Houston City Council this week voted 16-1
in favor of a Southwest Airlines plan to launch international service at William
P. Hobby Airport. The decision elicited a strong reaction from United Airlines,
which now plans to cut capacity at neighboring George
Bush Intercontinental Airport by 10 percent, reduce up to 1,300 positions and also reconsider
an ongoing redevelopment project at Intercontinental's Terminal B.
"This will directly harm our IAH
hub," according to a United employee bulletin posted this week.
"Based on a comprehensive economic study, we said throughout the council’s
deliberation that the diversion of traffic from IAH would cause us to reduce
our planned capacity at IAH by 10 percent, costing 1,300 jobs."
The carrier told employees it would initiate
cuts with its fall 2012 schedule, though capacity and job reductions will
"occur over time." United plans "to mitigate job loss through
voluntary programs and relocation to other positions in the company,"
according to the employee bulletin.
"We have been maintaining some
unprofitable flying at IAH based on our projections that future growth at the
hub would make those routes profitable," according to the employee
bulletin. "Since that growth won't occur, because there will be less
international connecting traffic at IAH, we will have to reallocate that flying
where it can earn a profit. The rest of the reduction will come from future
planned capacity, including not flying our previously announced service from
IAH to Auckland, New Zealand. That flight was heavily dependent on connecting
traffic through IAH."
While "it's too late to stop" a
first phase of an overall $700 million plan to redevelop Terminal B, United in
the bulletin said "this decision puts the need for the remaining $600
million investment in significant doubt."
As United retrenches at Intercontinental, Southwest
next spring will start construction on a proposed $100 million Hobby airport expansion.
The carrier will "design and build
the five new gates and customs facility to the city’s specifications,"
according to the Houston City Council. "When finished, the city will own
the improvements debt free."
Southwest in return "will have
preferential scheduling rights and pay no rent for its use of four of the five
new international gates, and will also pay no rent for its use of the customs
facility," the council determined. "The fifth additional gate and the
customs facility will be available for use by all other airlines at Hobby, but
unlike SWA, the other airlines will pay rent."
Adding an estimated 20 daily departures at
the airport, "the expansion will mean flights to Latin America from Hobby
by 2015, if the federal government approves a new customs facility necessary to
screen international passengers," according to a statement from the
council.
Despite United's protestations, an independent
study commissioned by the local airport authority and cited by the city council
concluded that new services at Hobby would increase competition, lower fares
and lure more visitors to the area, thereby driving job growth in
tourism-related sectors.