Friday, July 11th, 2008

Mega-Skepticism

[Update 7/12: For a 1990’s take on the concept of a super-region from the perspective of Cincinnati, refer to the Gallis Report (9MB PDF)]

There seems to be a lot of talk lately about an expanded concept of regionalism. Perhaps the best known exponent of this view is creative class guru Richard Florida, who published his thesis in a paper called “The Rise of the Mega-Region“. In Florida’s view, the mega-region is the logical unit of economic activity, superseding nation-states, US states, or metro areas. He defines mega-regions as basically a conglomeration of metros and their surroundings with more or less continuous development as indicated by light emitted and tracked from space. In this logic, much of the Midwest is in what he dubs the “Chi-Pitts” mega region, a collection of 46 million people creating $1.6 trillion in economic output (GDP equivalent) per year. This rates that mega-region third in world based on economic output. His map incapsulates the northern arc of the Midwest around the Great Lakes, extending from Minneapolis to Pittsburgh. Florida believes that thinking mega-regional is one way for struggling cities to boost their fortunes.

Author Richard Longworth has a similar view. He sees Midwest state boundaries as historical anachronisms unsuited to the modern economy. His travels while researching his book brought to light that few people in Midwest even know what’s going on in the next state, much less around the world. In his view the Midwest has great assets, but significant challenges, and the best way to deal with the latter is through a self-consciously Midwestern strategy developed through new regional institutions.

Academic institutions appear to be getting in on the game as well. The Committee on Institutional Cooperation (CIC), an organization of Big Ten universities plus the University of Chicago, recently held a summit on the regional future of the Midwest in Minneapolis, co-sponsored by the Federal Reserve.

It is easy to see the surface logic and appeal of this. The Midwest is collectively struggling, so it makes intuitive sense to pool resources and tackle the problems together. Who could be against regional cooperation?

What I can’t help noticing, however, is how few concrete proposals are out there that would appear to show any material uptick from regional cooperation. Other than holding conferences, what is it that cites and states in the Midwest are actually supposed to do to implement this strategy? What does a mega-regional solution allow a city to do that it couldn’t do on its own?

I have struggled to think of operationalizable actions, but can’t come up with many. In fact, most of benefits of thinking bigger appear to be elusive. Let’s think about why size and scale works in a business environment. There are a few reasons.

One is economies of scale. Typical scale economics comes from capital efficiency. That is, a large producer can substitute fixed costs for variable costs, and with large volumes produce a unit cost that can’t be beat by smaller producers that can’t absorb the fixed costs.

Two is purchasing power. This exploits economic inefficiency from being a dominant purchaser of inputs or producer of outputs such that a company can trade on favorable terms. We see just such a battle playing out for iron ore, featuring a large customer (China) haggling back and forth between a handful of large producers (Vale, Rio Tinto, etc).

Three is additional specialization and the division of labor. With more people, you can have greater specialization. This enables ever more division of labor which creates a more efficient production environment a la Adam Smith’s pin factory.

Four is diversification. This is the logic of the conglomerate like General Electric. Being in diverse businesses, it is better able to weather the storms that hit any particular one of its units. It should be noted that conglomerate thinking is definitely out of favor.

Do any of these apply in the case of the Midwest? It is hard for me to identify specific scenarios. To give a real example, I think of the triangle of cities formed by Cincinnati, Indianapolis, and Louisville. These are all smallish major metros separated by about 100 miles. While none would be mistaken for Sunbelt boomtowns, none of them are Cleveland or Detroit either. They are also a good example since they are in different states. How might these cities cooperate to take advantage of mega-regional thinking?

I can already name some small scale things that have been done. One is mutual aid. The electric utilities in the three cities have long sent crews to help out the others after major storm related outages. And the cities formalized a disaster assistance pact. This is sort of the diversification argument and seems to create something tangible.

Beyond this, are the cities able to take advantage of scale economics? I don’t see how. I could see some level of capital efficiency that could be achieved if, for example, the three cities shared an airport located somewhere between them. But they seem far enough apart not to be able to do that for anything I could think of.

Is specialization an option. In theory, yes. In practice, I’m dubious. Thinking about how this might work, I use the example that Cincinnati could be the headquarters city, Indianapolis the life sciences city, and Louisville the tourism city. Each city would specialize and the others would agree not to compete but support the chosen city for each individual segment. This would eliminate costly duplication of effort and allow more muscle to be put behind each individual item. But would this happen? Highly unlikely. None of these cities is giving up an inch in fighting for all three items. That’s just not gonna happen.

Now, we do see around the country some degrees of specialization in cities that are nearby such that one could argue they form an extended region. NYC specializes in finance, DC in government, for example, and there is a lot of travel back and forth. In Texas, Dallas, Houston, and Austin seem to have specialized in complementary niches. But I don’t see a great opportunity for this in the Midwest, at least not in a pratical sense.

Ironically, the one area I do it happening in is within those much maligned state boundaries. For example, Indiana University and Purdue University have a great degree of specialization. Purdue has engineering, pharmacy, and agriculture as specialities. Indiana University has law, medicine, etc. They complement each other so well, in fact, that they are able to share major regional campuses in Indianapolis and Ft. Wayne.

What about purchasing power? This is something I do see some logic in. Namely, if the Midwest congressional caucuses pooled their power, they could accomplish something. Again, how likely is this in practice? Most congressman and senators seem primarily concerned with their district, and not that likely to expend clout elsewhere. But if a Midwest caucus were formed in the House and Senate, there could emerge something. Perhaps the forthcoming battle over the Great Lakes Compact would be a good place to start.

There are certainly benefits to an expanded view of the market for state and local level procurement. For example, “home cooking” in terms of favoring in town or in state suppliers probably raises the cost of road construction, etc. Throwing this wide open to Midwestern competition, with common standards would be a financial benefit. But of course, so would opening it up to global competition. And that’s just unlikely to happen due to politics. Not in the Midwest, not anywhere.

Looking again at our three cities, I don’t see them able to reap much advantage from pricing power effects of cooperation. And even if they did, would this really materially change their economic fortunes? Unlikely.

So where are the benefits of mega-regionalism to be found? Jim Russell of Burgh Diaspora views it as less about scale than about critical mass, particulary critical mass of talent. This is a powerful metaphor because it makes us think that once a certain talent level is reached, a chain reaction will set off a powerful economic explosion.

I prefer to think of this as a concept I call “minimum efficient scale”. That is, there is a certain minimum size it takes in order to support certain things or to do them in house. For example, a city needs to be a certain size to support commercial air service, a pro sports team, or a Neiman Marcus. Would cooperation between our three cities enable anything they can’t support today because of inefficient scale?

There is some intruiging evidence here. Cincinnati seems to have benefitted from this. They have a Delta air hub, a major league baseball team, a major amusement park, and an IKEA store. I would argue that most of these only make sense for Cincinnati in the context of exploiting the expanded regional population. However, Cincinnati has favorable geography (being also close to Dayton and Columbus and thus serving as a natural focal point) and was traditionally the more prominent and large city of the three. The benefits to Cincinnati are clear, but are there benefits to anyone else? Not anything significant. What’s more, none of these items required any mega-regional cooperation at all. They happened naturally because of the marketplace. What would the cities specifically cooperate on that would give them something they don’t have today?

When it comes to talent, there are certainly benefits to having more of it. But I don’t see any particular benefits to mega-regionalism here. What would they be? Idea exchange? Possibly, but there is no particular geographic advantage to that. I can exchange ideas with anyone. If I were a struggling Midwestern city, I’d probably be more concerned about building connections to successful places and to the overall global economy than I would be to my failing neighbor next door. Believe me, if a good idea comes up, people will find out about it. The Youngstown shrinkage experiment is a good example of that.

Could there be an expanded labor market? I’m having trouble seeing it. In our example, consider a life sciences company in Indianapolis. Would they be more easily be able to tap into labor in Louisville and Cincinnati if there were some cooperation in place? Perhaps if the respective life sciences communities were intertwined, there would be more awareness of job opportunities, but my experience is that people are either going to stay where they are, or follow the money. In the latter, they probably aren’t moving 100 miles for what are probably similar wages. They are going to go to San Diego and make some real bucks. What’s more, the regional cities I know seem to harbor a special contempt for each other, which would seem to make it doubly unlikely someone would move if they bought into that rhetoric.

I also do not buy into the “chain reaction” analogy. I’ve yet to see a successful example of this that spans metro areas.

Geographic proximity alone can offer some benefits. Philadelphia is certainly benefitting from proximity to New York as NYC prices turn it into the sixth borough. Pittsburgh can’t tap into that. But I view this as less of a mega-region, than just the colossus that is New York City expanding its sphere of influence as it becomes an ever more important world city. There is a similar effect going on with Chicago and Milwaukee, but is that replicable elsewhere?

I think again about this, what would proximity alone bring to our three cities? Well, for some it could mean easier access to professional sports. But other than Reds baseball, which has a very broad fan base for historical reasons, I don’t see it. A local Louisville blog recently noted the lack of inroads the Colts have had in building a fan base in that city, for example. And looking to the bigger city example, what benefit could Indianapolis reap from closer engagement with Chicago that say Kansas City, which is outside the Floridian mega-region, could not?

Florida himself probably offers the best potential explanation. He argues that mega-regional integration will lead to emergent properties that can’t be predicted based on the inputs. This is plausible, but not where I’d be hanging my hat if I were trying to figure out where to invest my time. And emergent properties could be good or bad and Florida doesn’t predict what they might be.

Longworth is also big on mega-regional thinking. He does a great job of diagnosing and describing the Midwest’s problems. But I do not see how the specifics of his proposed solutions will dramatically change the Midwest’s course. And he himself recognizes the political difficulty of making them happen. Among his proposals, he wants to see a Midwest regional think tank and newspaper. He’d like to see reciprocal in-state tuition. He’d like to see a higher degree of academic specialization among Big Ten schools with less competition. And he’d like to see states call a cease-fire in the economic incentives game versus each other. All good ideas, and potentially beneficial. But I don’t believe they are game changers, apart potentially from the academic specialization, which seems to be a daunting proposition.

I’m willing to be convinced. I clearly see the benefits of regional cooperation on a metro or economic area basis. Even there, however, we’ve seen significant challenges operationalizing even that idea. To really justify significant time and effort being spent on mega-regionalism beyond the quick and easy idea exchange variety, I think a specific program of recommended actions and the type of results we should expect to see from them needs to be put forward. Otherwise I’m inclined to view mega-regionalism in the Midwest as dinosaurs mating. Rolling up a bunch of weak players won’t make a strong one.

I welcome any thoughts on this subject, of course.

39 Comments
Topics: Economic Development, Regionalism

39 Responses to “Mega-Skepticism”

  1. David says:

    One example of co-operation could be major league sports and particulalrly, the NBA and MLB. Both play lots of home games (82; 80); both are very expensive to operate and very expensive to attend; and both the Pacers and the Reds are mediocre or worse in regards to ability to win games.

    I would argue the Pacers and the Reds could immediately improve their on field/off field performance by regionalizing their operations among Indy, Cinci, Louisville.

    For the NBA it would mean 13-14 NBA home games per city; a recruiting/drafting strategy that would attract the best players from the basketball powerhouses in this region (IU, UL, UK, UC, XU etc); ability to perhaps increase ticket prices. The result would likely be a team that would consistently lead the league in attendance; be profitable and be a winner.

    The same applies to MLB; with each city getting 25-26 home games…then also rotate the AAA franchise around providing an additional 25-26 home games.

    Pro Hockey and Soccer might also become a reality in this type of ‘regionalism’.

    A by-product would be increased awareness of what each city is about among these cities which could lead to other ‘regional’ efforts.

    Likelihood? NBA idea is more likely than the MLB. Cinci would probably not be too happy about sharing the Reds; however, as costs continue to escalate and they continue to put out a marginal product on the field…

  2. thundermutt says:

    You touched a LOT of bases there.

    First, I think I’d expand the idea of the regional cooperation zone to include Dayton, Columbus, and Lexington, a W-shaped arrangement with a good interlaced interstate network. Then some obvious regional advantages emerge: logistics and Japanese auto assemblers and suppliers.

    Clearly each state has gained spinoff effects of the location of the Honda, Toyota, and Subaru plants in the region. Clearly Honda and Toyota have a critical mass in the area, no doubt leading to Toyota’s Princeton plant, its investment in SIA, and Honda’s decision to locate in Greensburg.

    That last is the closest thing to regional choice as there is, since the plant is almost exactly halfway between Indianapolis and Cincinnati. The SE Indy suburbs and NW Cincy suburbs are only 30-40 minutes by car, all interstate. Very shrewd move on Honda’s part.

    Could the three states now develop an economic-development compact and cut a special deal with Honda and Toyota that no other state or region could match? Could the three governors somehow get an advanced-automotive institute located somewhere in the W region with resources from the region’s schools of engineering (Purdue, Rose-Hulman, Ohio State)? Could the three join forces on an advanced-manufacturing initiative? Could the three states cooperate on transportation infrastructure that would cement the three states as the ideal location for distribution and logistics operations? Perhaps a new world-scale freight-only airport and multimodal terminal that would lure both UPS and FedEx, or help both to expand in the region?

    Finally, I think the Great Lakes Compact might be a platform for superregional cooperation, as one of the regional advantages is plentiful fresh water.

    However, the W-region mentioned above is outside the Great Lakes watershed…it’s the mid-Ohio Valley region. Where the Lakes are a “uniter”, the river has always been a “divider”: North vs. South, industrial vs. rural, field crops, livestock and dairy vs. tobacco and bluegrass.

    But the region is united by its reliance on coal-fired electricity, and the genesis of many of the regional-aid utility agreements is their shared-ownership of generation facilities. Duke (old CGE & PSI), DPL, and AEP (old Columbus & Southern Ohio) own a number of facilities in common in various combinations. All will be faced with increasing demands to replace coal with something else over the coming decades, and perhaps they are likely to look into joint nuclear and wind power investments.

    Interestingly, these issues don’t have partisan political solutions…but they clearly require political cooperation.

    One last note: the reason Indiana’s state schools don’t overlap much is that the General Assembly pressured them to eliminate overlap. Thus Ball State is the center for architecture, planning and design, and broadcast arts and sciences. Indiana State retains its historic mission as a state teacher’s college. Purdue emphasizes the “A&M” mission of the historic land-grant colleges…one of which it is. Indiana is the state’s liberal arts and professional-school university, and it is greatly aided by the fact that its med, law, business, and public and environmental affairs schools all have major graduate-school operations in Indianapolis. And lately, Ivy Tech has morphed into our junior-college system that is trying to feed 2-year graduates both into the workforce and into the major universities. Higher ed may be one of the places where Indiana is getting it right.

  3. thundermutt says:

    I also can’t let your aside about Philadelphia go.

    Philadelphia is probably near the bottom of the US’s list of “world-class cities” but it is one and has been one for two hundred fifty years, longer than the rest.

    (I would put NYC, Chicago, LA, SF, Philadelphia, and Washington on that list. I don’t think Boston, Detroit, Pittsburgh or New Orleans qualifies for consideration any longer, and Atlanta and Dallas have aspirations, but that’s a whole other topic.)

    I assert that Philadelphia’s growth and revitalization is not merely a spillover from NYC, though it has probably happened for many of the same reasons as NYC. It has been a transportation hub (port and railroad) as long as NYC. It has a significant life-sciences cluster as well as a huge oil-refining and petrochemical cluster, which is not in New Jersey like NYC’s. It has a very significant post-secondary education cluster which is probably the equal of NYC (maybe better), with Penn, Temple, Drexel, Villanova, St. Joe, LaSalle, Bryn Mawr, Swarthmore, and a host of smaller institutions.

    It does not have the UN or Wall Street, so it clearly isn’t the world center of diplomacy or finance. My big knock would probably be yours: the brand (birthplace of the Declaration and Constitution and Great American Experiment), an image (the Liberty Bell), and the brand promise (???) are centered around history and past prominence and therefore reek of “nostalgia”.

    I realize this comment is right on the line of boosterism, but I did go to school there…

  4. The Urbanophile says:

    I do think there is possibly something to sports in terms of achieving scale. The practical barriers are daunting, however. First, the NBA limits local telecasts to a 75 mile radius. This would need to be altered to allow Pacer games to be shown in Cincy and Louisville. From the perspective of Indy, one reason the city built the Fieldhouse was to bring people downtown. Giving away home games to other cities can’t be viewed as that attractive. Given the tone of the Indy-Louisville discussions on this blog alone, I can’t see anyone in Louisville cheering for the Pacers. They harbor their own NBA ambitions. Similarly, why would anyone in Cincy care about the Pacers?

    The Reds already have a regional following that draws people from wide swaths of Indiana and Kentucky to downtown Cincy. Why would Cincy want to reduce that draw by loaning out the Reds dates? Also, neither Louisville nor Indianapolis has a stadium suitable for MLB.

  5. The Urbanophile says:

    Thunder, your “w” zone reminded me of the Gallis Report, which I added a link to at the top of the post.

    The Honda case study is an interesting one. Perhaps there is something to the automotive business there. The exact form of this would have to be carefully thought out to build trust and avoid the free rider syndrome. The real problem with Greensburg type locations is that they don’t make nearly as much sense in an era of $4-$5 gas.

    A regional cargo-only airport is an interesting idea, but I think the chicken done flown the coop on that one, with UPS and FedEx both having huge sunk facility costs.

    Green power collaboration is a good potential idea, especially if Tri-State regulators decided to coordinate. After Marble Hill, I don’t know that there is much appetite for nuclear in Indiana, however.

    Right now there appears to be fairly light economic connections between these areas despite their proximity. There is more intra-Ohio activity. But I-74 between Indy and Cincy is very lightly traveled. You don’t see people shuttling back and forth between Louisville and Indy the way you do, for example, between Chicago and Minneapolis.

  6. David says:

    In regards to sports….the names of the teams would need to change and stadiums would need to be expanded. End result is these teams and their respective metros would be healthier as less ‘local’ money is needed to support the individual franchises

    In regards to shuttling between among cities…I do not have the figures but would suggest that Lou-Cin is heavier than either Ind-Cin or Lou-Ind. Reason: Historically, Cinci has been the “big city” for Louisville and there are many businesses with operations in both cities. (moreso than Indy’s ties to either city)

    The heavier shuttling is probably Cin-Dayton and Lou-Lexington.

    In regards to economic connections…would suggest they are stronger than ever. Lots of business decisions will put an office in one pf those cities and it then serves the other cities in the region; much like an airline hub. Cinci serves as the gateway to the world for Indy & Louisville via the DL/NWA hub providing both air and ground connections to that airport from those cities. 1000’s of passengers fly or drive to Cinci from both metro’s for the kind of int’l (and domestic) connections which it provides. Same can be said for packages with UPS hub in Louisville and the Fedex hub in Indy. Am sure there are similar connections with healthcare, law, banking etc.

  7. thundermutt says:

    The “similar connections” in banking are not connections at all. The superregional banks in the Midwest all have their roots in Ohio since the regulators there allowed statewide banking roll-ups before Indiana even allowed cross-county banking.

    Indianapolis’ four big banks are Chase (formerly Bank One, Columbus), Key (Cleveland), 5/3 (Cincy), Huntington (Columbus) and I suspect the same is true of every one of the cities in the W.

    Bank One ultimately acquired both of Indiana’s two leading banks (AFNB, INB) plus Chicago’s (First Chicago) and Detroit’s (NBD) before its merger with JPM/Chase.

    That’s probably an example of “regional specialization” but it happened from one state’s action (and inaction by the other two) on financial deregulation…comparative/competitive advantage at its best.

  8. The Urbanophile says:

    thunder, one reason Chicago is so weak in the commercial banking sector is that Illinois was a unit banking state for many years. Chicago is a powerhouse in financial markets, but it now almost completely lacking in large commercial banks.

  9. Gary says:

    David I think your idea about sharing sports teams is a bit opptimistic. Why would Cincy and Indy want to share their teams? Those cities have worked hard to maintain those teams in their cities. The backlash to those respective franchises from their fan bases would be enormous. Professional sports teams in a city are highly coveted by the cities they are in. Charing teams would undermine the concept of “cheering for the home team”.

    Why would the Colts and the city of Indianapolis want to ship a game or two to Louisville each year. The Colts have a waiting list for season tickets?

  10. Gary says:

    David…Sharing teams does not help professional sports teams “attract players”…colleges attract talent.
    Professional teams draft players.

  11. Patrick Sewell says:

    I don’t quite understand your interest in using economies of scale to benefit professional sports. I’m a little biased against using sports as an economic development tool. It’s probably because when I was 12 I went a whole baseball season without a hit. But I digress…

    I think thundermutt is on to something about the auto industry. We in Alabama also have a new Honda plant. On a tour we discussed their use of “Just-in-time” production, which means that they build few component parts at their plant, relying instead on a network of suppliers to deliver them “just in time.” So instead of Honda producing everything in-house (the Detroit model), everything is purchased from local suppliers. This begins to look like the “symbiotic” web of prorducers Jane Jacobs says are vital to economic life in Cities and the Wealth of Nations.

    So maybe the midwest could take advantage of the mega region by developing strong networks of local suppliers.

  12. CoryW says:

    David-

    I would be very surprised if many people from the Indy metro used the CVG airport. For one, CVG is very expensive to fly in and out of. Delta’s total domination has hurt CVG in that other near-by airports offer cheaper flights due to the competition (with less options though). I would go as far as saying that Delta has probably led to less for CVG because of this. Granted, as a hub, of course there are more passengers, but that is for connection purposes. Maybe residents of Louisville, Lexington and Dayton due to the availability of flights, but I would be surprised by IND passengers. IND offers a good number of flights domestically for a non-hub airport and is well-served by many carriers keeping prices competitive. Further, I don’t know of an Indy to CVG service for ground transport, but I could be wrong.

    About the sports being shared between Cincy/Indy/Louisvlle. It’s interesting to think about. I do know that the Reds used Indy as a bargaining tool for a new stadium a few years back. They probably even kicked Louisville in as a threat. The Reds playing in all 3 places, I think would be good; however, as mentioned, it would be at Cincy’s expense and with public-funded sports cathedrals, it’s a tough sell. HOWEVER, Indy could at least provide Cincy with an alternative by allowing Pacers games (as noted) so the impact would just shift from one season to the next in those Cities.

    As for Louisville, I could easily see the Pacers playing a few home games at their new arena, but with no MLB-caliber stadium, the Reds won’t go to either city and with no NFL-caliber facility in Louisville, neither the Bengals or the Colts are going to want to go there. Besides, the Colts organization has become one of the very best in all of professional sports, there (right now) is no real need to expand their reach.

  13. Gary says:

    I agree compelety with CoryW. I was a little skeptical of the statement of “thousands coming” to Cincy to use the Airport. That may infact be the case for Louisville. Louisville’s airpot does nto have the size and passenger counts Cincy and Louisvile has. I would need to seem some facts to back up that statement.

  14. Gary says:

    Soory I menat to type Louisville does not have the passenger counts the Cincy or Indy have.

  15. The Urbanophile says:

    Let’s make extra sure to watch ourselves and not turn this into a “my city vs. your city” thing.

    CVG is the most expensive market to fly from the United States. There have been many media articles suggesting people from Cincy driving to nearby airports to avoid high fares, though $4-$5 gas might discourage this. On the plus side, Cincy has non-stops to Paris and such, so there are pluses and minuses of a hub.

    Again, let’s keep the focus of any discussion on cooperation between cities please.

  16. David says:

    Gary & Corey,

    You 2 tend to not read what is posted.

    In regards to sports…I never suggested the Colts or the Bengals should share their games….The PACERS play 82 home games and DO NOT lead the NBA in attendance; the REDS play 80 home games and DO NOT lead the MLB in attendance. My suggestion was to split those games among 3 cities to make it more affordable for all 3 and to provide the franchises the opportunity to become more competitive. Today, both teams are mediocre at best

    I noted that Cinci would be more challenging to share the Reds; doubt there would be much outcry from the Pacers when they see the decrease in season ticket prices for a season where very few could go to all 82 home games

    Also, pro teams do draft…they also trade. An NBA team that was able to focus its recruiting efforts on the regional schools would build a powerhouse business and a rabid fan base.

    In regards to CVG use by either IND or SDF…and vice versa….it happens ALOT among all 3. CVG for international and some domestic; IND for cheaper fares and SDF for cheaper fares.

    In regards to passenger counts, CVG and IND both benefit from connecting traffic in their passenger counts. (for CVG it represents @80%; not sure the % for IND but it is positively impacted by NWA focus city and that connecting traffic) SDF has ZERO connecting traffic…that means they all start and end at SDF.

    There is no scheduled ground service between any of these airports…it woudl be done the old fashioned way…get in your car and drive there.

    CVG’s air service is on a whole nother planet compared to any city in the region (and yep it is very expensive); If you think IND does not use that hub…why do you think Comair flies the route with multiple frequencies every day?

    You really do not understand how the hub system works if you think otherwise

  17. thundermutt says:

    Will CVG even remain a hub when NW is integrated into the DL system?

    I’d guess either Memphis or Cincinnati will be on the block for elimination as a hub, as DL won’t need both along with Detroit and Atlanta as it rationalizes its system.

    Memphis has a lot of currently unutilized gate space in its main terminal.

  18. The Urbanophile says:

    NW has been pulling down MEM for some time now. MEM, CVG, and the IND focus city are all at risk post-merger.

    david, I realize people fly from IND to CVG to connect. What I say they probably don’t do is drive to CVG in order to fly nonstop due to the huge ticket price difference.

  19. thundermutt says:

    Urbanophile, from this customer/user’s point of view, MEM is a much more friendly transfer point than CVG when moving between RJ and full-size jets. CVG has that funky “bus to midfield” thing going with its RJ gates, where MEM is all an indoor walk.

    Of course, DL may have a ready buyer for daytime takeoff/landing slots at MEM (FedEx) and only a limited possibility for CVG.

    Another factor is whatever promises have been made and what the financing and lease obligations are at each airport…though a(nother) trip through BK could resolve that for DL as resolved United’s obligations at the Indy maintenance hub.

  20. Anonymous says:

    The CVG hub is at real risk. It now serves as a larger operation for RJ's than mainline. RJ's are gas hogs and are being retired at an accelerating rate. The same applies to MEM, however not sure that RJ flying is as large a % as it is in CVG.

    AirTran at IND & DAY; WN at CMH, IND & SDF could put increasing pressure on the CVG hub by attracting more and more pax from the CVG catchment area.

    I think CVG becomes a focus city for DL/NWA. If that happens, IND loses focus city status. MEM could remain hub for awhile as a reliever to ATL but think it also likely to move to focus city status for the RJ reason.

  21. Gary says:

    David I do understand the hub and spoke system very well.

    I did some research on this subject.
    In fact Delta runs more flights between IND & ATL than it does to IND & CVG. What was truly shocking was the number of flights between CVG & SDF. It was doulbe the number of flights of IND & CVG.
    So it appears there is a ton of pax from Louisville using CVG to get someplace else.

    Another fact that was of some interest was the the bulk of Northwest flights out of IND were independent of any of the hub cities. That indicates what I suspected, Northwest is dominating the non-stop service out of IND. So one has to assume to some degree Northwest is feeding some connections in to Indy then providing the Indy market non-stop service. That indicates that there must be a pretty strong market for those routes out of Indy.

  22. Gary says:

    David,

    Additionally with regards to sports. I still think you are looking a professional sports like it is college. Professional sports franchises don’t just jump around and play games in other cities. There are too many hoops to jump through. The fan bases are far more particular, and these aren’t college kids.

  23. David says:

    Gary,

    And the the point is? IND does send lots of pax to CVG via air/ground.

    You and Corey both originally asserted that "I would be very surprised if many people from the Indy metro used the CVG airport."

    hmmm…just on air cx alone IND sends 36,000 pax to CVG (minimum)….and my original assertion was that IND sends lots to CVG.

    Would also say that CVG send 1000's of pax to IND…but they are not flying there. Just as would say there are 1000's from IND that make the drive to CVG.

    Same is true of SDF-CVG; SDF-IND.

    And yes, IND pax counts are positively impacted by the connecting traffic that comes thru via NWA focus. Just as CVG is impacted by DAL connecting traffic but on much larger scale.

    If NWA did not focus on IND…it would lose flights and see its pax count decline. IND O&D helps NWA figure which routes to focus…but simply said, if there were no focus, there would not be the same level of service by NWA at IND.

    Likewise if DL decided to de-hub CVG, it's ability to support flights via O&D alone would reduce the number of flights to @ 20-30 more per day than SDF has and @10-15 more than IND. All international nonstops would go away.

  24. thundermutt says:

    David, I don’t think thousands of people drive to CVG from the IND local market, based on my own experience. Every time I fly, I check fares from CVG, IND is cheaper by a lot…even on DL trips that involve a RJ flight from IND to CVG.

    Further, IND is almost the largest inland metro that isn’t someone’s hub. (Austin is a notable exception.) Over the past 25 years it has been a “focus” city for several airlines, most notably USAir, ATA, and Southwest. If not NW, then someone will make it a focus again in hopes of capturing the dominant market share.

    This small air-traffic debate points out the inherent difficulty of regional cooperation quite nicely.

    I’m back to thinking that the Honda plant site was a major missed opportunity for the region to move its air-cargo hubs to one non-passenger airport. Would’ve saved Indiana a ton of money to relocate I-70 for FedEx.

  25. Gary says:

    Thundermutt was FedEx the only reason for the I-70 relocation?
    Was the in fact also part of the plan for the new midfield air terminal? I don’t honestly know but I suspect if was a part of that.

  26. thundermutt says:

    I think FedEx expansion is the only real reason for moving I-70 south a few hundred yards. At the county line (where the new airport entrance is) the road returns to its original course.

    A rebuild and some realignment of that road segment to handle the increased traffic load (and better separate the I-465 and airport traffic) would probably have been at least partially justified, so maybe it didn’t really cost any extra to move it also. I think the airport authority already owned the land on which the new segment was built.

    I suspect The Urbanophile knows, or knows how to find out, and he could probably answer that question definitively.

  27. Gary says:

    Intersting, according to the FAA IND had 7.127 million O&D passengers to CVG's 4.3, SDF 3.3 million. If I were NWA or DL I would certianly look twice at those numbers.

  28. The Urbanophile says:

    The biggest reason to relocate and depress I-70 was to allow for the construction of a future airplane taxiway bridge across I-70 to access a third parallel runway. This is in the long range plan and the airport authority already owns the land for it. The FexEx expansion was part of the deal, however.

  29. Anonymous says:

    The Pacers play 41 home games, 82 total.

  30. Anonymous says:

    Guys, do the math. 1000's driving to CVG (or some other airport) means like 7 people/day. I am quite confident that at least 7 people/day drive to one of the region's airports for one reason or another. Add to that the air cx and you get into multiple 1000's.

    In regards to O&D counts…how could IND have 2x the O&D as CVG? CVG is the larger metro. If that is a true stat…then folks really just want to get out of IND :)

  31. Anonymous says:

    Anon:

    Regardless of total home games…it is alot…and a season ticket to all of them is alot of $. None of the region’s metro’s have the $ to put 20,000 butts in the stands for every home game at current ticket prices without taking away form the butts who might see/support other events in that metro

  32. Gary says:

    Regarding O&D passenger counts.
    I am only reporting what the FAA listed as O&D passengers for 2007 through March of 2007. Look it up yourself.

  33. Gary says:

    Also remember it cost about half to fly anywhere from Indy than it does from Cincy.

  34. Gary says:

    Guys, It has been that long ago that the Pacers were a contending team and regualarly filled up Conseco.

    The only problem the Pacers are now having is that the people of Indy don’t like the “charcater” of the current team. The Simons stepped in and took the bull by the horns. Personally I don’t agree with handing the team over to Larry Bird, but we will see.
    Regardless there are whole sale changes going on.

    The Paccers still do “ok” with attendence. But, yes it is down from a few years ago. I personally believe this city is still adjusing to the retirement of Reggie Miller that was the face of the Pacers. He is someone you just don’t go out a replace over night. Give this city a team with players they like and attendence will go back up even if they are only marginally good.

    Also, consider that the NBA teams share all TV revenues which is huge chunk of a teams revenue. This franchise won’t and has no reason to start playing a few games in other cities. I again I get back to “this is not college” we are talking about here.

  35. Gary says:

    Also I will add this…the NBA as a product is down over all. It really does have kind of thug image to it which is a big problem. This is just not an Indy thing. Compare the NBA to the NFL.
    The NFL by any account is a “monster” from a size, marketing and interest of fans perspective. It is huge and getting bigger. The fact is the NBA over all has seen better days.

  36. thundermutt says:

    Anon 8:43, the piece you’re forgetting is the large convention business in Indy, plus two huge racing events per year.

    You’ve got it backward: lots of people want to come to Indy.

  37. CoryW says:

    Although Cinci is a larger metro, it is only larger by about 100,000-150,000 people. Not much when both are 2 Million metros. And say what you want, Anderson/Madison County is metro Indy, which places it at 1.9 million.

    BUT, IND is the airport for ALL of Central Indiana while CVG has a much smaller market/region, so I am not surprised to see IND's O&D higher than CVG.

    Finally, David, you stated that 1,000 DRIVE to CVG from IND, not "use." Big difference.

  38. Da Ville says:

    coryw:

    You have trouble with numbers dude.

    Cinci metro is bigger than Indy Metro. PERIOD. Official census has Cinci larger by 400K; Indy is larger than Louisville by 300-400K.

    I am certain that 1000’s drive/fly to CVG from IND to catch planes; the same is true from Louisville; and the same is true from CVG to both cities except they only drive as neither IND or LOU would offer the same type of cx that is offered by DAL via CVG.

  39. CoryW says:

    Da Ville-

    You must have missed it the first time.

    “Although Cinci is a larger metro, it is only larger by about 100,000-150,000 people. Not much when both are 2 Million metros. And say what you want, Anderson/Madison County is metro Indy, which places it at 1.9 million.”

    There, now, try again.

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