Philadelphia International Airport appears to have successfully avoided what those in the airline industry call "DoomsDay" in the merger between U.S. Airways and American Airlines.
But for a while there, insiders like Seth Kaplan, managing partner of Airline Weekly, weren't so certain of the future.
"People kind of looked at map and saw that, in global terms at least, Philadelphia is kind of close to New York, and there's a hub there also, at JFK, an intercontinental hub as well as sort of a domestic hub at LA Guardia, and people thought if there's vulnerable hub, maybe it's Philadelphia. Maybe Phoenix. That was another one that was sort of bandied about."
In past, airline mergers like the one between Delta and Northwest Airlines or another between United and Continental led to the failure of at least one--if not two--hubs.
"Memphis and Cincinnati were casualties of the Delta-Northwest Merger, Cleveland of the United-Continental merger, and so people kind of took it for granted that airline mergers have to mean the closure of a hub, and I think more precisely, the story was just that in those cases, those hubs just weren't working. It's not that an airline after it mergers...has to pick a hub to close, it's just that in those cases, sort of the mergers, gave those airliners the ability to close hubs that weren't working because they had other hubs in the same region that were stronger," said Kaplan.
So why did Philly survive? The answer is pretty simple. American likes Philadelphia, according to Kaplan.
"Is [Philadelphia] ever going to be a huge growth market? Probably not--for the simple fact that the economy in Philadelphia is larger, larger than all those other hubs that didn't survive merger, and I think that's another important reason why it survived. Let's not forget Philadelphia is simply a rather large economy, but it's not a growth economy...typically over the past several years, if you look at a list of where air service is growing, Chinese airports, among those around the world have been growing very rapidly. In the U.S., it's often been Sunbelt markets, where the population's been growing, where perhaps the economy has been growing."
But despite no significant growth, Kaplan said American's hub at PHL remains vibrant and strong, in part, due to an economics issue at New York-based airports.
"In Philadelphia's case, the reality is that Philly has something that New York doesn't have. Obviously, it doesn't have the same size local population; it doesn't have the same size economy, but in New York, American has a particular problem that all airlines have there, if they sort have their operations split between New York's JFK and LaGuardia--and that's the fact that travelers prefer LaGuardia for short-haul flights. If somebody's going to fly to St. Louis to New York, they're going to fly to La Guardia, if they're trying to get to Manhattan--not to much more distant JFK."
"But then you have those intercontinental flights, flights to London and places beyond, they all go from JFK, and the flights into LaGuardia don't connect into the flights at JFK so the airlines have to decide whether to run these money-losing short-haul flights, run a flight from St. Louis to JFK-- that's probably not really going to make money in its own right--but might be necessary to fill the flight too London, because even in New York, you can't fill whole flight with just people and starting and ending their trips there," said Kaplan.
In Philadelphia, airlines don't have that issue because the airport solidly serves both short- and long-haul flights.
"And not only that, it's a less competitive market. New York is a very competitive market, the kind of market where one airline probably isn't going to earn outsized profits just because of how competitive it is. Philadelphia--although there is some new competition in recent years--American has a very strong market position there, and it's kind of, by default, always going to be the choice of the corporate travel community, especially, large companies Aramark, Comcast, and so forth, decide what airline to use, and there's one airline that's a rather obvious choice."
But Philly did see some losses with the merger. A non-stop flight to Brussels is no longer an option out of PHL.
"You can tell American said, 'You know what? That's a market that just makes more sense from New York.' Maybe some of the kinds of travel between the capital of the European Union, and the U.S more of those people want to go to New York than want to go to Philly, and U.S. Airways, by it self, didn't have a hub in New York."
But travelers looking to holiday in Eastern Europe out of PHL are now in luck.
"[Places] like Budpest and Prague now have service from Philadelphia, whereas they didn't quite then. When you think about markets like Prague and Budapest, these are markets that are popular with leisure travelers--they're popular vacation spots; sure, there's business travel in those markets too, but it's probably a more diversified demand base in terms of the places of U.S. where the demand originates. So it's not just a lot of business demand in New York, or a lot of government demand in the Washington area...but people all over who are willing to connect to get to those places," Kaplan said.
He added Philadelphia has connectivity that JFK simply doesn't.
"American doesn't have nearly the domestic network at JFK that it has at Philadelphia. So a market where the demand is sort of more evenly distributed between different cities, American can handle it much more efficiently at Philadelphia, with all of those short-haul flights--that in most cases, are successful and profitable in their own right--it doesn't have to subsidize the long-haul flights in Philadelphia with money losing short-haul flights in the way it often has to do in New York. It has to make those difficult decisions--do we have LaGuardia flight from some domestic destination that's probably going to do well, cause people flying to or from New York non-stop love LaGuardia, but it's not going to connect with the long-haul flight because you're not allowed to fly to Europe from LaGuardia. Philly they have to make those tough choices."
But out of Philly International, travelers will rarely catch a deal like ones you can snag out of JFK or Newark because of the sheer lack of competition.
"Philly is a more competitive market than it previously was; if you look back--before the merger--American controlled more of the market than it does now, and you do see other airlines there, that have grown a lot, airlines like Frontier, like Spirit, in particular, those ultra-low-cost carrier-- as they call themselves--that sometimes offer very cheap flights, but to specific places...there's no question that American doesn't have to scratch, claw, or fight for every point of market share in Philadelphia, as it does in New York, Chicago, Los Angeles, in particular," Kaplan analyzed. "Those are three places, where it has hubs, but they're very competitive, so if you're looking for a non stop flight from Philadelphia to Charlotte and American is the only game in town that's never going to be all that cheap."
And while Philly's American hub status is likely out of the woods when it comes to the effects of the 2015 merger Kaplan cautions:
"What will happen in a downturn? What will happen when the airline--at the highest level--decides that it has to shrink...and then it has to decide where to shrink, and you would want to just sort of confirm that things are always going to be OK at Philly. ou would just want to see that cycle complete itself, you would want to get through a downturn and see things still be OK," said Kaplan. "I think they will be, I think it's simply a profitable and very useful hub for American--that's what we haven't yet seen. Part of what happened when other hubs closed years back is partly yeah it was the mergers, but it was also just that times were bad in the U.S. airline industry."