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American Airlines Rebanks Dallas DFW and Chicago O’Hare

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American Airlines Rebanks Dallas DFW and Chicago O’Hare

American Airlines Rebanks Dallas DFW and Chicago O’Hare
August 17
12:03 2015

MIAMI — American Airlines faces a number of key hurdles in completing its integration with US Airways. The new airline plans to phase out the US Airways brand by the end of this year, operating as one unified entity: the “new American,” as the company refers to itself. At the end of March, American initiated a major change along the road to complete integration: the “rebanking” of its Dallas-Ft. Worth (DFW) and Chicago O’Hare (ORD) hubs.

American previously operated “rolling” hubs, in which it more evenly spread departures and arrivals throughout the day. By rebanking two of its major hubs, American stacks most of its activity throughout the day into eleven individual “banks.” Regional flights arrive first and depart last, broadening the number of connections available to customers passing through the airport.

American's tails during sunset at Chicago O'Hare (Credits: Eddie Maloney)

American’s tails during sunset at Chicago O’Hare (Credits: Eddie Maloney)

Now a few months removed from when American formally flipped the switch, we wish to begin digging into the effects of the departure from rolling to banked operations at its two largest airports. So far, the operation appears fairly successful, although a number of formidable tests lie ahead for the airline with its new scheduling.

Prior to 2001, banked hubs were relatively commonplace. By concentrating the bulk of arrivals and departures into short windows, airlines can offer fliers shorter connection times, an effect which most passengers desire. When booking flights, travelers make decisions on a spectrum, with the lowest price and the greatest convenience sitting at opposite ends. With its transition to banked hubs, American hopes to push customers a bit closer toward the convenience side.

Because fliers partly wish to minimize total travel time, an airline can theoretically charge a premium for a shorter itinerary, allowing it to capture more revenue. As long as the increase in revenue outweighs the additional costs of operating a banked schedule, which requires higher levels of staffing to meet the peak demand, airlines benefit financially from stacking departures and arrivals.

On January 16, 2015, American Airlines flight 1461 from Little Rock, Arkansas marked the 40th anniversary of DFW Airport, home to American Airlines.

On January 16, 2015, American Airlines flight 1461 from Little Rock, Arkansas marked the 40th anniversary of DFW Airport, home to American Airlines.

While banked scheduling had historically proved beneficial to “hub-and-spoke” oriented airlines, 9/11 quickly changed this calculus. With severely depressed demand for air travel, airlines could no longer charge the same prices to fly, tipping the scales such that the costs of a banked operation overshadowed the benefits. Many airlines, including American, transitioned to a rolling schedule in order to trim labor costs. A more smoothly spread schedule requires less staffing and increases employee utilization, as flights roll in uniformly rather than all at once.

As the new American embarked on its integration efforts, however, it began to realize that it might be leaving some profit on the table by continuing to run rolling schedules. While American had jumped to rolling hubs, US Airways relied on banked schedules at its notable hubs, including Phoenix Sky Harbor (PHX), Charlotte Douglas (CLT), and Philadelphia (PHL). American’s movement to bank DFW and Chicago better aligns the two airlines’ operations, paving the way for the sunset of US Airways and for a more synchronized American.

The shift in DFW and Chicago comes off the heels of an earlier rebanking at Miami (MIA), which served as a test case for the banked hub concept. The graph, courtesy of masFlight, illustrates the effects of rebanking in Miami, which now experiences higher peaks and more relaxed intermissions. While American’s prior schedule exhibited some degree of waviness, even more concentrated peak periods increase the number of timely connections available to connecting passengers. At a hub that strongly depends on connecting international traffic such as Miami, such a transition seems logical for American and has accompanied a high level of success to this point.

(Credits: masFlight)

(Credits: masFlight)

However, American’s operations in DFW and Chicago differ significant from those in Miami. While Miami only supports around 300 daily flights, DFW and O’Hare harbor much more significant flight activity. More than 500 American flights depart from Chicago daily, and DFW lands nearly 900 flights, dwarfing the scale of operations in Miami. With so much activity at these two fortress hubs, connecting passengers already enjoy a larger number of convenient connection choices. This raises the question of whether American truly needed to rebank Dallas and Chicago to get its passengers to their destinations in a reasonable amount of time.

For example, Delta Air Lines operates its largest hub, Hartsfield-Jackson Atlanta International Airport (ATL), with a view to a rolling schedule. While a bit larger than Dallas or Chicago – it’s the largest airport in the world – Atlanta isn’t altogether unlike DFW or O’Hare, suggesting that hubs of such magnitude can facilitate connections easily without departure and arrival banks. While rebanking the hubs does shave some time off the connection, American stands to gain less in DFW and Chicago than in Miami, but must still bear the risk associated with a banked schedule, including more volatility and a greater sensitivity to delays, especially during periods of irregular operations (IRROPS) induced by inclement weather.

At DFW, American schedules “about 100 arrival and 100 departures in an hour” during its tallest peak periods. According to Ilhan Ince, American’s managing director of operations planning and performance, the airline’s new schedule accommodates “12 arrivals and 12 departures per five-minute period” at its busiest, placing heavy demand on runway usage. While this may work well under normal circumstances, severe weather can greatly cramp American’s ability to operate such an intensive schedule, raising the possibility of delays.

While customers may like brief layovers, a delay can easily wipe out any time they might have saved in comparison to a rolling schedule. And even more threatening, a delayed inbound flight might cause a passenger to misconnect given such a short window to reach the outbound flight, potentially stranding the passenger for hours if not overnight at the airport. Historically high load factors may prove disastrous for passengers missing their connections, as fewer seats remain available on later flights.

So far, the data indicates American has evaded a dip in on-time performance in both Dallas and Chicago. Brett Snyder from The Cranky Flier crunched the numbers and found that rebanking actually increased the percentage of on-time departures and arrivals for April. We can attribute much of the success to an extremely well-planned transition, as Snyder notes. Especially in Chicago, American had to navigate around the activity of United Airlines, which also runs a banked schedule, to avoid large stack-ups for the runway.

CrankyFlier_ORD

(Credits: The Cranky Flier)

(Credits: The Cranky Flier)

Simply using on-time percentage as a benchmark might be somewhat misleading though. Data from masFlight show that rebanking in Miami (as well as with efforts attempted by United at its hubs in Denver, Houston, and Chicago) lengthened taxi in and taxi out times. In addition, airlines typically elongate the time devoted to turning a plane and add some buffer to the flight time itself. So while flights may technically depart and arrive on-time, operating the same flight requires more time than with a rolling schedule. Fliers may save some time sitting in the terminal, but should expect to spend at least a little more time sitting on the tarmac. As such, the benefits promised by rebanking – delivering passengers most quickly to their destinations – may not materialize quite as advertised, with total travel time not cut to the same extent as total layover time.

Still, overall the results do seem very promising, but it also appears a bit early to declare the operation fully successful just yet. American enjoyed relatively favorable weather conditions in both Dallas and Chicago during April. The theoretical downside – most importantly, cascading delays – of a banked operation would most notably manifest during bad weather. The more formidable tests will come as summer thunderstorms at DFW and winter snarls at O’Hare begin to plague the two airports. While the system should flow smoothly (and to its credit, it has) during ideal conditions, the most principal criticism facing a banked schedule stems from its inability to handle irregular operations well.

Rebanking its Dallas and Chicago hubs almost certainly benefits American’s bottom line by allowing the airline to capture more revenue, luring passengers with shorter layovers. And maybe some would argue that’s all that matters. But only time will tell if American can sustain its success. In its lunge to attract more bookings in the short term, it just might sacrifice long-term customer loyalty if its customer experience falls below par. For the time being, we should most appropriately mark American’s rebanking of DFW and O’Hare as a qualified success.

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About Author

Alex McIntyre

Alex McIntyre

Texan. Airways Business Analyst. Emory University student, and lifelong AvGeek. Favorite airport and aircraft are: Dallas/Fort Worth International Airport and the Boeing 787. Passionate about all things commercial in the airline business, including route networks and hub operations. I love the window seat.

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