Minot, N. Dakota, USA, is served over one Hub airport Destination

MSP MINNEAPOLIS/ST. PAUL-INTL

PHX PHOENIX, ARIZONA, USA-INTL LAS LAS VEGAS, NEVADA, USA-MCCARRA DFW DALLAS/FT. WORTH, TEXA-INTL SEA SEATTLE/TACOMA, WASHIN-SEA/TAC DCA WASHINGTON, DC, USA-NATIONAL DEN DENVER, COLORADO, USA-INTL MCO ORLANDO, FLORIDA, USA-INTL LAX LOS ANGELES, CALIFORNI-INTL SAT SAN ANTONIO, TEXAS, USA ANC ANCHORAGE, ALASKA, USA ORD CHICAGO, ILLINOIS, USA-O'HARE ATL ATLANTA, GEORGIA, USA SFO SAN FRANCISCO, CALIFORNIA, USA EKO ELKO, NEVADA, USA IAH HOUSTON, TEXAS, USA-INTERCONT LGA NEW YORK LA GUARDIA Rest of World (117 more Cities) TOTAL/avg

Dist (km)

724

1879 1771 1747 1574 2211 974 2797 2139 2097 3360 1263 2152 2082 1418 2097 2323 2022 1818

Passengers

23.9

8.7

5.6

5.0

4.9

4.8

4.7

4.5

3.7

3.6

3.0

2.9

2.7

2.7

2.6

2.6

2.6

91 177

fare

$ 191

$ 215 $ 213 $ 241 $ 209 $ 309 $ 197 $ 226 $ 220 $ 331 $ 245 $ 225 $ 255 $ 219 $ 48 $ 290 $ 228 $ 240 $ 230

Minot Feeds to Minneapolis Hub MOT MSP

18:00 Bank Gives Minot 38 Destinations Inbound Bank Outbound Bank Origin Depart Hub city time time

ONT BOS 1200 1505 1727 1728 SNA PSP PDX 1200 1210 1210 1728 1729 1729 MSO CWA GFK RST SMF ORD DFW 1355 1630 1620 1650 1205 1600 1510 1730 1731 1731 1732 1732 1734 1735 YEG YYC ABQ LNK DCA STL LAX YWG BIS 1355 1357 1405 1615 1559 1600 1215 1618 1630 1735 1735 1739 1740 1741 1742 1744 1744 1747

Origin Depart city time

DLH SAN 1655 1210 IND TUL DTW 1604 1550 1700 GRB MKE SJC RAP DTW DSM MSN 1641 1635 1215 1530 1705 1650 1645

MOT

SFO BOI GEG ATL MDW CVG CWA

1635

1220 1415 1312 1620 1635 1655 1715

Hub time

1748 1748 1749 1750 1753 1755 1756 1756 1757 1759 1759 1800

1800

1800 1804 1804 1805 1809 1809 1815

==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> ==> Hub Arrive Destin' time time city

1835 1836 1837 1838 1839 1839 1840 1841 1842 1843 1844 1845 1845 1845 1846 1847 1847 2030 1932 2159 2159 2209 2214 2207 2108 2139 2104 2210 2159 2022 2134 2208 2208 2253 MEM FAR IAD RDU PVD GSO BDL GRR BUF OKC ATL ROC SBN DAY CLT DCA TPA

Hub time

1848 1849 1850 1850 1850 1850 1850 1851 1852 1853 1854 1855 1855 1855 1856 1857 1858 1859 1900 1900 1901

Arrive Destin' time city

2116 2136 MBS CMH 2227 2130 2130 HPN AZO AZO 2215 900 2142 2128 2217 2246 2255 TYS LGW DTW FNT BWI BOS ORF 2008 2124 2126 2158 2007 2002 2200 2027 2030 MLI LAN DFW YYZ GRB OMA PIT ORD MCI

Minot Connects to the World

Most Markets are Small 16% 14% 12% 10% 8% 6% 4% 2% 0% Too Small For Nonstop <3.

125 <6.

25 <12.

5 <25 <50 <100 <200 <400 <800 Passengers per Day One Way <1600 1600+

Half of Travel is in Connecting Markets

16% 14% 12% 10% 8% 6% 4% 2% 0% Connecting Markets <3 .1

25 <6 .2

5 <1 2.

5 <2 5 <5 0 <1 00 <2 00 Nonstop Markets <4 00 O&D Passengers per Day <8 00 <1 60 0 16 00 +

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Lots of O&D Connections 4-leg connect Double Connect 1-connect thru nonstop 30 0 10 00 20 00 30 00 40 00 50 00 60 00 70 00 80 00 90 00 10 00 0 11 00 0 12 00 0 St. Mi. Range Block (excludes US domestic O&Ds)

Half the Trips are Connecting

400000 350000 300000 250000 200000 150000 100000 50000 0 3+legs 2-legs Nonstops 30 0 10 00 20 00 30 00 40 00 50 00 60 00 70 00 80 00 90 00 10 00 0 11 00 0 12 00 0 St. Mi. Range Block (excluding US domestic)

Connecting Share of Loads Averages about 50%

80% 70% 60% 50% 40% 30% 20% 10% 0% 0 2000 4000 6000 Flight Distance (Km) 8000 10000

Long-Haul Flights are from Hubs, and carry mostly connecting traffic

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100 Point-to-Point Markets 150

Markets over 5000km

200 250 300 350 Trend 400 450 500 Seats per Departure

Hub Concepts

• Hub city should be a major regional center – Connect-only hubs have not succeeded – Early hubs are centers of regional commerce • Early Gateway Hubs get Bypassed – Early International hubs form at coastlines – Interior hubs have regional cities on 2 sides • Later hubs duplicate and compete with early hubs – Many of the same cities served – Which medium cities become hubs is arbitrary – Often better-run airport or airline determines success – Also the hub that starts first stays ahead

SFO LAX Regional and Gateway Hubs in US DEN DFW ORD ATL MIA JFK

Three Kinds of Hubs

• International hubs driven by long-haul – Gateway cities – Many European hubs: CDG, LHR, AMS, FRA – Some evolving interior hubs, such as Chicago – Typically one bank of connections per day • Regional hubs connecting smaller cities – Most US hubs, with at least 3 banks per day – Some European hubs, with 1 or 2 banks per day • High-Density hubs without banking – Continuous connections from continuous arrivals and departures – American Airlines at Chicago and Dallas – Southwest at many of its focus cities

Secondary Hubs in US

SFO LAX

SEA SLC DEN PHX MSP ORD DTW PIT STL CVG

JFK

EWR ATL DFW IAH

MIA

Value Created by Hubs

The idea in business is to Create Value Do things people want at a cost they will pay Hubs make valuable travel options Feeder city gets “anywhere” with one connection Feeder city can participate in trade and commerce Hubs are cost-effective Most destinations attract less than 10 pax/day Connecting loads use cost-effective airplanes

Hubs Build Loads First, then Frequency

$600 $500 $400 $300 $200 $100 $ 0 Too Expensive 50 Good Balance 100 Seats 150 Add Frequency 200 250

Hubs Give Competitive Advantages

• Less peaking of demands, as variations in different markets average out • Dominate feeder legs – Connect loads allow dominant frequency – Connect loads avoid small, expensive airplanes – Feeder cities can be “owned” • Dominant airline will get 15% market share advantage • Dominant airline can control sales channels • Control of feeder cities makes airline attractive to alliances

Hubs Compete with Other Hubs

• Compete on quality of connection – Does the airport “work?” • Short connecting times • Reasonable walking distances • Reliable baggage handling • Few delayed flights • Recovery from weather disruptions • Later flights for when something goes wrong

Hubs Develop Pricing Mixes

• Higher fares in captive feeder markets • Low discount fares in selected connecting markets to fill up empty seats – Low connecting fares compete against nonstops – Select low fare markets against competition – It pays to discount and fill • Unless you discount your own high-fare markets