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What Happened to Hub & Spoke

For most people who have flown, they will be familiar with the Hub & Spoke concept. You maybe board a small plane to take you from a Domestic Airport to an International Airport. You switch to a larger plane and are flown on to your destination. In some cases, the International Airport may not be your final destination and so you'll board another smaller jet that will complete your journey.

Airlines will position their aircraft depending on the amount of traffic (passengers), the size of the airports operating to and from and what makes most economical sense. For the above scenario, you will likely travel in the following way:

This makes sense because it allows each aircraft to operate "point to point" services, rather than calling at multiple airports. So far so good.

Let's say that we want to travel from London to Tokyo but that we live in Frankfurt. We will catch a small plane to London and then switch to a larger aircraft to take us to Tokyo.

We may also be travelling to an airport near Tokyo and so will board a 3rd aircraft for the final leg. Our overall journey looks like this:

Now let's suppose that our airline doesn't want to have a mixture of short and long haul planes. They only want to operate the biggest planes, the Airbus A380. They can still fly direct from London to Tokyo, but what about the customers that don't live in London? There aren't enough passengers living within reach of London so the plane is not going to be used to 100% capacity.

Because the airline put all the money into buying the bigger aircraft, they will now have to call at more airports than just London and Tokyo. In order to make any money, they're going to have to fly into the "spoke" airports. At each stop, some passengers and cargo will disembark and some passengers will board the aircraft. Eventually, the plane will be full and can set off to Tokyo.

But this isn't where the problem ends. Now the airline has an aircraft full of people for whom Tokyo is not their final destination. Once again, the bigger aircraft will have to fly into the "spoke" airports, embarking and disembarking passengers until they finally reach Tokyo.

Suddenly our "Long-Haul" flight begins to look something like this:

Would you choose to fly with this airline? Unless you like take off and landing, it's unlikely!

So why am I talking about airlines and aircraft on a website about container shipping. Well, the answer is quite simple. Shipping lines have been building monster vessels for years. They are designed to do 2-3 port calls in Europe and 2-3 port calls in Asia. The cargo will then switch to a feeder network of vessels that can call at the smaller ports.

That was the intention anyway. The reality of the situation is that there are not sufficiently large Hub Ports for these vessels to call at and there isn't the yard space or time to completely load and discharge any of these vessels. The end result of this is clearly shown in this extract from Maersk Lines' AE5 schedule:

Look familiar?

The main issue here is that by calling at 15 ports, as opposed to 2 or 3, the port call costs add up to 15 calls in just one voyage. More fuel is used and productivity at each terminal is reduced because to is almost impossible to give each port entire bays of cargo to work.

Of course, this problem isn't Maersk Lines' alone, but there are carriers that deploy their 18,000 TEU vessels on a small number of European and Asian ports. They reduce costs, increase productivity and often can offer a faster transit time.

At what point does a vessel have to be so big that the industry reverts to the Hub & Spoke methodology?


#Industry #Network #HubSpoke

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