Air Transport World

Endangered species? Some wonder whether the hub- and-spoke system remains a viable business model in light of post-Sept. 11 changes. (Competition).(Robert Crandall, former American Airlines CEO)

Well into his retirement, American Airlines' legendary former chair man and CEO, Robert Crandall, still is capable of roiling an industry he once dominated. He did so in March when he delivered a sobering message that, if heeded, could have as much impact as the B scale and the AAdvantage frequent-flier program. Speaking to the Wings Club here, he called for "an examination of whether hub-oriented networks, in concert with a complex, value-based price structure, remain a viable business model."

Crandall, of course, is by no means the first expert to question the notion that the hub-and-spoke system is the sine qua non of business efficiency, or to point to the success of Southwest Airlines and of the latest stock marker darling, JetBlue, as proof that an alternative exists. But it was a stunning turnabout from a man who is singularly associated with the establishment of the hub-and-spoke system and the "complex, value-based price structure" as religion among nine of the 10 US Major airlines and many of their counterparts in Europe and Asia.

Until recently, few who practiced that religion could see a clear path toward the unraveling of the vast, complex networks that now account for a stunning 88.7% of US Major airline capacity--excluding Southwest--according to Salomon Smith Barney analyst Brian Harris. United Airlines does nor wake up one day and start flying point to point; Northwest does not suddenly shift its focus away from Detroit and Minneapolis. This is gospel in airline boardrooms.

But at this point the airlines have no choice but to reconsider the model, Crandall told ATW. "They have to. The formula doesn't work. They have to sit down and run the data through alternative scenarios. …

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