Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV): Unintended Consequences?

At an investor conference last fall, Glen Hauenstein, Delta Air Lines, Inc. (NYSE:DAL)’s executive vice president for network planning and revenue management, explained the logic of downsizing in Memphis. Instead of running small regional jet flights from a city like Birmingham to both Memphis and Atlanta, Delta Air Lines, Inc. (NYSE:DAL) will in the future direct all of its traffic to the big Atlanta hub using larger planes. Offering fewer flights on larger planes is more cost-efficient for Delta Air Lines, Inc. (NYSE:DAL).

Industry shake-up
As airline fleets converge toward larger planes, small cities will continue to see a reduction in flight options. Among the network carriers, smaller hub cities like Memphis, Cincinnati, and Cleveland are likely to see the biggest cutbacks. Low cost carriers may reduce frequencies for lower-traffic routes while fitting more passengers on each flight.

On the other hand, if you live in a large metropolitan area with a busy airline hub, such as New York, Chicago, Dallas, or Atlanta, you may see better flight options in the future. As capacity becomes more concentrated in the biggest markets, airlines will offer more flights on larger planes in those cities. This trend could lead to somewhat lower prices and more available itineraries.

Great transformation
The upgauging trend will take years to fully unfold, as airlines tend to replace only a small proportion of their fleets each year. However, by the end of the decade, today’s small hubs may have disappeared, but large hubs will be even bigger, while accommodating larger planes (on average).

This shift will have the greatest effect on small-town America. Small cities which today have flights to several different hub airports will not be able to support as many flights on larger aircraft. Customers are therefore likely to have fewer choices in the future, with flights to just two or three big hubs becoming the norm. Unfortunately, this reduction in consumer choice may be the price of having a profitable airline industry.

The article Will Your Airport Have Fewer Flights in the Future? originally appeared on is written by Adam Levine-Weinberg.

Motley Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines.

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