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Can someone with a better understanding of economics than me explain something: How is the "point to point" (direct short flights via Ryanair and the like) bea

Can someone with a better understanding of economics than me explain something: How is the "point to point" (direct short flights via Ryanair and the like) beating "hub and spoke"(hubs like London and Frankfurt)? I don't mean for convenience - obviously it's nicer to not have layovers. But I mean economically. In the last 10 years, fuel prices have only gone up, as has environmental awareness, and the A380 is surely cheaper per passenger than a plane half it's size. So shouldn't flights via hubs be significantly cheaper and be the most popular?

SkyMarshal 9y ago
Not an economist, but it may b/c point-to-point can be made cheap enough (vis-a-vis Ryan Air, EasyJet, etc) that customers will choose that service over hub-and-spoke any time their itinerary allows it.
crooked-v 9y ago
A lot of people value "not having to make a layover" more than you think.
saryant 9y ago
Jet fuel prices are half what they were ten years ago: https://www.eia.gov/dnav/pet/pet_pri_refoth_dcu_nus_a.htm https://www.eia.gov/dnav/pet/pet_pri_refoth_dcu_nus_a.htm Prices peaked in 2008, dropped during the recession, reached that peak again in 2011 and are now even lower than they were during the worst days of the GFC.
- deanCommie 9y ago
  Whoa that's shocking, why is this?
  - saryant 9y ago
    Crude oil prices tanked over the last ten years. Mostly a combination of OPEC ramping up production and the rise of the American frackers.
    - bmmayer1 9y ago
      tanked
AGoodName 9y ago
Point to point is more efficient if you can fill the plane. Hub and spoke - an indirect flight where you perform extra inefficient landings/takeoffs. Direct flight - shortest possible distance. Maximum time in the most efficient configuration. The only issue is that you have to fill the plane to 100% and that might be harder with direct flights between certain destinations. Although i'm sure modern booking systems (automatic pricing to fill all planes) help a lot with this.
srinivasan 9y ago
The A380's engines were developed in the early 2000's. Newer twin-engine planes (B737-MAX, A320neo, A330neo, A350, B787, the upcoming 777-X) have improvements in engine efficiency that have not been ported over to the A380. Airlines operate on wafer-thin margins, so even a percentage point increase in engine efficiency is huge. Granted, the engines themselves are not made by Airbus, but there are integration costs involved. There are other economic issues: (1) It's just hard to fill an A380 year-round. Not an issue on trunk routes like SFO-LHR, but there are only so many of those. (2) If slots at airports were auctioned out, you'd arguably see more demand for larger planes - maybe not the A380, but 777 or 787 sized.
- ghaff 9y ago
  >so even a percentage point increase in engine efficiency is huge. I interviewed with Boeing out of school many moons ago. To be precise, they offered me a job in response to my mailing them my resume. (In an envelope with a stamp on it; this was a while ago.) But I asked to come out to talk to people. Did get me the opportunity for a plant tour in Everett (?) if I remember. Anyway, the engineer who took me out to dinner talked about his project for the past couple of years--some fuel system design of an upcoming design that saved something like a fraction of a percent fuel consumption. I decided the job didn't sound very appealing.
disordinary 9y ago
The big airports cost more to land at than the small ones, Ryan air might say it's landing at a city but actually be at a rural airport an hour or more away. If the plane loads are good enough and the plane is scheduled in such a way that it always returns to a home airport for maintenance then I can see how it makes economic sense even if logistically it's tougher.
totalZero 9y ago
> In the last 10 years, fuel prices have only gone up This is simply not true. http://www.iata.org/publications/economics/fuel-monitor/Pages/index.aspx http://www.iata.org/publications/economics/fuel-monitor/Page...
InTheArena 9y ago
The question really isn't hub-to-hub versus hub to point to point, it's hub-to-spoke versus spoke to megahub to megahub to spoke. For example, if I were going to travel from Denver to Toulouse, 30 years ago my options would probably be DEN <-> JFK <-> PARIS <-> TOULOUSE. Twenty years ago, it might be DEN <-> FRA <-> TOULOUSE as the 737s and 320s displaced wide-bodies for intra-Europe flying. In ten years, as the 737-MAX, A320-NEOs, and Boeing's new Middle of the Market, you will start to see very interesting secondary markets pop up. Good case - the 787 has changed Denver so that instead of two international flights daily (To FRA and LAX) - it now has FRA, London(LHR and LGW), France, Japan, Zurich, plus every small tourist Mexican destination you can think of.
timb07 9y ago
> the A380 is surely cheaper per passenger than a plane half it's size Actually it's not. Both the 787-8 and 787-9 (just below and just above half the A380's size by passenger numbers) are more efficient per passenger mile: https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#5,000%E2%80%937,600_nautical_miles_(9,300%E2%80%9314,100_km) https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#5,000...

SkyMarshal 9y ago

Not an economist, but it may b/c point-to-point can be made cheap enough (vis-a-vis Ryan Air, EasyJet, etc) that customers will choose that service over hub-and-spoke any time their itinerary allows it.

crooked-v 9y ago

A lot of people value "not having to make a layover" more than you think.

saryant 9y ago

Jet fuel prices are half what they were ten years ago: https://www.eia.gov/dnav/pet/pet_pri_refoth_dcu_nus_a.htm https://www.eia.gov/dnav/pet/pet_pri_refoth_dcu_nus_a.htm Prices peaked in 2008, dropped during the recession, reached that peak again in 2011 and are now even lower than they were during the worst days of the GFC.

deanCommie 9y ago
Whoa that's shocking, why is this?
- saryant 9y ago
  Crude oil prices tanked over the last ten years. Mostly a combination of OPEC ramping up production and the rise of the American frackers.
  - bmmayer1 9y ago
    tanked

AGoodName 9y ago

Point to point is more efficient if you can fill the plane. Hub and spoke - an indirect flight where you perform extra inefficient landings/takeoffs. Direct flight - shortest possible distance. Maximum time in the most efficient configuration. The only issue is that you have to fill the plane to 100% and that might be harder with direct flights between certain destinations. Although i'm sure modern booking systems (automatic pricing to fill all planes) help a lot with this.

srinivasan 9y ago

The A380's engines were developed in the early 2000's. Newer twin-engine planes (B737-MAX, A320neo, A330neo, A350, B787, the upcoming 777-X) have improvements in engine efficiency that have not been ported over to the A380. Airlines operate on wafer-thin margins, so even a percentage point increase in engine efficiency is huge. Granted, the engines themselves are not made by Airbus, but there are integration costs involved. There are other economic issues: (1) It's just hard to fill an A380 year-round. Not an issue on trunk routes like SFO-LHR, but there are only so many of those. (2) If slots at airports were auctioned out, you'd arguably see more demand for larger planes - maybe not the A380, but 777 or 787 sized.

ghaff 9y ago
>so even a percentage point increase in engine efficiency is huge. I interviewed with Boeing out of school many moons ago. To be precise, they offered me a job in response to my mailing them my resume. (In an envelope with a stamp on it; this was a while ago.) But I asked to come out to talk to people. Did get me the opportunity for a plant tour in Everett (?) if I remember. Anyway, the engineer who took me out to dinner talked about his project for the past couple of years--some fuel system design of an upcoming design that saved something like a fraction of a percent fuel consumption. I decided the job didn't sound very appealing.

disordinary 9y ago

The big airports cost more to land at than the small ones, Ryan air might say it's landing at a city but actually be at a rural airport an hour or more away. If the plane loads are good enough and the plane is scheduled in such a way that it always returns to a home airport for maintenance then I can see how it makes economic sense even if logistically it's tougher.

totalZero 9y ago

> In the last 10 years, fuel prices have only gone up This is simply not true. http://www.iata.org/publications/economics/fuel-monitor/Pages/index.aspx http://www.iata.org/publications/economics/fuel-monitor/Page...

InTheArena 9y ago

The question really isn't hub-to-hub versus hub to point to point, it's hub-to-spoke versus spoke to megahub to megahub to spoke. For example, if I were going to travel from Denver to Toulouse, 30 years ago my options would probably be DEN <-> JFK <-> PARIS <-> TOULOUSE. Twenty years ago, it might be DEN <-> FRA <-> TOULOUSE as the 737s and 320s displaced wide-bodies for intra-Europe flying. In ten years, as the 737-MAX, A320-NEOs, and Boeing's new Middle of the Market, you will start to see very interesting secondary markets pop up. Good case - the 787 has changed Denver so that instead of two international flights daily (To FRA and LAX) - it now has FRA, London(LHR and LGW), France, Japan, Zurich, plus every small tourist Mexican destination you can think of.

timb07 9y ago

> the A380 is surely cheaper per passenger than a plane half it's size Actually it's not. Both the 787-8 and 787-9 (just below and just above half the A380's size by passenger numbers) are more efficient per passenger mile: https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#5,000%E2%80%937,600_nautical_miles_(9,300%E2%80%9314,100_km) https://en.wikipedia.org/wiki/Fuel_economy_in_aircraft#5,000...