During the next three months the cost of domestic airfares are at historic lows, but only if you travel in and out of major hubs. If you fly to a city that’s not a major hub, the cost of airfares are higher. To understand why this is happening and how you can take advantage of it, it helps to understand the hub-and-spoke model of air travel, and which cities are airline hubs.
Load Factor
The hub-and-spoke model emerged when government regulation of the airline industry was reduced in 1978. Prior to that, government regulations required airlines to fly to smaller markets with direct flights. The government was concerned that if airlines weren’t compelled to fly to smaller markets, they wouldn’t, since smaller markets are not as profitable as larger markets.
Profitability in the airline industry is a simple matter of filling seats; the more seats with passengers in them, the more profitable the flight. The airlines refer to this as the “load factor”, which is the percentage of seats sold necessary for the flight to breakeven. The average industry load factor is 80%, which shows how narrow the profit margins are.
The Hub-and-Spoke Model of Air Travel
If a flight has to fly between two small cities, say, Memphis and Omaha, they cannot reasonably expect to be profitable. During the era of heavy government regulation, airlines were forced to fly such routes, and lose money. As a condition of lifting most government regulations in the 1970’s, airlines had to come up with a way to ensure that smaller markets would still be serviced. They came up with the hub-and-spoke model.
With the hub-and-spoke model, flights between two small cities connect through a large city, replenishing their passenger loads. Those large cities are the airline’s hubs. The flights out to smaller cities are the spokes. A flight between Memphis and Omaha, for example, will connect through Chicago. A flight between Charleston and Baton Rouge will connect through Atlanta, and so on.
Hub-to-Hub to Pump up the Volume
A flight between two small markets like Albuquerque and Reno might only generate a 30% passenger load, but by connecting through Denver the load factor is increased by adding more passengers, reaching the magical 80%.
The current sale on airfares is limited to travel between major hubs because when airfares are so low, load factors are even higher, say, 90-95%. In other words, the airlines need to fill almost all of their seats in order to make it profitable. They can only achieve this by flying between major hubs.
Here is a list of major hubs in the United States
American Airlines
- Dallas/Fort Worth International Airport (DFW)
- Chicago O’Hare International Airport (ORD)
- Los Angeles International Airport (LAX)
- Miami International Airport (MIA)
- New York LaGuardia Airport (LGA)
- Washington Reagan International Airport (DCA)
- Phoenix Sky Harbor International Airport (PHX)
- Charlotte Douglas International Airport (CLT)
- Philadelphia International Airport (PHL)
United Airlines
- Chicago O’Hare International Airport (ORD)
- Denver International Airport (DIA)
- Newark International Airport (EWR)
- Houston Intercontinental Airport (IAH)
- San Francisco International Airport (SFO)
- Los Angeles International Airport (LAX)
- Washington Dulles International Airport (IAD)
Delta Airlines
- Atlanta Hartsfield International Airport (ATL)
- Seattle-Tacoma International Airport (SEA)
- Salt Lake City International Airport (SLC)
- Boston Logan International Airport (BIA)
- New York LaGuardia International Airport (LGA)
- Minneapolis International Airport (MSP)
- Los Angeles International Airport (LAX)
- Detroit Metropolitan Airport (DTW)
- Cincinnati International Airport (CVG)
Southwest Airlines
- Dallas Love Field (DAL)
- Chicago Midway (MDW)
- Houston Hobby Airport (HOU)
- Las Vegas McCarran Airport (LAS)
- Atlanta Hartsfield International Airport (ATL)
- Denver International Airport (DIA)
- Phoenix Sky Harbor International Airport (PHX)
- Orlando International Airport (MCO)
- Oakland Metropolitan International Airport (OAK)
- Baltimore Washington International Airport (BWI)
Sources
Beers, Brian. “How Does Load Factor Impact Airline Profitability”, Investopedia, 19 Oct 2020, Website
Bosner, Kevin. “Hubs and Spokes: How Airlines Work”, HowStuffWorks, acquired 16 Feb 2021, Website
Diaz, Antonio. “List of Major Airline Hubs,” Travelmiles101, 24 Feb 2017, Website
Image credit
Delta North American Route Map, Delta News Hub
