MIAMI — Austin—Bergstrom International Airport is on a hot streak. Passenger traffic hit an all-time record of 11,897,959 in 2015, growing 11.0% year-over-year (YOY) versus 2014. 2015’s YOY growth was actually an acceleration over the 2014 YOY growth figure of 7.0%. The airport has been on a nonstop tear since bottoming out during the recession in 2009 at 8.2 million, crossing the 10 million passenger threshold in 2013.
Austin’s economic and demographic fundamentals are strong
Austin, as a centrally located airport, would serve a similar purpose for a national airline as current airline hubs in Dallas (American and Southwest) or Houston (United and Southwest) do. It would serve some east-west transcontinental traffic flow (though its location is not optimal for such flows as Austin is too far south), but would mostly serve as a gateway to the South (and potentially to Latin America).
As it stands currently, Austin is definitely on the small side for a legacy carrier or Southwest Airlines hub. Austin is currently the 35th largest metropolitan area in the United States, with a population of 1.95 million people. The smallest metro area in the US to support a hub is Salt Lake City (Delta), which is ranked 48th at 1.15 million people.
But Salt Lake City is an outlier, as it is one of two possible hubs in an important geographic region and generates similar O&D traffic to Austin despite its size. Las Vegas (Southwest), Kansas City (Southwest), Portland (Alaska), Orlando (Southwest/JetBlue), and Charlotte (American) are the next smallest cities in a band of 2-2.3 million people, but Orlando and Vegas of course have the tourism factor to inflate O&D traffic.
On a GDP basis, Austin is larger than Salt Lake City, Las Vegas, and Nashville (a hub for Southwest) as the 32nd largest city in the US, and will likely surpass Orlando and potentially Columbus ahead of it to move into the Top 30 for 2015’s rankings. Indeed growth and demographics are the points in favor of Austin. The metro area has the 18th highest income (GDP per capita) in the country, and the economy is growing at 6.1% annually.
Meanwhile, the population is growing at 2.5% annually. What this means is that by 2020, Austin is going to have a GDP comfortably within the top 25 of the US and maybe even inside the top 20, comfortably enter the top 30 in population, and generate close to 15-16 million O&D passengers annually. That is more than strong enough of a base for a genuine hub for a legacy or national airline.
Southwest is the most likely contender
In some senses, Austin is already a connection point for air travelers. Using the T100 and DB1B reports from the US Department of Transportation, we estimate that nearly 1.4 million passengers connected through Austin last year (excluding direct, one stop passengers), with nearly 90% of those flying on Southwest Airlines. Southwest offers nonstop service to 30 cities from Austin, with 62 peak day departures, making Austin the 20th largest city in its system. Southwest’s Austin operation carried just over 4.37 million passengers last year, meaning that the 1.25 million connecting passengers represented +/- 28% of Southwest’s total Austin traffic.
Southwest is the preferred O&D airline in Austin and to get a sense of what its operation could look like 3-4 years from now if Southwest decides, one need look no further than Nashville, which is Southwest’s 13th largest city and secondary Southwestern hub. In Nashville, Southwest carried 7.92 million passengers in 2015, and nearly 3 million of them were connecting (~40% connecting passengers).
Nashville has 92 daily departures to 35 cities, and its not hard to imagine Austin expanding to a similar size for Southwest at +/- 100 daily departures to 35-40 destinations. At that point, you could see well over 3 or 4 million passengers connecting in Austin annually. This would not necessarily be a dedicated effort by Southwest to build a hub from scratch in Austin but rather the natural evolution of its growing operation in Austin alongside the city’s growth.
The legacy carriers don’t really need another Texas hub, so any thought of nonstop widebody international flights on a legacy carrier to pair with British Airways’ flight to London is a pipe dream. But Austin is a distinct possibility as a hub for both JetBlue and Virgin America. Both airlines lack a network or hub in the middle of the country (Virgin America is perhaps most geographically constrained) and Austin, as a young, affluent, and fast growing city fits their target customer demographic.
JetBlue even has some high profile sponsorships in the city, including of the Texas Longhorns football team. In the middle of the last decade, moreover, JetBlue even began to offer Austin as a connection point between San Francisco/Long Beach and Fort Lauderdale/Orlando. The problem is that JetBlue never fully invested in Austin, and it has stagnated and even cut back Austin in recent years (2015 saw YOY declines in traffic).
Virgin America for its part, couldn’t sustain Dallas Love – Austin service in direct competition with Southwest. This is a worrisome sign, as a healthy Texas operation is a critical part of making Austin work as a hub. If either JetBlue or Virgin were to build Austin as a hub/focus city, the airport would probably nestle in that 70-90 daily departure range serving 25-30 destinations. But neither carrier is as likely as Southwest to build a hub in Texas’ capital.