Thursday, April 05, 2012

United Airlines says global William P Hobby Airport would cost jobs, flights at George Bush Intercontinental Airport

United Airlines officials said Wednesday that allowing international commercial flights at Hobby Airport would force the carrier to cut 1,300 Houston jobs and dozens of flights from Bush Intercontinental Airport, and that city-paid consultants and Southwest Airlines are using unrealistic data to support the proposal.

In a letter to Mayor Annise Parker on Wednesday, United CEO Jeff Smisek said "the assumptions that underlie the analysis are so contrived it is clear they were designed to reach a predetermined conclusion."

Smisek said United is commissioning its own study and urged Parker to "delay this decision, which you agree will impact Houston's aviation industry and economic future for decades to come." The Houston City Council is scheduled to consider the proposal next month.

Executives from Southwest, which has offered to pay an estimated $75 million to $100 mil- lion for a Customs facility at Hobby so it can begin flying to Latin America, told the Houston Chronicle editorial board on Tuesday that such flights would create 10,000 jobs and inject $1.6 billion a year into the area economy. 

They based the assertions on two un-released studies commissioned by the Houston Airport System.

Representatives from Chicago-based United, which merged with Houston's former hometown carrier Continental Airlines in 2010, made their case to the editorial board Wednesday, arguing that any economic benefit the project could bring would be eclipsed by the harm done to United and Bush.

'Defies' economic logic

They said the economic impact projected by the studies is based on Southwest offering airfares that are unrealistically low given high fuel prices. That inflates the increases in international traffic Southwest could achieve, they said.

"It defies airline economic logic," said Bill Swelbar, a research engineer at MIT's International Center for Air Transportation, who is working with the University of Houston on a study of the proposal for United.
United argues that a second international airport would reduce the number of connecting passengers at Bush. 

The carrier relies on those passengers feeding into Bush to sustain - and add - a wide variety of international flights.

Greg Hart, United's network senior vice president, said that splitting international operations would siphon travelers from Bush to Hobby.

"The fact is, the local market isn't big enough," Hart said, noting that low-cost carrier Viva Aerobus flies only to Monterrey, Mexico out of Bush Intercontinental. "Why aren't they flying to Cancun or Mexico City? The market doesn't exist," Hart said. "So what will happen is Southwest and United will cannibalize each other's schedules."

Southwest, which is looking to move into the international arena after acquiring AirTran Airways last year, has argued that the Hobby project would increase competition and result in more passengers at both airports.

'Welcomes competition'

In his letter, Smisek said United "welcomes competition from AirTran, Southwest and all carriers for international service at IAH, where there are ample gates and facilities."

Gary Kelly, CEO of Dallas-based Southwest, said in the meeting with the Chronicle Tuesday that Houston's market can support Southwest's proposed 24 flights a day from Hobby to Mexico, the Caribbean and the northern part of South America.

But Hart said that even if Southwest doesn't prove competitive at Hobby, United is concerned that federal budget restraints will stretch Customs officers too thin between Hobby and Bush, which United contends already is understaffed.

"This is a huge issue for us and Southwest has yet to operate an international flight, so I don't expect them to understand it," Hart said.

Kelly dismissed the staffing issue Tuesday, saying it is paid for by a $17.50-per-international-passenger fee.

Nene Foxhall, United's executive vice president of communications and government affairs, said if the Hobby proposal goes through, the airline will have to rethink proceeding with the next stage of an expansion project at Bush Intercontinental's Terminal B - a potential $1 billion investment.

'A lot of hard feelings'

Foxhall acknowledged some local displeasure with the merger, but said that Houston remains United's largest hub.

She said the airline employs 17,000 Houstonians, about the same as before the merger, and has added more flights to Houston than any other hub since then. "I know there are a lot of hard feelings about the headquarters move," she said, "but I just wanted to remind you how important Houston is to us as we go forward."

Former Continental CEO Gordon Bethune, who attended the Wednesday meeting, said Bush was always intended to be the city's only global airport. "There was a partnership that was forged on the 'I' in 'IAH'," Bethune said.

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