connecting the
world of travel
America connects:
the need to change
customer habits
America connects: the need to change customer habits
Contents
Introduction3
2
US airlines continue to dominate connectivity
3
Connectivity crucial to carrier profitability
5
Disruptive solutions required to reduce pressure on airports
8
© 2016 OAG Aviation Worldwide Limited. All rights reserved
Introduction
In the first quarter of 2016, some 12.8 million passengers travelled
between North and South America, a ten percent increase from the
previous year. As the number of travellers continues to grow, airport
and airline infrastructures are struggling to deal with peak capacities.
Consequently, will airports and airlines consider a radical new approach
to scheduling flights to alleviate the chaos? Will customer habits change
enough to allow this to happen? The analysis below looks at the factors
airlines and airports are facing when connecting between North and South
America, and examines possible solutions.
The geographic breakdown of those travellers between North and South
America is detailed below:
TABLE 1 – CONNECTING TRAFFIC COMPARISON Q1 2015 V’S Q1 2016 NORTH
AMERICA TO LATIN AMERICA & CARIBBEAN
Q1 2015
Q1 2015
Q1 2016
Q1 2016
North
Direct
Connecting
%
Direct
Connecting
%
America to: Passengers Passengers Connecting Passengers Passengers Connecting
(000’s)
(000’s)
(000’s)
(000’s)
Caribbean
2,872
1,733
37%
3,182
1,830
36%
Central
America
2,743
2,113
46%
3,196
2,384
43%
398
521
57
477
590
55%
428
756
64%
412
755
64%
6,441
5,123
44%
7,267
5,559
43%
Upper South
America
Lower South
America
Total
Source: OAG Traffic Analyser
Central America is clearly the largest region for connections and has seen
growth year on year of 14.9 percent, which is reflective of very strong
growth in the Mexican market. Despite that strong growth in air services,
the proportion of connecting traffic has fallen from 46 percent in 2015 to
43 percent in 2016. Nevertheless, some 2.3 million passengers in the first
three months of 2016 connected at an intermediate point between their
origin and destination; equivalent to over 26,000 passengers connecting
per day via some point.
Naturally, as the geographic distance between the origin and the final
destination increases, then the proportion of passengers connecting
also increases while the total market size declines. This reflects both the
natural market linkages and reduced trade activity between those points.
However, with the notable exception of Lower South Americas, which
includes the struggling Brazilian market, travel between North America and
Latin America and the Caribbean has grown year on year.
3
America connects: the need to change customer habits
The strong economic indicators in many countries can be expected to
continue through 2016 and beyond. In the first quarter of 2015, 5.12 million
passengers connected at an airport as part of their journey, 56,900 a day;
in 2016 that had increased to 61,000; an increase of 7 percent.
US airlines continue to
dominate connectivity
Analysis of the connecting airports undertaken by OAG reveals that there
is little change in the connecting habits of travellers’ year on year.
TABLE 2 – CONNECTING TRAFFIC, TOP 10 AIRPORTS NORTH TO SOUTH AMERICA
Q1 2015 V’S Q1 2016
Q1 2015
Connecting
Passengers
(000’s)
Q1 2015 Average
Connecting
Passengers Per
Day
Q1 2016
Connecting
Passengers
(000’s)
Q1 2016 Average
Connecting
Passengers Per
Day
Atlanta
621
6,900
673
7,395
Miami
615
6,833
621
6,824
Houston
451
5,011
524
5,758
Dallas/ Ft Worth
341
3,788
350
3,846
Panama City
214
2,377
227
2,494
Connecting
Airport
Charlotte
260
2,888
250
Mexico City
188
2,088
220
2,417
Toronto
185
2,055
199
2,186
New York JFK
142
1,577
153
1,681
Ft Lauderdale
135
1,600
144
Source: OAG Traffic Analyser
The domination of the US scheduled airlines via their respective hubs is
clearly shown in this table, although Atlanta appearing in first place ahead
of Miami may be a surprise to some. The appearance of Charlotte reflects
the strength of the former US Airways Caribbean hub operation that has
been retained under the new American Airlines operation. With the notable
exceptions of Charlotte and Fort Lauderdale, connecting traffic at eight of
the top ten connecting airports has increased year on year. Placing that
growth into context, at Atlanta, 7,395 one-way South American passengers
connecting at the airport is equivalent to B767-400 Delta Air Lines aircraft
arriving fully loaded at the airport.
4
2,747
© 2016 OAG Aviation Worldwide Limited. All rights reserved
1,582
Connectivity crucial to
carrier profitability
Connecting traffic to hub airports, potential connecting flows and access
to smaller secondary markets increases the opportunity of employment
at the airport and surrounding areas, whilst allowing airlines to build their
operations and revenues. For many airlines those connecting flows can
account for up to half of all passengers carried and in places like Dubai,
Singapore and Amsterdam, they can account for even higher. For airports,
those connecting passengers put pressure on infrastructures while
typically generating less commercial revenue than their local market fellow
passengers. Airlines of course also have to facilitate very intensive peak
periods of activity, moving bags between aircrafts with short turnaround
times. Ensuring passengers connect to their onward flight and depart on
time can be challenging for even the best logistics managers.
The resilience of these airports to competitive pressure is immense and
such are the established positions of these airports and their respective
base airlines that we are unlikely to see any significant change in their
positions and importance in the coming years - unless Mexico City does
finally open a new airport. Today, many of the airports within the top ten
connecting airports are at capacity during peak hours and with little room
to grow capacity further at many facilities, the obvious question is how
future traffic and connecting flows will be handled. This summer the TSA
will struggle to handle the volume of passengers at many of the major US
airports, which just adds to the complex challenge being faced.
So, what are the potential solutions and how realistic are they? Our
analysis of the OAG schedules database has identified two possible
options for consideration outlined in the charts below.
Using Miami as an example, the American Airlines operation to Latin
America in the chart below shows both arriving and departing flights to
the airport for Monday, June 6. American Airlines shows a very clear
‘wave’ pattern that is replicated by other US-based carriers at their
respective hubs.
CHART 1 – AMERICAN AIRLINES MIAMI BANK STRUCTURE TO LATIN AMERICA, 6TH
JUNE 2016
Bank Structure Report Graph
Inbound
Outbound
Frequency
40
20
0
20
40
0000 0100 0200 0300 0400 0500 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300
Hour
Source: OAG Schedules Analyser
5
America connects: the need to change customer habits
The chart also shows two very clear peaks of activity. The first a series
of outbound flights from 09:00 to 12:00 combined with the arriving nightstop aircraft from selected markets in Central America and the Caribbean.
Later in the day, a more noticeable peak occurs between 17:00 with the
returning Caribbean and Central American wave and the departing longerhaul Lower South America services from 18:00 onwards. Essentially, there
are six hours of intense hub activity with lengthy periods of inactivity.
This operation places considerable pressure on all elements of the airport
operation and when American Airlines European services are added, the
situation multiplies.
CHART 2- AMERICAN AIRLINES MIAMI BANK STRUCTURE TO LATIN AMERICA,
6TH JUNE 2016
Bank Structure Report Graph
Inbound
Outbound
Frequency
40
20
0
20
40
0000 0100 0200 0300 0400 0500 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300
Hour
Source: OAG Schedules Analyser
In the peak two hours for arrivals between 17:00 – 19:00, American Airlines
have 34 aircraft scheduled to arrive from Latin America, the Caribbean or
Europe; those aircraft deliver over 5,500 seats to Miami in that two-hour
period. On a peak summer day those flights will be operating with load
factors in excess of 90 percent, meaning that nearly 5,000 passengers
will be clearing immigration and customs at that point. Of those 5,000
passengers, the majority will be staying in Miami but typically 45 percent
will be connecting on to another service on the same day. Those arrivals in
the 17:00-19:00 time period happen to coincide with one of the peak hours
for local market demand amongst business travellers which only adds
further pressure to the airport operations. Factor in other airlines’ services
arriving in this time window and the pressure intensifies to a point where
something has to give, but what?
6
© 2016 OAG Aviation Worldwide Limited. All rights reserved
Disruptive solutions required
to reduce pressure on airports
The most obvious solution is to extend the hub schedules at these
airports and stretch the current connecting times to reduce the pressure
on operations. Existing services appear to be scheduled to optimise
connectivity but if that connectivity fails to be made on many occasions,
as is now happening at some airports, then the customer merely becomes
a frustrated traveller with a reluctance to use that connecting airport
and airline for their next journey. Extending connection times at airports
obviously impacts aircraft utilisation and potentially results in later final
arrivals for consumers at the end of the day. Nevertheless, it would appear
a small compromise for the increased probability that a connection will be
made.
The more radical solution is to completely adjust the conventional
scheduling of selected services into new periods of the day where capacity
is under-utilised. In recent years, long-haul, low-cost airlines such as
Air Asia X and Norwegian have opened services that operate outside
of accepted ‘normal’ time bands. Rather than focussing on optimal
scheduling and connectivity, these carriers have based their schedules
around maximising aircraft utilisation with resultant deviations from the
conventional schedule timings operated. Taking just one example for
June 6, 40 aircraft arrive from Lower South America to the United States
between 04:00 and 07:59 yet just one arrives between 09:00 and 16:00.
Dramatic adjustments to schedules are an airline CEO’s nightmare, fraught
with risk, but equally so are operations where connecting passengers
simply don’t connect because of the congestion created in the systems.
Low-cost, long-haul airlines may be appealing to new customer segments
but they are proving that passengers are prepared to change their travel
patterns. Legacy carriers have learnt much from their younger low-cost
competitors in recent years; cost bases are now similar, utilisation higher
and financial performance much improved. It may be that now is the time
to take some other scheduling learnings from these carriers to recover
some of the losses in connecting integrity that these carriers are seeing
this summer.
Unlike Singapore and Dubai, the US major airports cannot continue to
build further infrastructure or have bottomless access to resources. Very
soon something will have to give in terms of scheduling and connecting
structures; the question is who will be brave enough to move first?
7
For more information, visit www.oag.com
or email us on [email protected]
Europe, Middle East & Africa
1 Capability Green
Luton
Bedfordshire LU1 3LU
United Kingdom
T: +44 (0)1582 695050
Americas
9155 S. Dadeland Boulevard
Suite 1414
Miami
FL 33156
USA
T: +1 800 342 5624
Asia
6 Shenton Way
#24-08A, Singapore
OUE Downtown 2
068809
T: +65 6395 5888
China
#3710B Jingguang Building
Hujialou Chaoyang District
Beijing China 100020
T: +86 10 5095 5960
Japan
Toranomon
40MT Building 9F5-13-1
Toranomon Minato-Ku
Tokyo 105-0001
T: +813 6402 7301
© 2016 OAG Aviation Worldwide Limited.
All rights reserved
Usage and attribution
This information can be reproduced either in whole or in part,
online or in print, for non-commercial purposes only but must
include attribution to OAG and a link to www.oag.com.
Disclaimer
The intended recipient (“The Customer”) acknowledges that
all data provided by or available through OAG is owned either
by OAG Aviation Worldwide Ltd or by a third party provider
(“The Owners”) and that the customer shall not acquire any
ownership or interest in such data.
OAG data is solely for the benefit and purposes of the
intended recipient and may not be disclosed to, used by
or copied by anyone other than the intended recipient.
OAG Aviation Worldwide Ltd has used reasonable efforts in
collecting and preparing data in the report but cannot and
does not warrant that the information contained in this report
is complete or accurate. OAG Aviation Worldwide Ltd hereby
disclaims liability to any person for any loss or damage caused
by errors or omissions in this report.