The airline industry is ever changing in the United States. Recent developments, such as the elimination of Cleveland as a United hub and the ongoing mega-merger between US Airways and American Airlines, make it clear that the industry appears to be consolidating in an effort to increase competition or to find market niches at the expense of some other people.
New and emerging airlines are making strides by appealing to a very specific market based on traveler class, such as business travelers or vacation travelers, and markets based on area, such as new airlines in cities that are seeing increased demand. Other airlines go against some of the big players and offer something that the traditional airlines do not, such as rewards programs or cost structure.
We are now entering an era where four airlines control 80% of the United States domestic air travel market and it is these airlines that will try and reduce those numbers. How will these airlines bite increase their share of the pie, and how will the big four airlines in the United States (Delta, United, American, and Southwest) react to that? At the same time, the big four airlines will increase competition among the four at the expense of some marketing segments.
Amateurs and analysts all over the industry are trying to predict the next big move for the airlines. With the trends towards new markets, new niches, and increasing competition, many people come up with their own ideas about what these airlines will do next and where the industry will be in the near future. Here are 10 predictions that were made based on current market analysis, market opportunities, and future market growth.
Delta Airlines Establishes Hubs In Seattle And LA
Delta has been working for the past few years to break into the United dominated Trans-Pacific market. This market, which has grown exponentially over the years, is something that is desirable for many airlines on both sides of the pond. United has two massive hubs on the west coast and is naturally in a good position to dominate this market, but the acquisition of Northwest Airlines by Delta in 2008 put Delta Airlines in a good position to break into the market in a big way as well.
Delta and United both have a hub in Japan as well, but they hope to reduce dependence on the Asian hub because of the increased demand for more direct flights. Delta has been working aggressively in Los Angeles to increase flight capacity in the wake of increased competition from American Airlines and United Airlines. In Seattle, Delta has been aggressively penetrating markets that were once dominated by former partner Alaska Airlines, paving the way for a market war between the two airlines going into the future.
Frontier Airlines Establishes Hub At Cleveland Hopkins
As United de-hubs in Cleveland, a small hub that was losing money, another airline will inevitably takes its place. That airline, in the short term at least, appears to be Frontier Airlines. Indigo Partners LLC, which owns Frontier, has made it clear that they want to decrease dependence on the massive Frontier hub at Denver by investing in other markets.
It started with cities such as Orlando, Trenton, New Jersey, and Wilmington, Delaware, and it will continue its push to the east by offering more flights from Cleveland. Whether Cleveland will be a true hub or not depends on the initial success of the city for Frontier. Cleveland has many advantages that other cities with large airports do not have such as population and location.
American Airlines Will Drop Hub Status From Reagan National
American Airlines and US Airways agreed to give up slots at Reagan National in exchange, among many other conditions laid out by the US Department of Justice, for permission to merge and become the largest airline in the world.
This prediction can be seen coming true now with the slashing of many destinations by US Airways because of the slots it had to give up, and the addition of many destinations by Jetblue and Southwest Airlines. This increased competition coupled with its new marketing strategy in the northeastern United States may signal the end of Washington DC as an American Airlines hub.
Alaska Airlines Establishes Hub In Salt Lake City
In retaliation to the intrusion of Delta Airlines into the Seattle market, Alaska Airlines is starting to deal a blow to Delta Airlines at its hub in Salt Lake City. Alaska will start to compete with Delta in key western markets. Delta has also been slowly downsizing operations at Salt Lake City because of its marketing strategy targeting the west coast.
Those two factors may lead to a larger hub operation at Alaska, giving it a market to expand to the east and a stronger footing in the west, where the Alaska Airlines name is well known.
American Airlines And Delta Airlines Will Compete In The Northeast
American Airlines is starting to re-organize its hubs in the northeast ahead of the merger with US Airways. After the merger, American Airlines will have hubs at La Guardia Airport and John F. Kennedy International Airport. It will also inherit Philadelphia International Airport from US Airways.
American Airlines holds a smaller market share in New York than Delta and United Airlines. Those factors compelled American Airlines to rethink its hubs going through the merger, and to be more competitive in New York City by using Philadelphia as a feeder airline to channel large numbers of people to New York to bring passenger counts up.
Alaska Airlines And Delta Airlines Will Further Compete In The Northwest
Much like the competition heating up in the northeast, Alaska Airlines and Delta Airlines will start competing in the northwest through the hub cities in Seattle and Salt Lake City. These two airlines have codeshare agreements, but they recently hit a snag in their dealings. If these two airlines decide to terminate their relationship, there may be increased competition as one airline tries to gain a footing in the hubs of another airline.
Frontier Airlines Will Merge With Spirit Airlines
In an era of mega mergers, there may be one more merger to round out what has defined the post-9/11 industry. The most likely new pairing is the merger of two airlines that are owned by one company. Indigo Partners LLC owns Frontier Airlines and Spirit Airlines.
Frontier Airlines is one of the highest-rated airlines in the United States and Spirit Airlines is the lowest-rated airline. The two airlines have complementary route maps, similar goals, and appeals to similar niches. A merger between the two could be possible and would most likely use the Frontier Airlines name.
Delta Airlines Reduces Service In Salt Lake City And Cincinnati
Many airlines will continue to modernize fleets and get rid of unprofitable airplanes and destinations. Delta Airlines started to reduce Cincinnati in 2008 after merging with Northwest Airlines and inheriting two massive midwest hubs. Cincinnati shrunk so small that the operations of the airport moved to one terminal. It may only be a matter of time until Cincinnati is eliminated altogether, especially since the airport has one of the highest landing fees in the nation and many locals flock to nearby airports for their flying needs.
There are a couple of things going for it too, like the fact that many major corporations are based in Cincinnati and it serves as a great hub for locals in a region that has lost a lot of airlines due to decreasing importance as business centers. Salt Lake City has seen a smaller reduction, but with focus shifting to Los Angeles and Seattle, Salt Lake City may be adversely affected.
Trans-Atlantic Competition Will Increase
The biggest changes will come from outside the United States. Many airlines in Europe and the Middle East have expanded rapidly over the past few years and continue to request routes to airports all over the United States. Airlines based in the United States will have to increase competition to these regions and it has been and will continue to be relevant going into the future. Many airlines will allocate routes to these regions at the expense of reducing resources to other regions.
Trans-Pacific Competition Will Increase
Similarly to the increase in competition from the Atlantic, the Pacific markets in the far east and in southeast Asia have exploded in recent years and there is more opportunity than ever for new routes. In addition to increasing competition, there is a huge marketing war between the United States airlines for customers in the trans-Pacific market. There is also an increase in competition at the fewer airports in the West for space to establish hubs.