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Economy and Business


United's Cleveland Hopkins hub closure could have a silver lining
Immediate loss of 470 jobs could be offset by more competitive fares in coming years
by WKSU's KABIR BHATIA


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Kabir Bhatia
 
In a letter to employees Saturday, United CEO Jeff Smisek said the Cleveland Hopkins hub has been unprofitable for more than a decade
Courtesy of K. Bhatia
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The United Airlines hub that’s leaving Cleveland Hopkins will cost the airport at least 470 jobs. But the move might be a boon to passengers in the long run. WKSU’s Kabir Bhatia reports.
United's Cleveland Hopkins hub closure could have a silver lining

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Continental Airlines opened the Cleveland hub in 1987, replacing a United Airlines hub that was moving to Washington Dulles at the time. In 2010, the situation came full circle when the two airlines merged, and Hopkins became the smallest of the company’s eight American hubs. In fact, Cleveland is United’s second-smallest hub in the world, just ahead of Guam.

At the time of the merger, United said it would leave flight levels unchanged for two years, then give Cleveland three years to prove itself when it came to passenger volume.

Time’s up. And between this April and June, United will slash flights out of Hopkins from more than 200, to about 70. That also means 430 jobs lost at the airport, plus 40 based here for United’s catering division.

'The sky is not falling'
But Kent State economics professor Lockwood Reynolds says this does not mean the hub’s estimated $4 billion impact will vanish in a few months.

“It’s not like the airport is actually going away. It’s not like it’s going to completely disappear. So you can think of it as muting that economic impact.”

United says popular destinations like New York, Boston and Orlando will still be direct from Hopkins. Reynolds says connecting flights to places like Erie and Grand Rapids will likely be the ones affected. But for Shaker Heights attorney Nicole Braden-Lewis – who had just flown in on Sunday -- the change is going to increase the cost of business.

“I work on cases across the country and if I have to go to St. Louis or Miami to try a case, I want to get there. My clients don't want to pay for me to spend all day travelling.

“There really is no other good option. The Cleveland airport is in a great location for people in the Cleveland region. I never even choose Akron; I always fly out of here.”

From business to pleasure
That’s going to affect her business. For Philip Diemer, it also affects pleasure. He returns here from Los Angeles often because: 

“I have a girlfriend that I see often. We have a long distance relationship. We’re both annoyed. We’ve talked about it over the last day or so because we just found out.

“I like the hub because of the convenience. There’s always a couple flights that are direct to LAX. And it’s been competitively priced. Now that it’s not going to be here, the flights probably won’t be here and I’ll be totally inconvenienced and I’ll have to take connecting flights with an alternate carrier.” 

Those alternative carriers might step into the fray here in Cleveland, according to Professor Reynolds.

“There's a pretty substantial premium associated with hubs in the United States. At the same time, it might encourage a little more competition among airlines -- particularly lower cost airlines -- at Hopkins, which could also encourage the price to fall somewhat.”

Reynolds uses the example of USAir leaving Pittsburgh a decade ago, after which fares fell 61 percent over the next five years. Pittsburgh has not returned to hub status, and Reynolds says Cleveland is unlikely to be a hub again, either.

Going forward
United says the Cleveland hub has been unprofitable for more than a decade, and must be closed as part of a $2 billion cost-cutting plan announced last year. The move comes even as the airline plans to hold its annual shareholders meeting here in June.

Both Gov. Kasich and Cuyahoga County Executive Ed FitzGerald released statements over the weekend that looked ahead, offering assistance to the employees and their families affected by the move. 

The airline unions were unavailable for comment, and United employees at Hopkins were instructed not to comment. A Hopkins spokeswoman says there will be no comment until Mayor Jackson’s press conference this morning at 11.
Listener Comments:

"“It’s not like the airport is actually going away. It’s not like it’s going to completely disappear. So you can think of it as muting that economic impact."

You needed a Ph.D for that profound comment? You should have interviewed the garbage collectors instead.


Posted by: Mr. Oldschool (Miami/NY) on February 3, 2014 4:02AM
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