paving the way for modern hub-and-spoke networks.

It’s tempting to think the same of other hubs that have grown since then, as well as of those that have come and gone. But in reality, every other hub or former hub already “mattered” by 1978. Yes, Atlanta has grown impressively since then, but it was already the second busiest U.S. airport (behind Chicago O’Hare) by then. Charlotte, on the other hand, enplaned less than a third as many passengers as Pittsburgh. Its figures then were in fact more similar to Anchorage, Alaska, than to any other post-deregulation hub.

One question today is whether Charlotte’s future has more in common with Atlanta or with Pittsburgh.

That might seem reasonable enough to ask, given what has happened to hubs in other midsized cities, which have shrunk or disappeared, often after they became redundant following mergers. Charlotte, after all, is now among the smallest U.S. metropolitan areas with a hub. And no airline is as interested in consolidating as the carrier with which its fortunes rise and fall: US Airways.

It all started when Charlotte leaders decided to begin expanding the airport in the late 1970s. They knew impending deregulation would likely lead to traffic growth, and they knew Piedmont Airlines—although headquartered in Winston-Salem, a city with its own airport—might like to grow at Charlotte. They didn’t imagine then, with a little more than a million passenger enplanements per year, that a decade later the airport would have nonstop B767 service to London.

Since then, Charlotte has always managed to expand—but never over-expand—in line with demand. And it’s done so with by far the lowest costs of any U.S. airport—less than a dollar per enplaned passenger, according to an analysis for Airline Weekly by LeighFisher, a consultancy. Even low-cost Atlanta is several times more expensive (and to Charlotte’s benefit, Atlanta’s costs will soon rise thanks to an expensive expansion project there). Its four runways make it a good place to operate, and Charlotte is also an easy and pleasant airport for passengers to use, with just one terminal and all gates connected airside.

Piedmont merged with USAir, which later changed its name to US Airways and then merged with America West. The Charlotte hub survived all the transactions while other hubs like Dayton, Baltimore, Pittsburgh and Las... (449 of 1,796 words)

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The world is a long way from the economic misery of late 2008 and early 2009. But the middle part of 2011 certainly won’t win any prizes for dynamism. In the U.S., job growth remains weak, the housing market can’t seem to lift itself up from depression, medical costs keep eating more and more of the nation’s productive capacity and high oil prices continue to be economic kryptonite. Signs of slower growth in China, Japan’s painful crisis recovery and persistent debt woes on Europe’s periphery don’t help.

But let’s not be too gloomy. IATA, which holds its annual meeting this week, unveiled healthy international traffic results for April, especially relative to last year’s figures, which were clouded by ash. US Airways, meanwhile, became the first carrier in its market to report y/y unit revenue trends for May—and sure enough, the data indicate strong demand growth.

If worldwide demand for air travel does turn south this summer, or perhaps this autumn, airlines want to be ready. But years of cost cutting and revenue raising can be wiped out quickly with labor strikes, several of which now seem possible. European carriers seem most vulnerable, but don’t forget about Qantas, Air Canada and perhaps even American or US Airways down the road if contract talks remain stalled.

Speaking of American, its distribution battle with Travelport took a turn for the worse, from its perspective anyway, when a court ordered its content back on Orbitz. Taking a turn for the better, meanwhile, was Bombardier, which finally got some more CSeries orders.

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