1. d. Networks Develop from Skeletal to Connected High growth does not persist at initial gateway hubs
Early developments build loads to use larger airplanes:
Larger airplanes at this state means middle-sized
Result is a thin network – few links
A focus on a few major hubs or gateways
In Operations Research terms, a “minimum spanning tree”
Later developments bypass initial hubs:
Bypass saves the costs of connections
Bypass establishes secondary hubs
New competing carriers bypass hubs dominated by incumbents
Large markets peak early, then fade in importance
Third stage may be non-hubbed low-cost carriers:
The largest flows can sustain service without connecting feed
High frequencies create good connections without hub plan
Route developments come in three stages.
In the first stage, the idea is to bring as many cities and people into the air travel system as possible. This is done by focusing on a few obvious major hub cities—usually the ones that are already centers for ground transportation. A hub is a place where flights are timed to provide useful connections. Usually there will be at least 2 or 3 “banks” or “waves” of flights, with an inbound set all within an hour, and an outbound set an hour later.
In the second stage, other hubs develop. These hubs are still in organized banks. But the cities where these hubs develop are somewhat arbitrary. Some large cities get hubs, some do not. Which get them depends on who starts first, and how well the hub is run. These hubs turn what were 2-connect trips into trips that are 1-connect, and they provide nonstops were there were 1-connects. All this traffic is diverted off the earlier gateway hubs. Historically, these hubs stop growing and the secondary hubs absorb most if not all of the traffic growth.
The third stage seems to be developing in the US right now. Two things happen. First, the addition of new airport pairs in regional markets begins to taper off. And second, there are now many markets that are big enough by themselves for the local nonstop passengers to fill medium-sized airplanes. Start-up airlines can offer non-hubbed operations in “point-to-point” markets without the support of feeding connect traffic. At the same time major hubs have so many banks (6-12 a day) that they are operating continuously. They can now go to non-banked operations, with some gains in gate, labor, and airplane utilization. There will be little loss of connecting times. Instead of timing connections into banks, dense hubs get their connections by chance. However, frequencies are so high that the chance connections work out very well indeed. At this point the complexity of hubbed operations merges back towards the simplicity of point-to-point operations. However, this does not mean hubs disappear. About half the travel still has to make a connection to get where they want to go, and at least half the flying needs to be by carriers who make it possible to connect.

2. Consolidation Theory: A Story that Sounds Good
Large markets will need larger airplanes
Industry consolidation increases this trend
Alliances increase this trend
This trend is happening
We keep hearing from people who “grow” the large markets by the growth rate of the industry as a whole, say 5% a year. Having made this mistake ourselves years ago, we were pretty sure that the larger markets did not grow quite as fast as the industry in general. However, there are people who advocate the opposite—that large markets are not only growing fast, but they are (a) using large airplanes today, and (b) going to use even more tomorrow.

3. Fragmentation Theory Large markets peak early
Bypass flying bleeds traffic off early markets
Some connecting travelers get nonstops
Others get competitive connections
Secondary airports divert local traffic
New airlines attack large traffic flows
Frequency competition continues
The other side of the debate says that networks develop a small number of markets early, and the rest of the history of network development is the story of these initial markets being bypassed in various ways. The story is that all future network development bleeds traffic off the original “minimum spanning tree” network.

4. Route Development Data: Measures What Really Happens
Compare top 100 markets from Aug 1993
Top 100 by seat departures
Growth to Aug 2003
Data from published jet schedules
For data, we examined recent network history. We looked at the 100 largest markets in The data was published jet schedules. We used August because we use August for most of our fleet studies. Summer is the peak season. It drives the total fleet needs. [Of the top 100 markets were 50 US markets. Only 3 long-haul (over 500km, 3100mi). Many were very short haul. A fair number were “shuttle” markets with unusually high local traffic. As such, these are more difficult to fragment.]

5. Largest Routes are Not Growing as bypass flying diverts traffic
This chart compares the 100 largest markets (largest in seats) to the rest of the worlds’ scheduled jet markets for the peak month (August) in 1993 and the growth to As you can see, the large markets have passed their peak and they are loosing traffic faster than travel in general is growing. They loose traffic three ways. Most important, for hub markets over half the onboard loads are people taking connecting trips. As further hubs start in smaller cities, the number of choices for connecting paths increases and the share that flows over the original gateway hubs is whittled away. Second, some hubs provide connecting service in competition with major nonstops. For time-of-day, airline choice, frequent flyer, or price reasons, these connecting services compete and divert some traffic off the original nonstops. And third, in a surprising number of cases involving larger cities, secondary airports provide parallel nonstop service. These airports end up dividing one city into a number of separate catchment areas. Additional airports are helping solve ground congestion problems.
It is amazing but true that the top 100 markets, as a group, have actually shrunk over the last 10 years.
97 of these top 100 markets are short haul. So we also looked at the top 100 long-haul markets. Long-haul travel as a whole was up 81% over the period. (Lonhaul here is over 500km, or 3100 miles.) Grwoth in the top 100 long-haul markets was only 8%. That is less than 10% of the overall growth rate, and works out to under 1% a year. As in the short-haul, frequencies continued to grow (up 11%) and average airplane size get smaller (down 3%). Worse yet, frequencies by the largest airplane, the 747, were down 14%.
So the development of new routes means that the largest markets peak early, then are nearly flat while network developments absorb all the travel growth.

6. Large Long Routes are Not Growing as bypass flying diverts traffic
This chart compares the 100 largest markets (largest in seats) to the rest of the worlds’ scheduled jet markets for the peak month (August) in 1993 and the growth to As you can see, the large markets have passed their peak and they are loosing traffic faster than travel in general is growing. They loose traffic three ways. Most important, for hub markets over half the onboard loads are people taking connecting trips. As further hubs start in smaller cities, the number of choices for connecting paths increases and the share that flows over the original gateway hubs is whittled away. Second, some hubs provide connecting service in competition with major nonstops. For time-of-day, airline choice, frequent flyer, or price reasons, these connecting services compete and divert some traffic off the original nonstops. And third, in a surprising number of cases involving larger cities, secondary airports provide parallel nonstop service. These airports end up dividing one city into a number of separate catchment areas. Additional airports are helping solve ground congestion problems.
It is amazing but true that the top 100 markets, as a group, have actually shrunk over the last 10 years.
97 of these top 100 markets are short haul. So we also looked at the top 100 long-haul markets. Long-haul travel as a whole was up 81% over the period. (Lonhaul here is over 500km, or 3100 miles.) Grwoth in the top 100 long-haul markets was only 8%. That is less than 10% of the overall growth rate, and works out to under 1% a year. As in the short-haul, frequencies continued to grow (up 11%) and average airplane size get smaller (down 3%). Worse yet, frequencies by the largest airplane, the 747, were down 14%.
So the development of new routes means that the largest markets peak early, then are nearly flat while network developments absorb all the travel growth.

7. Very Largest Long Routes are Not Growing as bypass flying diverts traffic
This chart compares the 10 largest markets (largest in seats) to the rest of the worlds’ scheduled jet markets for the peak month (August) in 1993 and the growth to As you can see, the large markets have passed their peak and they are loosing traffic faster than travel in general is growing. They loose traffic three ways. Most important, for hub markets over half the onboard loads are people taking connecting trips. As further hubs start in smaller cities, the number of choices for connecting paths increases and the share that flows over the original gateway hubs is whittled away. Second, some hubs provide connecting service in competition with major nonstops. For time-of-day, airline choice, frequent flyer, or price reasons, these connecting services compete and divert some traffic off the original nonstops. And third, in a surprising number of cases involving larger cities, secondary airports provide parallel nonstop service. These airports end up dividing one city into a number of separate catchment areas. Additional airports are helping solve ground congestion problems.
It is amazing but true that the top 100 markets, as a group, have actually shrunk over the last 10 years.
97 of these top 100 markets are short haul. So we also looked at the top 100 long-haul markets. Long-haul travel as a whole was up 81% over the period. (Lonhaul here is over 500km, or 3100 miles.) Grwoth in the top 100 long-haul markets was only 8%. That is less than 10% of the overall growth rate, and works out to under 1% a year. As in the short-haul, frequencies continued to grow (up 11%) and average airplane size get smaller (down 3%). Worse yet, frequencies by the largest airplane, the 747, were down 14%.
So the development of new routes means that the largest markets peak early, then are nearly flat while network developments absorb all the travel growth.

8. JFK Gateway Hub Stagnant for 30 Years
In the US, the main early gateway airport to Europe was New York’s JFK airport. This plot shows that a line climbing fast indicating growth of total departures from US airports over time. The line that is not climbing at all is the departures from JFK. Only in the last couple of years has a new, low-cost, internal domestic carrier added operations at JFK. Otherwise, the growth of other hubs has stolen all of JFK’s growth.

9. JFK Gateway Hub Airplane Size Is Declining
This is another plot for JFK. This time it shows the average airplane size used for departures from JFK. Not only has there been no growth in frequency, there has been no growth in seats, either. In the last few years, increased short-haul services have driven the average down.

10. Congestion Has Not Slowed Route Developments Congestion is not driving seats per departure up
Seat Counts at Top 5 Airports Show Little Congestion
You would think that congestion would undo all these arguments.
The data suggest otherwise. This data is from the top 5 airports in each world region. If congestion is going to drive any airplanes up in size, it ought to be the airplanes at the top 5 airports. But it is not so. Seats per departure are mostly down or flat. This is just like every other cut of traffic flows we have made. Small is beautiful. And congestion does not seem to be changing this so far. Look at Europe, thought to have the worst congestion. Bigger airplanes in Europe? Not yet.

11. Congestion: Solutions From History Congestion has been a cost, not a constraint
Solutions favored by airports:
Redefining measurement of capacity movements
Technical improvements to raise capacity
Added runways
Building replacement airport
Solutions provided by the airline market:
Using un-congested times of day
By-passing congested gateways with new nonstop markets
Building frequencies and connections at secondary hubs
Using secondary airports at congested cities
Solutions beginning to be used:
Reducing smaller, propeller aircraft movements
Moving small, short-haul jet movements to larger aircraft
Congestion seems to have become a cost, but not a constraint. We have identified 10 ways a network can adjust to congestion. All 10of these are being used today. Market developments show as items 5-8 are happening based on competitors trying to create added value of services, without the spur of congestion at all. The system is de-congesting before the constraints hit.
Items 9 and 10 are where we look for evidence of congestion. To be honest, we are seeing a little bit of it, as the next slide will show.

12. Congestion Affects Short & Small Flights
This is a comparison of the departures in world-wide schedules by airplane size category. The smallest regional jet markets (717 size) are moving up to larger 737 and 757 use on short-haul fights. Most of this is in Europe, and most of the 757 gains are at London Heathrow.
At the same time, there is no evidence at top end of large and long-haul airplanes of a congestion effect. Look at the poor It is giving up market share day by day.

13. Chicago Airplane Sizes Do Not Show Congestion

14. Congestion is Not Driving 747 Shares UP

15. William Swan:
Data Troll
Story Teller
Economist