What Has the Loss of Hub Status Done to Northeast Ohio?

May 3, 2016

In 2014 United Airlines said it was shutting down its hub at Cleveland Hopkins Airport.  This came after the U.S. Airways hub closing in Pittsburgh and Delta drastically scaling back operations at its Cincinnati hub. In the first part of our series "Grounded," WKSU’s Tim Rudell looks at what dehubbing is and what the downgrade means to northeast Ohio.

Dehubbing is the back-side of hub-and-spoke, a business model widely adopted by major air carriers following federal deregulation of the airline industry in 1978.

Kerry Tan, an economist at Loyola University in Maryland, explains how it works.

“You’re trying to channel as many passengers as possible through these concentrated, large airports. And get these passengers from point A to point B, via a point C. You can fly larger planes and your costs can go down.”

Hubbing to funnel customers to fuller flights, has been good for airlines, at least large ones. And, being a hub has been good for host communities, who get broader destination choices and more flight-time options and, perhaps more importantly, big-city status. 

Jilted
According to branding and positioning expert Loraine Kessler, that’s why de-hubbing is seen as a blow to the region, though, she says, it shouldn’t be.

“It’s almost as if someone snubbed you at a party. 

Next week, WKSU's Kevin Niedermier takes a look at the aftermath of dehubbing at Cleveland Hopkins.

The airlines said we’re not good enough to be on the world stage. And on the news cycle it might look bad for the moment. It really isn’t. When you look at the whole picture, what makes a strong Cleveland  and a strong Ohio -- as we move forward with a vision of what this community can be about -- dehubbing won't be a factor.         

The loss of United’s hub at Cleveland Hopkins could, however, still be problematic for some of northeast Ohio’s biggest companies. 

Mike Jacobsen, Diebold corporate spokesman
Credit Tim Rudell / WKSU

An example is regional corporate anchor, Diebold,   poised to become the nation’s next Fortune 500 Company when it finalizes acquisition of its biggest European competitor.

Diebold spokesman Mike Jacobsen acknowledges, "The perception we hear from our customers and business partners of Hopkins is not good, which is not at all in line with perceptions of the city in general that we hear from the same folks, which are positive. We’ve taken a lot of steps forward, (and) as a native of the region, the airports perception is a tough thing to have to hear from the people with whom we do business.” 

The practical effect

We'd love to hear your own travel experiences following dehubbing. Share with us on social media, using the #flying fiasco.

Image issues aside, what is the practical matter of attracting businesses in a sprawling and varied area like northeast Ohio if there’s no nearby hub?

Along with industrial and commercial concentrations like Cleveland, Akron and Canton, the region has half-a-dozen economic centers identified by the Office of Management and Budget as “micropolitan” areas. 

Wooster is among them, and has been ranked in the top 10 U.S. “micros” in a new investment for 10 years. 

Rod Crider, Economic Development Director Wooster/Wayne County
Credit Wooster Area Chamber of Commerce

Rod Crider is economic development director.

“Hub status might be an issue if, for instance, we were looking to locate a company from Asia. Larger airports often have more direct flights to international locations So, it’s certainly an advantage to have.  But, it has never been for us a deal-killer.”

Holding on
Keeping companies in northeast Ohio could be another story.

Again, Diebold, could be an example. Mike Jacobsen says dehubbing could impact the electronic-banking company's ability to grow.

“It’s very difficult to grow and make local investments in the company when the surrounding infrastructure can’t keep pace.

"And this is particularly true as we consider our pending combination with Wincor- Nixdorf from Germany. We’re going to have customers, business partners and employees wanting to come in and out of the region. Our global growth will definitely increase the demand for international travel. So, not having a hub limits our potential, and limits the region’s potential as well.” 

The dollar hit
What about for Cleveland Hopkins itself, and the direct costs of dedubbing?  A lot was invested in infrastructure and terminals, large swaths of which are now little used, although United Airlines will continue through 2029 paying off  $110 million in construction debt. 

Research specialist and urban planner Chris Nicak of the University of Cincinnati Economics Center says airlines that do not use hub and spoke operating models are moving in and stepping up.

“They’re definitely taking into account that capacity. And I think the smaller, more origin-to-destination, no-layovers; those flights, will be increasing in popularity as will the super-budget. And I think we can look to Europe to see how successful super-budget flights have been over there."

Perspective

Kerry Tan, of the economics department of Loyola University of Maryland, says dehubbing is tied into the new model for the airline business.
Credit LOYOLA UNIVERSITY, MARYLAND

Both Chris Nicak, and Loyola economist Kerry Tan say the change coming in economic conditions that drove hub and spoke is driving new approaches to the air travel business. 

They say communities where airport de-hubbing happens should not presume that they didn’t do enough to keep the big airlines or presume that their airports will never recover.