The European hubs are the weakest structurally because airlines there face the most low-cost carrier competition and greater pressure in some of their long-haul markets due to the Persian Gulf carriers. Nonetheless, the big European airlines believe they have found ways to stabilize.

Structural problems at these hubs are not only the result of competition. “Short-haul-to-short-haul hubs are pretty disastrous,” says John Strickland of London-based JLS Consulting. A brief look back indicates how fast things have changed in little more than 10 years. Former Swiss carrier Crossair used to operate a “regional hub” connecting European 50-seater markets in Basel, quite an absurd thought nowadays. Air France once tried something similar in Lyon or even Clermont-Ferrand and Bordeaux. And smaller hubs such as Vienna and Warsaw are struggling to keep operating, while many others like Milan-Malpensa have disappeared.

Strickland believes it is high time for European airlines to recognize that they “can't be all things to all people.” Instead they should “focus on high-frequency thick routes,” even for hub feeder traffic, he says.

Operating a large base like London Heathrow Airport does not necessarily lead to better protection. British Airways has long pulled out of a lot of the European secondary markets. It could do so without jeopardizing its important long-haul operation because the local London market is big enough to sustain long-haul flying with much less feed than elsewhere. Lufthansa, KLM, Swiss International Air Lines, Iberia and (to a degree) Air France do not have that luxury.

“You can no longer operate long-haul without feed,” says Avinomics founder Philip Goedeking, an expert in network planning.

Airlines that have acted can expect some results. “At best, the situation stabilizes at an uncomfortable level, as hub carriers fight back,” says Markus Franke, head of Franke Aviation and Transportation Consulting. “Capacity has been taken out of loss-making markets, smaller aircraft like 50- and 70-seat regional jets are on their way out, if they have not already been retired, improving the average unit cost of the remaining fleet. On the other hand, trunk route frequencies have been increased to protect these attractive markets and airlines are often willing to accept compromises as far as yields are concerned.”

Hubs continue to evolve. Lufthansa has redesigned its main base in Frankfurt to reflect new market realities. “The system is very much geared toward short-haul-to-long-haul connections,” explains Alexis von Hoensbroech, vice president of network planning at Lufthansa. “Short-haul-to-short-haul has been superseded because of low-cost carrier competition. It has become less and less valuable to us.”

Lufthansa's main hub still offers intra-European connections, but rather than being carefully planned, they are mostly coincidental by-products of a system serving long-haul traffic. Seventy-five percent of the Frankfurt capacity (in available seat miles) is deployed to long-haul routes.

Lufthansa operates a four-bank system in Frankfurt, but it is in the process of introducing a fifth and making some of the bank peaks higher to improve connectivity. It plans to add long-haul services to its afternoon peak, which is currently the only predominantly short-haul-to-short-haul one.

Since Frankfurt is a relatively small origin-destination market, Lufthansa needs feed even on short-haul routes, though it must minimize losses in the sector. To do this, the airline is decoupling high-frequency services from the hub logic. Markets such as Hamburg, Berlin, Munich or London are served so often on any given day that Lufthansa has stopped bothering about optimizing connectivity in Frankfurt. These markets are run for efficiency and, with a fourth runway and more slots available now, there is some potential to actually achieve that. Low-frequency markets still have to be put in synch with long-haul operations, however, in order to be economically viable.

Von Hoensbroech forecasts that there will be further structural changes for hubs, as the “winner-takes-all” paradigm is felt. Wherever two airlines operate parallel hubs at the same airport, the bigger carrier grows faster over time and the smaller carrier tends to shrink, as witnessed at Chicago O'Hare International Airport with United Airlines and American Airlines.

Hub carriers also grow more quickly than the airlines serving them from elsewhere, and the hubs continue to align for alliance membership. “It is becoming increasingly difficult for us to fly into hubs of competing alliances,” von Hoensbroech concedes. That challenge will be felt in particular in Charlotte, N.C., where US Airways essentially owns the market and is switching from the Star Alliance to Oneworld (as a result of its merger with American), leaving Lufthansa and its other former Star partners without feed.

Von Hoensbroech expects the Sao Paulo market to become less of an issue (with TAM leaving Star for Oneworld) because the local market is so big that alliance members are less dependent on connections.

The dominant hubs are only becoming more dominant because airlines are becoming less liberal on interlining deals that have historically opened their networks to competitors at relatively attractive terms. “That approach is being questioned more and more,” von Hoensbroech says.

Goedeking argues that airlines should allocate more revenues generated in short-haul-to-long-haul connections to the shorter sectors, which have very high unit costs but are necessary. The costs are high partly because of the legacy structure built up over decades, but partly almost by definition. Short-haul flying is less efficient in terms of fuel burn, airport charges and bank structures. “But the economies of scale are still very powerful,” Goedeking says.

Air France still has significant short-haul flying built into its Paris-Charles de Gaulle (CDG) hub, but the bank system is arranged in such a way that are short-haul-to-short-haul connections unattractive. In any given bank, short-haul services are the last to arrive and the first to depart. Narrowbody aircraft can be turned around more quickly than widebodies, but scheduling sometimes means that low-yield short-haul passengers will have to wait for the departure sequence of the next bank because some connections are simply too short to make.

Six Air France banks at CDG are steered by a network planning group that is also in charge of KLM's Amsterdam operation. The hub is heavily geared toward short-haul-to-long-haul connections. The first morning peak, P1, mainly includes inbound long-haul and short-haul services; the late-morning departure bank, P2, is focused on North American flights; whereas the P3 peak from 1:30 p.m. includes flights to North America and Africa as well as the corresponding European feed.

Air France has split operations for long-haul and CDG-based short-haul services as well as the point-to-point flying from around France as well as Paris Orly Airport.

Iberia, currently the most troubled of the large European airlines in spite of its inclusion in International Airlines Group (IAG), has tried to retain its European feed to the extent possible and transferred it partially to lower-cost affiliate Iberia Express. Its hub-carrier peers are watching closely for lessons on battling high costs. Iberia Express's cost advantage mainly stems from its low pay scale for flight crew and higher productivity, but the airline is still tied to the broader Iberia bank structure that would make it inherently less efficient.

The strategy is apparently paying off. Even though its fleet is just a fraction of the size of the mainline carrier's, Iberia Express has managed to achieve 20% lower unit costs and remain profitable.

A few airlines have outsourced the hub feeder flying. Not many others have gone as far as outsourcing hub feeding. FlyBe Nordic, a joint venture with FlyBe, is operating Finnair's Embraer E-Jets. Lufthansa has decided to move the non-hub short-haul flying to its lower-cost subsidiary Germanwings, but wants to retain the hub feeder flights for now to ensure product consistency and appease its pilot union.