By David Knibb www.flightglobal.com
Hubs and spokes have been around for decades, but the map keeps changing as traffic and aircraft performance dictate changes in hub preference.
Nowhere is this more obvious than on international routes, where, for example, the Middle East and Singapore have emerged as favored new hubs. They could eclipse such traditional standbys as London and Tokyo.
The recent decision by Australia’s Virgin Blue group to form a strategic alliance with Etihad illustrates the dynamics of this trend. V Australia, Virgin Blue’s long-haul carrier, is ditching point-to-point routes into South Africa, southeast Asia, and the South Pacific to concentrate on two hubs – the one it already has in Los Angeles, where it codeshares with Delta Air Lines on internal US flights, and a new one in Abu Dhabi, capital of the United Arab Emirates, and Etihad’s base.
In this new alliance, V Australia will codeshare with Etihad on flights between Australia and Abu Dhabi, offer reciprocal frequent flyer plans and lounge access, while Virgin Blue handles Etihad’s interline traffic within Australia. But the key to this deal from Virgin Blue’s perspective is the codeshare V Australia gains on Etihad flights beyond Abu Dhabi to destinations in Europe North America, plus Beirut and Johannesburg.
Trading in its point-to-points for the Abu Dhabi hub gives V Australia a significant presence on three continents. John Borghetti, chief executive of the Virgin Blue group, tells local reporters that this two hub strategy – Abu Dhabi and LA – opens up “hundreds of destinations around the world, hundreds we would never be able to fly to on our own without buying squadrons of aircraft.”
Emirates pioneered the Middle East as a hub by building a global route network out of its Dubai base. Some of its traffic is origin-and-destination, but the bulk of it is sixth freedom. Thanks to geography and the range of today’s aircraft, Dubai and neighboring cities sit at a modern-day crossroads between Europe, Africa, Asia, and Australasia. And Emirates is trying to extend this to the Americas.
Calin Rovinescu, Air Canada’s chief executive, is not a fan of this expansion. At the Vancouver board of trade in March he complained about Emirates seeking more Canadian rights than it needs for O&D traffic between Canada and the UAE. “At the end of the day, sure, you will still be able to get to anywhere from Vancouver. But you will have to get there through Dubai.”
Etihad’s strategy of partnering with local carriers, such as V Australia, will help it avoid the protectionist reaction Emirates provokes, rightly or wrongly, by diverting traffic away from national carriers and flying everything with its own metal. But either way, it is hard to argue against the geography of a Middle Eastern hub.
Singapore is emerging as a close second. It has always been a stopover on the Kangaroo route between Europe and Australasia. Now Qantas unit Jetstar has plans to expand Singapore into a jump off for more routes into Asia, southern Europe and the Middle East. By combining traffic in Singapore, it expects to operate profitably into secondary cities where Qantas, with its higher costs, can not.
Economics are certainly key in choosing a hub. But so are bilateral rights and traffic. As volumes grow, routes may fragment and traditional hubs lose out. Witness what has happened on the North Atlantic. Instead of more flights between New York and London, we now see Charlotte-Frankfurt, Miami-Milan, and so forth. London is still a hub, but for connections into secondary European cities that are too small for point-to-point flights.
Even this can change, especially as more efficient jets come on line. Vancouver, for example, expects to host more North Pacific routes when Air Canada launches Boeing 787 flights into secondary Asian cities. Traffic on these routes is too thin for today’s aircraft. The route fragmenting that will follow will do the same thing to the hub in Tokyo as it did to London. A new generation of hubs emerges as new routes bypass old ones. The hub and spoke system is alive and well – and constantly changing.