Transportation. Transportation is the backbone of the economy moving things and people across the country and across the world. The part of this business that we see every day is that of transportation along the highways and interstates but, in the sky, millions of travelers and passengers traverse massive distances. But the airlines that make these journeys easy, that, one hundred years ago would have been seen as miraculous, have felt the full weight of what the attacks of 9/11 and the recession that began in 2008 brought to bear on the economy and the numerous industries that power it like transportation. Lately, many of the airlines have buckled under the pressure of the economy and this has, in turn, spread to the airports that host them. Over the past five years many of the airports in the United States have experienced losses in operations, a majority experiencing losses of over ten percent. Now, the airlines and airports are attempting to recover from the events that sent them downhill.



The attacks of 9/11 have led to an increase in the amount of security procedures in order to keep flights safe that, if you’ve flown in the last ten years, you’ve probably noticed. This, in turn, led to longer lines and longer delays. Due to tensions and the turmoil in the Middle East in the fallout of 9/11, gas prices rose which, in turn, led to significantly higher ticket fares. Although the terrorist attacks were problematic for the airline industry, the events of 9/11 did not spell a complete disaster for the airlines. In fact, the history page of the Cincinnati/Northern Kentucky International Airport says that “following the turmoil and tragedy of 2001, activity at CVG quickly rebounded, peaking at a record 22.8 million passengers and 670 daily departures in 2005” (CVG- Detailed History).

Like with many sectors of the economy, the recession that began in 2008 was the real downfall of the airlines. When the recession began, the worst seen since the Great Depression, the average disposable household income fell by one thousand dollars. Since air travel, for many people, is a leisurely expense and the higher price of fuel was driving ticket prices significantly higher than previous years, a large number of people had to give up the expense of flying to their various vacation and tourist destinations. Thus, the airlines found themselves floundering in the wake of the extreme economical stress of the recession.



In order to keep from succumbing to the crushing burden of the collapse in the economy, many airlines were forced to merge with other companies according to a study done by the Department of Transportation concerning the performance of the aviation industry. The study goes on to say that, in 2000, there were ten major airline companies that handled ninety percent of all commercial flights in the United States but, by 2012, there were only five major airlines handling eighty-five percent of commercial air traffic (“Aviation Industry Performance”). Following these sweeping mergers, airlines started to consolidate many of their operations in order to remain profitable under the financial burden of the economy. Of the thirty-five largest airports in the United States as of 2007, thirty have experienced a drop in operations over the last five years with an average of nine-point-four percent drop in operations at these airports. The most significantly impacted of the thirty was the Cincinnati/Northern Kentucky International Airport, or CVG, experiencing a drop of sixty-three percent to the number of flights handled by the airport.



The reason for the absolutely astounding downsize in operations at the Cincinnati airport, compared to other major airports which experienced much milder losses, was the culmination of numerous outside factors that, fortunately, were not as pervasive in the airline industry as the problems caused by the recession and the terrorist attacks of 9/11. In the mid-1970s, Delta decided that they would start to use Cincinnati as their base of hub operations for the Midwest. This meant that CVG became the hub in a hub-and-spoke pattern where passengers would get on connecting flights in order to get to regional destinations in the Midwest.



In the 1970s, the Federal Government tore down regulations on airline companies, allowing them to expand and build hubs wherever they wanted. Delta, prior to the deregulation, had only operated flights for the South and, when the deregulation went into effect, the company looked to expand to operate regional flights in the Midwest. The most obvious candidate to house Delta’s Midwest hub was Cincinnati even though, at the time, the airport was much smaller than those at Chicago and Cleveland because United and American Airlines both already had hubs at Chicago and Cleveland housed Continental Airlines. Detroit was another possible option but Northwest was already attempting to build its own hub. Besides the fact that most of the viable options in the Midwest were already taken by some of the other largest airlines, Delta had historical connections to the airport in that it was one of the first airlines to operate out of CVG. As it does today, Cincinnati housed a rather dense population of Fortune 500 companies when Delta was looking to expand to the area. This meant that Delta and CVG would not only see a large number of recreational passengers as well as a significant number of passengers flying on business. Besides these, the weather was rather decent and rather consistent year round and there was plenty of space to build runways. (Why CVG lost half of all flights)



When CVG operated at its peak in 2005, it saw 670 flights per day operating out of one hundred different gates carrying twenty million passengers annually. The airport serviced non-stop flights to 129 cities, both domestic and foreign. A study done by the University of Cincinnati found that the airport helped bring four-point-five billion dollars into the local economy and was responsible for creating nearly fifty-six thousand jobs either working directly for the airport or airlines or working in jobs that were indirectly influenced by the operations at the airport. Seven years later, the number of flights haven fallen so much that the airport shutdown two terminals and Concourses C, the airport only services non-stop flights to half the cities that it did in 2005 with only one flight to an European city per day, and the contribution to the local economy has fallen immensely.



So, the question needs to be answered, why did the Cincinnati/Northern Kentucky International Airport experience such a rapid decline? There were two main factors that helped spur the decay of operations at CVG. The first was the use of a very inefficient, small regional jet. The second was the incredible increase in the price of fuel spurred on by the fallout of 9/11. By themselves, neither one of these factors would have had a very big impact on Delta’s operations or CVG.



The regional jet, when it was first incorporated into the Delta fleet, seemed like a great idea; the airline could run hundreds of these small jets back and forth on regional flights that had too little demand to justify using the larger aircraft that was mainly used for flights to the coasts and other, big ticket destinations. Although these regional jets were extremely inefficient for their size, it didn’t really matter because, when they were first introduced, the price for a barrel of oil was only ten dollars, compared to eight-fold price of today’s oil. Thus, any fuel costs were essentially negligible. The flights were also using significantly less fuel than the larger jets were since they were smaller and making shorter flights. The cost of the flight on Delta’s end was even further reduced because the fifty-seat regional jets required a much smaller crew because it only needed one flight attendant when other, larger flights required four or five. You also have to take into account that, in 1998, Delta operated about eighty percent of the regional jets in service at the time meaning that they could price at just about any rate. However, in 2005, the company only controlled fifty percent of the regional jets in service thus eliminating Delta’s control. (Why CVG lost half of all flights) Loss of control, coupled with the rising fuel prices, spelled disaster for the regional jet that had been so profitable for Delta.



You may be wondering why most of my discussion about why the Cincinnati airport declined as a whole, but you have to understand that Delta, for all intents and purposes, controlled airport’s livelihood. After Delta decided to make CVG its Midwest hub, the company sunk hundreds of millions of dollars into expanding the airport by building an entirely new terminal just for servicing Delta operations and Concourses B and C. It is understandable then why the company wanted to keep other airlines from intruding on their turf at Cincinnati but it may have been why CVG saw the largest cuts in operations from 2007 to mid-2012 of the thirty-five largest airport in the United States. In order to keep a hold on the market in Cincinnati, whenever another airline tried to get a foothold at CVG, Delta would temporarily lower their prices to match the lower costs of the competition and, when the other airline was forced to leave, Delta would raise prices to where they were beforehand.



However, these aggressive practices didn’t keep passengers from finding lower cost alternatives. The low-cost carriers that Delta had worked so hard to keep out of Cincinnati found homes in other, nearby airports like Dayton, Louisville, and Indianapolis. Instead of lowering their ticket prices to be competitive competition in the area, Delta kept theirs much higher and passengers started to leak out because they were willing to drive the extra distance for the much lower fares. Delta started to hemorrhage money because, with the lower demand around Cincinnati, the company was unable to cover the overhead of the inefficient regional jets that had once been so profitable for the now failing company. Trying to stay afloat, the company looked to merge with Northwest Airlines.



The merger was the final nail in the coffin for CVG. Since Northwest already had a hub for their Midwest operations in Detroit, the now merged companies didn’t see any profit in trying to continue operations at the large hub in Cincinnati as Delta had operated in 2005 so the company’s plan was to downsize the facility. When it was at the peak of operations, the Cincinnati/Northern Kentucky International Airport was operating over one hundred gates across three terminals and Concourses A, B, and C. Now, only Concourses A and B are operational with fifty-four gates servicing flights.



So, what impact has the downsizing of CVG had on the community? Firstly, there are significantly fewer direct flights to both domestic and foreign cities. In 2005, the airport offered a staggering 129 cities to which it offered direct flights. Of these, four were European destinations. Compare that to the dismal number, for a large airport, of sixty-three which it now offers. This includes only a single flight to Paris every day.



Secondly, the fares are now considerably higher than they were in Cincinnati’s heyday. Although the airport has always had higher than average fares, in 2011, according to a study by the Department of Transportation, Cincinnati was tied with the Memphis airport for the highest fares in the country at $476 on average. (2nd-Quarter 2011 Domestic Air Fares) This was one hundred dollars higher than the national average.



A third, direct effect of the downsizing of operations at CVG was the loss of jobs at the airport and the indirect job loss. Prior to the drastic cuts at the airport, there were 16,000 people employed at the airport. Now, there are only 10,000 working for the airlines, the airport itself, and restaurant and store employees inside the terminals.



There have also been a couple of indirect effects in the local economy of Cincinnati as a result of the cuts at CVG. Some of the major companies with headquarters in Cincinnati have decided to move including Chiquita. Chiquita decided to move their headquarters to Charlotte because the airport there offered much more convenience than CVG could provide with the high ticket fares and the rather low number of direct flights. An article in the Charlotte Observer specifically states that Chiquita was enticed into moving to Charlotte because of “the promise of easier international travel from Charlotte/Douglas International Airport, which has grown as the airport near Chiquita’s current headquarters in Cincinnati has shrunk.” (Chiquita Relocating)



The final effect on the local economy was a drastic decrease in the economic impact of the airport. According to a study done by the University of Cincinnati in 2003, the airport brought about $4.5 billion into the economy and tourists who spent one billion dollars besides. Because the airport services drastically fewer flights now than it did in 2003 and, thus, fewer people are putting money into the local economy, it is thought that the impact of the airport now is much lower than that of 2003 even though these hasn’t yet been a study done on the subject recently.



The airport at Cincinnati has experienced massive cuts but the future of the airport is perhaps not as bleak as recent years would suggest. Rather than focusing only on the passenger transportation side of the airline business, the airport negotiated with the cargo carrier DHL Express and the company reopened the package sorting hub that it had previously abandoned. (“CVG-Detailed History”) The history of CVG on the airport’s website states “DHL’s return helped to increase jobs in the region, while decreasing overall operating costs to all carriers at CVG.” (“CVG-Detailed History”)



I’ve spent a lot of time talking about the fate of CVG after the downsizing operations but the problem of airports making drastic cuts is not limited to Cincinnati. Of the thirty-five largest airports in the United States, thirty have cut operations since 2007, prior to the recession. Cincinnati has, simply, been the most affected by the economic climate. It would seem that, like other industries that have felt the full weight of the recession, the airlines and airports need to find other ways to try to stay afloat. CVG seems to be on the right track by closing useless terminals and gates and by trying to bring companies besides Delta into the airport. Because modern society relies so much on the airlines and the airports that house them, the future will hopefully be much brighter than the past few years.



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Sources

"CVG-Detailed History." CVGAirport.com. CVG Airport, n.d. Web. 4 Dec. 2012.

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Pilcher, James. "Why CVG Lost Half of All Flights." Cincinnati.com. The Cincinnati Enquirer, 23 May 2010. Web. 4 Dec. 2012.

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Portillo, Ely. "Chiquita Relocating Headquarters to Charlotte." CharlotteObserver.com. The Charlotte Observer, 30 Nov. 2011. Web. 4 Dec. 2012.

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United States. Department of Transportation. Office of Inspector General. Aviation Industry Performance: A Review of the Aviation Industry, 2008-2011. By Calving L. Scovel, III. Print.

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United States. Department of Transportation. Office of Public Affairs. 2nd-Quarter 2011 Domestic Air Fares Rose 8.5% from 2nd Quarter 2010. By Dave Smallen. Washington, DC: 2011. Print.



Images

Image 1: “Figure 28.” Aviation Industry Performance: A Review of the Aviation Industry, 2008-2011. Web. 9 Dec. 2012​

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Image 2: “Concourses A and B.” Screenshot from Google Images. 9 Dec. 2012​

Image 3: “The dots in red…” "Why CVG Lost Half of All Flights." Cincinnati.com. The Cincinnati Enquirer,  23 May 2010. Web. 9 Dec. 2012.



Extra Image

Image 4: “Catch Me if You Can” EnglishMoviez.com. Web. 9 Dec. 2012