"Houston Hobby airport expansion passes; Southwest wins fight with United"

Wednesday, May 30, 2012

United announces job cuts after Southwest plan OK'd
By Chris Moran
The Houston (TX) Chronicle


The City Council approved a plan Wednesday that will give Houston two
international airports, settling a debate over whether flights from Hobby to
Latin America would boost the local economy or divide the city against
itself and trigger layoffs, canceled routes and stagnation at Bush
Intercontinental Airport.

Within hours, United Airlines told employees in a bulletin that, as a result
of the council vote, it would be cutting planned operations at Bush
Intercontinental by 10 percent and eliminating 1,300 Houston jobs, with the
first buyouts, transfers or pink slips going out in the fall. It immediately
canceled planned service to Auckland, New Zealand.

The council's 16-1 vote, according to the bulletin, also puts in
"significant doubt" whether United will complete a planned $700 million
expansion of Terminal B at Bush Intercontinental on which it broke ground in
January.

"We believe that splitting Houston's international air service is the wrong
decision for the city's future, but we respect the fact that City Council
did not agree," United spokeswoman Mary Clark said in a released statement.

Houston Airport Director Mario Diaz declined to comment on United's jobs
announcement.

Mayor Annise Parker was dubious of United's post-vote stance.

"I'll wait to see that they do that," she said. "I think United is committed
to this city and that they're going to do their best to continue to grow
jobs here in Houston. We already know that we provide a much more
competitive environment in terms of cost of living and workforce than any of
their other hub areas. They committed early on that we would be the largest
hub in the largest airline in the world and that's the commitment I expect
them to keep."

She added later, "They've stated continuously that they welcome competition.
That competition is at least three years away. So, for United to say there
are going to be 1,300 people laid off next week or so, that's just not
reasonable. Because nothing is going to happen until that terminal is built.
There's no competition today. So any decisions they make in terms of
personnel are based on other things - not the vote we cast today."

$100 million project

Under the plan approved by the council, Southwest will pay $100 million up
front to build five international gates and a customs facility at Hobby. In
exchange, the airline receives control of four of the five gates, free rent
in the new facilities and a rebate based on how much sales inside Hobby
increase once Southwest launches its first planned international departures
in 2015.

"This is what we were sent here to do. We were sent here to expand business,
to create opportunities to continue the growth in our great city," said
District I Councilman James Rodriguez, who represents the southeast area of
the city where Hobby is located. "This is yet another historic day in the
city of Houston, and it's also another historic day in aviation."

The council supported the proposition that Southwest's entry into the
international market will lower fares, cause more people to fly, and pump up
the Houston economy.

"I can guarantee you that our fares are going to be lower than our
competition," said Southwest CEO Gary Kelly, who repeatedly visited Houston
to pitch the proposal. "It's all about competition. It's all about lowering
fares, and more traffic means more jobs."

Lone dissenter

United, which has a virtual lock on Latin American flights from Houston,
opposed the expansion.

Councilman Jerry Davis, whose District B includes Bush Intercontinental,
cast the lone negative vote. "I don't think the people of the city of
Houston really understand what could transpire," said Davis, who worried
that it will cost jobs and hurt businesses in north Houston. "I pray that
I'm wrong."

Though Davis stood alone in the vote, several of his colleagues openly
acknowledged that they were torn. The council had to pick between
diametrically opposite visions of the consequences of choosing a side in an
epic corporate battle between the nation's largest domestic carrier and the
world's largest airline. A city study forecasts as many as 18,000 new jobs
and $1.6 billion in annual economic impact from Hobby, while United's own
study predicts 3,700 lost jobs in the region and a loss of $300 million in
annual economic impact.

Popularity contest?

Failure to approve Hobby expansion would have driven Southwest to shop its
expansion plans in San Antonio or another competing city, Southwest leaders
said. 

Embracing Southwest, however, could trim back United's expansion plans at
Bush Intercontinental and strip it of its status as the largest hub of the
world's largest airline. Even some of those who cast votes in favor of Hobby
did so with some trepidation.

"I'm concerned that we're about to reverse 45 years or more of aviation
policy without having had the opportunity to have a sober discussion about
this matter around the council table," said District J Councilman Mike
Laster. "To me, at times this proposal has felt more like a public relations
campaign or a popularity contest rather than an attempt to forge good public
policy. I regret that I am not yet wholly convinced that the greater
metropolitan area, with its population of just over 6 million people, is
large enough to operate two international airports within one system without
inflicting damage of some sort."

After the vote, scores of United employees wearing blue shirts with the
slogan "Keep IAH Strong" silently filed out of the room while Parker
temporarily waived rules against cheering in chambers to permit an eruption
of hollering and applause from Southwest employees in yellow T-shirts with
the words "Free Hobby."

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