Continental Boosts Cleveland's Cachet

A big increase in service at Hopkins airport is elevating the city's importance as a hub.
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Thanks to

Continental Airlines

(CAL) - Get Report

, the city of Cleveland has emerged as a winner in the Rust Belt hub sweepstakes.

Over the past 15 years, competing hubs in Columbus and Dayton, Ohio, along with one in Pittsburgh, have disappeared. At the same time, hubs in Cincinnati and Detroit have hung on, despite downsizing by primary carriers. And Chicago's O'Hare remains, for all its flaws, one of the country's most desirable hub airports.

For its part, Cleveland Hopkins International Airport has long been a second-tier hub. With about 11.3 million passengers in 2006, it was the country's 33rd-largest airport. Memphis, Tenn., was the only hub with less traffic.

But now, Continental wants to expand its Cleveland capacity by 40% over two years. By June 2008, it will offer 300 daily departures to 100 destinations, up from 242 departures to 80 destinations today. More cities will be added in 2009.

"It makes sense to look at Cleveland," says Todd Payne, airport marketing chief. "We don't have the congestion you have in the Northeast corridor; we have a catchment area of 4 million people, and the airport almost never closes for weather."

Continental's buildup began about four months ago. Since then, it has increased capacity to Orlando, Fla., San Francisco and Seattle by one-third or more. Daily service to Oklahoma City and Ottawa, Canada, begins Sept. 30. Next year, the carrier will add 12 domestic cities, including Greensboro, N.C., Omaha, Neb., Lansing, Mich., and Memphis.

Seasonal flights to Paris will start next May, complementing existing London service.

"We have felt that the Cleveland hub has been underutilized for some time," says Continental spokeswoman Julie King.

A key is that Cleveland's expansion takes pressure off Newark, Continental's biggest hub.

"They want to get people who are using Newark as a transit hub, people who don't care where they are connecting, in order to relieve the congestion," says consultant Alan Sbarra. "Newark has so many operational issues." Most of the new Cleveland destinations are served from Newark.

Sbarra notes that none of the new destinations are among the seven cities served by

Southwest

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, Cleveland's second-largest carrier, with about 8% of the traffic. Continental carries about 65%.

Cleveland will also provide homes for new Continental airplanes. The fastest-growing legacy carrier expects capacity growth of 5.3% this year and 3% to 4% next year. It has commitments for 64 new Boeing 737s and 25 Boeing 787s. In some cases, regional jets will be moved from Newark to Cleveland and replaced by bigger jets.

Helping Cleveland's case have been cutbacks at competing airports. In nearby Pittsburgh,

US Airways

(LCC)

decommissioned its hub in 2004. Daily US Airways departures have declined to 110 from about 550 before the Sept. 11, 2001, attacks.

This summer, US Airways dropped Pittsburgh flights to Seattle and San Diego, while Continental boosted Cleveland service to both cities.

Compare Cleveland with the rest of the region. Piedmont Airlines' Dayton hub closed in 1992, five years after the carrier was acquired. In 2003, America West dismantled a small hub in Columbus.

In Cincinnati, traffic fell by 28.7% in 2006, as hub carrier

Delta

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downsized in bankruptcy. Similarly, in Detroit, traffic was flat last year as

Northwest

(NWA)

went through its own Chapter 11 reorganization.

Airline industry consultant Mike Boyd says the Cleveland expansion reflects record occupancies, with passenger loads in the 80% range. "Adding in Cleveland makes sense as long as everybody else stays full, because it means there is plenty of traffic to feed through Cleveland to and from the Northeast," he says.

Continental is adding the types of medium-sized cities where businesses often flourish despite the lack of nonstop service to key markets, Boyd says.

"People laugh and joke about the auto industry, but there's a lot more in Michigan than automotive," he says. "Cities like Lansing can feed plenty of high-quality traffic through a connecting hub."