MIAMI — As the sun rose over Cleveland, Ohio this morning, it signified not only a new day but also a new chapter in Cleveland Hopkins’ rich history. For more than twenty years, Cleveland has served as a hub for both Continental and United, but not anymore.
Last summer, the carrier operated approximately 200 daily departures out of Cleveland. This summer? A mere 72.
That translates into a 64% cut in overall operations. Folks following the story know that regional flights have been hit the hardest, losing 70%. Mainline flying was only reduced from 26 daily flights to 25 as the carrier discontinued flights between Cleveland and Phoenix. A total of 470 airline and catering employees were laid off or transferred.
United still continues to fly to major business markets such as New York and Boston. It also continues flying to United’s other hubs and leisure markets like Fort Lauderdale and Orlando.
Although, it seemed that United planned that it would be maintaining a Cleveland hub longer.
It certainly was not that folks didn’t try to keep them around. Just a few months after the CO/UA merger, the Ohio Attorney General reached a deal with the two in 2010 that required the combined airline to keep Cleveland as a hub for five years. The airline would have to maintain 90% of combined flight levels at Cleveland for the first two years of the agreement, but it could reevaluate its flight levels based on profitability. Should United not honor the commitment, it would be required to pay damages of up to $20 million.
Staying true to its word, the carrier maintained 90% of its pre-merger combined operations. It even added new routes to Cleveland during the last two years. But with the announcement earlier this year, the carrier clearly cut the cord early.
And yet the airline may not have to pay a cent for failing to honor its commitment through (the agreement would’ve ended in September 2015). Why? The airport will still be listed as a focus city. United operates flights to 11 other cities that aren’t United hubs, and many of these cities will be served by larger regional jets.
Even if it is fined, it’s not like it would hurt much. Vinay Bhaskara, Airways’ Senior Business Analyst, notes correctly that “$20 million is a drop in the bucket for a company that books more than $38 billion a year in revenue.”
Neither United nor the City of Cleveland has publicly commented on whether United will pony up the money.
The story starts back at the end of January 2014, when Jeff Smisek, the CEO of United Airlines, announced in a letter to employees that the airline would make substantial cuts to its Cleveland operations. He explained that the Cleveland hub, which United inherited as part of a 2010 merger with Houston based Continental Airlines, hasn’t been profitable for over a decade, and it has generated “tens of millions of dollars of losses.” Additionally, he said that the city lacks the basic demand for “hub-level connecting flying.”
To many, this was no surprise. They predicted long ago that Cleveland would be de-hubbed, back when United and Continental merged in 2010. They pointed to the combined carrier’s Chicago O’Hare and Washington Dulles hubs, both which are just a few hundred miles away from Cleveland.
Yet as recently as mid-2012, United executives were lauding the financial performance of Cleveland as a hub.
“Cleveland is to be commended” for encouraging customers to choose United Airlines, said Greg Hart, United’s senior vice president/network. “It is incredibly helpful….Year over year, (Cleveland Hopkins International Airport’s) performance is better than some other hubs in terms of profitability. The hub is in a far better place than it would have been without the efforts of the team in Cleveland.”
In 2013, Cleveland’s flight operations team beat its peers at Washington Dulles, San Francisco, Newark and other airports for getting United’s first flights of the day on their way as scheduled. “CLE” was inscribed on United’s traveling STAR (Start The Airline Right) trophy on six of the ten spots since November 2012, more than any other airport.
“The performance here is without a doubt the best, day in and day out, of all the hubs…on every measure we look at, Cleveland is the best” said Charles Duncan, United’s vice president at Chicago O’Hare International Airport, during a recent visit to Cleveland Hopkins.
Cleveland was also getting the highest marks company-wide in United’s email surveys asking MileagePlus frequent flyers about their flights into and out of the airport, although the company declined to share details.
Although the hub has been lauded for profitability and good operational performance, Bhaskara says “the primary function of an airline hub, especially one in as small of an origin and destination (O&D) market as Cleveland, is to connect passengers. And for pre-merger Continental, Cleveland did a good job of that, providing Continental with a presence in the Midwest. But once the merger happened, Chicago O’Hare was already positioned to provide those connections at a higher volume and cheaper price.”
Close to 80% of United’s Cleveland operations were operated by regional aircraft.
The regional airline industry has seen a lot of changes during the last few years. It has been facing pilot shortages thanks to new federal rules, and the 50 seat regional aircraft that have been the industry’s backbone for years are no longer economical.
Ricky Smith, the airport director of Cleveland Hopkins, reflects on the bubble: “Ours was a regional jet hub. Regional jets are very expensive to operate. Ten years ago, [they] were the wave of the future. The thinking was that the skies were going to be littered with these jets, until it became clear that they were very costly to operate.”
Needless to say, local leaders were disappointed. They have always worked to encourage the growth of Continental before and after they merged with United through the Greater Cleveland Partnership’s CLE Task Force. Mr. Jackson, Cleveland’s Mayor, explained that they have spent “many man hours of attempting to come up with solutions to support the hub and fill seats.” Plus, “many people have paid extra money to fly United to support the hub.” The city has also, over the years, made investments in new concessions, terminal updates, built Concourse D, and built a new control tower…all in large part to keep the hub going.
Change is in the Air
Yet the skies are not all bleak for the city. Mayor Jackson sees United’s departure as an open door to new opportunities. “United’s de-hubbing Cleveland is not the end. We are now free to redirect resources and operations that will support growth of other airlines and opportunities they see. And now the airport can work on building on success with other airlines in recent years.”
The efforts may already be paying off.Frontier Airlines, one of the first to get on the train after United’s announcement, will soon turn Cleveland into its next focus city. Next week, the Denver-based ultra-low-cost-carrier will add flights to Atlanta, GA (ATL), Dallas/Fort Worth, TX (DFW), Fort Lauderdale, Fla. (FLL), Fort Myers, Fla. (RSW), Las Vegas, NV (LAS), Orlando, Fla. (MCO) Phoenix, Ariz. (PHX), Raleigh-Durham, NC (RDU) and Tampa, Fla. (TPA). The airline will launch seasonal flights to Seattle on June 15, and it will increase its weekly flights to Denver from five to twelve. The carrier already connects Cleveland with Denver, Colorado and Trenton, New Jersey, as well as Cancun and Punta Cana in partnership with Apple Vacations.
Delta Air Lines stepped in too, and today it is launching new flights to Hartford, Indianapolis, and Raleigh/Durham. Additionally, all of Delta’s flights between Cleveland and Atlanta are now operated by mainline aircraft instead of regional, increasing to five flights a day on weekdays between the two cities.
US Airways has also announced some route changes. Starting in October, the carrier will begin flying one daily flight between Cleveland and Phoenix. This new service is replacing the only United mainline route that was cut.
The airport is planning to complete a $20 million renovation to improve its terminal facade, ticketing lobby, and baggage area. The project will upgrade the terminal’s exterior both on the departures and arrivals level. Some of the renovations will include modernizing the existing exterior facade and renovating the ticket lobby. Additional changes will include new signs, electronic media systems, interior design, and energy efficient glass. The airport’s director, Ricky Smith, says “the goal of this project is to transform the face of the airport and the ticketing lobby to a more modern look and feel, while introducing more customer-friendly features for airport visitors.”
Construction is set to start in phases next spring, to be completed in 2017. The final design will not be released until sometime this fall.
Mr. Jackson underscores the need to move on: “the idea of a Cleveland hub is behind us. The state of the industry is focused on international travel and hubs are used as a launching pad for international travel. Cleveland is not the first mid-sized market to lose a hub. We are one of two last such markets to have a hub. We will bounce back. We’re going to get through this. We’re very strong and have a positive outlook to attract other carriers…We’ll be fine.”