Thursday, February 21, 2008

CAL-UAL HQ, planning debate, subsidies, rankings, airport rail, and more

Yet again, I've let the smaller items pile up:
  • There will be a dialogue/debate on Houston land-use regulation at the George R. Brown this Tuesday evening Feb 26. David Crossley, Arthur Nelson, Wendell Cox, and Mayor Bob Lanier are participating, and yours truly will be giving the introduction. More info and RSVP here. Hope to see you there.
  • NYT on the slowdown in exurb homebuilding in Texas, with a focus on a small town outside Dallas. The state is still booming overall, but the mortgage credit crunch, especially at the low end, is hitting builders on the fringes hard.
  • An interesting stat on airport rail from a recent comment by DavidH:
"Regarding recent proposal that Houston needs rail to the airports "because all world-class cities have one", it should be noted according to a study done some time ago that the most heavily used airport rail in the country was Reagan National (Wash DC) where 11% of departures/arrivals used rail. All other cities were under 5%. Nobody except maybe visitors to downtown want to schlep their bags on a 15 mph rail ride to the airports."

I agree, and I've said before that the market here is a niche one plenty well served by buses: young singles who can't get a ride to the airport. Business travelers will almost always rent a car or take a taxi. Families won't schlep their luggage on transit. Most others will have friends or family pick them up or drop them off. And our off-site airport parking is dirt cheap. The ridership drivers just aren't there.
"He believes there are “enormous government subsidies” for driving. In fact, in 2005, the subsidies to the 4.4 trillion passenger miles of driving were $17.9 billion, or less than 0.4 cents per passenger mile. By comparison, the subsidies to the 47 billion passenger miles of transit were $29.4 billion, or 62 cents per passenger mile.

Subsidies to transit have outpaced subsidies to driving for decades, yet transit still makes up only about 1 percent of passenger travel. Somehow, I suspect that if 0.4-cent-per-passenger-mile subsidies had as much influence on American travel habits as Nozzi presumes, then 62-cent-per-passenger-mile subsidies would be even more significant. But they haven’t been."
  • If you haven't already gotten this in the emails going around town:
"Please go to this web site and vote for Houston (Children's Memorial Hermann Hospital) to get a new hospital playroom from Colgate. It is an easy process and would benefit so many of our children who spend their time at the hospital. Send it on to all you know and see if we can't win this for the kids. Thank you so much for your help with this."

When I last checked, we were barely in first place, with Detroit coming on strong. You can vote every day, so just keep it open in a browser tab.
I may have mentioned before on this blog that I'm somewhat of an amateur follower of the airline industry. In that vein, I thought I'd throw in some material about the rumored Continental-United merger that is expected to follow a Delta-NWA merger announcement. Some of you may even remember an op-ed I wrote in the Chronicle five years ago calling for exactly this merger when United declared bankruptcy. It's been well covered in the Chronicle, including this story on the headquarters issue: Houston or Chicago? The Airliners.net forums have discussions on the issue here, here, and here.

Most of the sentiment seems to be that Houston will probably win out - not only because of a friendlier and more affordable business climate, but also because Continental's management team is widely considered the stronger of the two (especially by Wall Street): it's easier to cherry-pick the UAL management stars and move them to Houston than try to mass-move CAL management to Chicago. And it probably doesn't hurt that UAL CEO Glenn Tilton has a history in the oil biz.

There's also someone claiming to have inside information that both the Continental brand and Houston headquarters will stay. I know you have to take what you read on the internet with a grain (or a shaker) of salt, but he sounds credible.

I'd like to end with a nice quote from former Continental CEO Gordon Bethune in the Chronicle interview:
Q: So what do you think about a combination of Continental and United?

A: If this were a chess game, then ... Continental taking over United would be called checkmate, end of game, home run, it is all over. When you put these two companies together with their route networks, you've got the Pacific, you've got the West Coast, you've got the Midwest, you've got the Southwest, you've got the East Coast, New York, Europe and Latin America. You are all around the world. You are a really good company. You can compete with Lufthansa, British Airways, Singapore Airlines, it doesn't matter. You are a powerhouse. That is what this country needs, is a couple of those. If you are going to compete globally, and Open Skies is going to make it a global marketplace, you better have global reach.

What would be so wrong to have the biggest airline in the world right here?

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15 Comments:

At 7:57 PM, February 21, 2008, Blogger Kevin Whited said...

** I'd like to end with a nice quote from former Continental CEO Gordon Bethune in the Chronicle interview: **

It's also worth noting that the investors with whom Bethune is working want a United merger, and if he can use his CO connections to pull one off, it will be a home run financially for them and for him.

Flyertalk has a lengthy thread on the topic, and is worth linking as well:

http://flyertalk.com/forum/showthread.php?t=536496

 
At 11:10 PM, February 21, 2008, Anonymous Neal Meyer said...

Tory,

I have flown with United since I worked in China and have followed United as a company for 16 years. I have flown Continental on a few business trips, but still travel through UAL for most of my vacations.

In my opinion, United has not nearly been as well managed as Continental over the past decade. Admittedly, Continental went through problems as an airline back during the days of Frank Lorenzo, but those days are long behind them. United on the other hand went through a nearly 3 year long bankruptcy before reemerging this past year as a pared down airline whose assets will end up in the hands of a consortium of private investors which rescued the carrier if they fail again. They ditched the employee pension scheme in the process.

Making a normative judgment, United , being a legacy carrier, is guilty of making hugely expansive moves when economic times are good, but then management gets into trouble and has problems scaling back when the economic waters get rough.

I would have to agree with Wall Street that if there were a merger, then Continental should emerge as "the winner" of it. Still, UAL has half of the terminals at O'Hare and you can bet the city of Chicago will not let that go unnoticed. If the merger comes down to a political battle, then area political leaders had better be prepared to offer up some big money up front to the carrier in order to get them to come here.

If we do win, I just hope my frequent flier miles don't get dropped in the process or else I won't fly Continental! :)

Neal

 
At 11:53 PM, February 21, 2008, Blogger John said...

"Business travelers will almost always rent a car or take a taxi."

Well, no; I suspect that you'd find that much of the rail traffic to the airport in DC was business travelers coming from downotwn, because it was the easiest and most reliable way to get there. Business travelers tend to have less luggage, and thus the train is more appealing.

And, having ridden that train many, many times, I can tell you that a huge number of the people getting on and off and the airport were clearly business travelers.

I think you're making some assumptions about how people travel in dense cities that really don't match the experience of those who've experienced daily life there.

 
At 7:52 AM, February 22, 2008, Anonymous mike said...

If it comes to a political/incentive contest, anyone who thinks Chicago will lose a battle for the world's largest airline knows nothing about Mayor Daley.

 
At 8:17 AM, February 22, 2008, Anonymous kjb434 said...

I've traveled to Reagan National several time too. The transit being successful there has to do more with the road connections from the airport being chaotic and jammed through most of the day. Even with that, transit still on makes up 11%.

Another point is that Reagan National is smack dab in the middle of the city with very dense business and residential nearby. It will be very interesting to see the transit numbers after Dulles International gets their connection to the rail transit system.

 
At 10:19 AM, February 22, 2008, Blogger Michael said...

Regarding 11% of arrivals / departures, do you have a source for that?

It is hard to debate something when the statistics are out-of-date, or based on faulty logic (as most of TI's stuff is). DavidH saying he saw something is great, but I don't trust statistics much, especially those without any source, those that are out of date, and especially those coming from an author who is known to be already biased.

 
At 10:29 AM, February 22, 2008, Blogger Michael said...

Or, you could just look here:

http://tinyurl.com/2f7rd7

Important points:
- Airport workers also use rail to get to their jobs. These people are heavy users of these systems. And "As a rule of thumb, there are about 1,000 workers for every one million airline passengers. Airport workers make an average of 10 trips per week."
- In Oslo / London (and presumably some other cities in Europe), some 40-60% of people are using public transport including rail to get to the airport
- Also from this article: "Rapid transit links have the advantage of high frequency and wide dispersal of passengers in the city, but journey times tend to be long and they are only really suitable for workers or airline passengers with hand luggage"
- Finally:
"North American airports think they are doing well if the percentage of ground travelers using public transit gets into double figures, whereas European and Asian airports are only pleased if they get above one-third."

I suppose this does not just include "arrivals / departures", but this is a more complete picture of "airport access", and the great efficiencies that some of our competitors across the world have already achieved.

If we really want all classes of people to use rail to get to the airport, it must be bus + high-speed rail service.

And, you are probably correct, that traffic would need to get significantly worse in Houston before a compelling case could be made for it here. That, or the federal government needs to dictate transit policy on down to the cities, which I would fully support.

 
At 10:50 AM, February 22, 2008, Anonymous jgriff said...

I doubt there are many airport workers who live along the light rail lines existing in Houston right now. Our airports are in very affordable neighborhoods, there is no reason for them to live downtown or in the medical center. Most of them probably live close to their job. This is a luxury a lot of other cities don't have. If you don't like the commute just move close to work. That's what I do.

 
At 2:56 PM, February 22, 2008, Anonymous mike said...

Here's another photo of "dynamic" Houston development:

http://swamplot.com/wp-content/uploads/2008/01/billboard-house-corner.jpg

Yep, that's a billboard. I'm sure the neighbors love this use of property rights.

 
At 6:32 PM, February 22, 2008, Blogger Tory Gattis said...

My airport rail comments were Houston specific. Of course, if somehow our core evolves into a dense network of heavy transit use (like some of the European cities mentioned), then extensions to the airport will make sense. But building them now, or even in the next phase, is *way* premature. Really very similar to the famous "Alaskan bridge to nowhere" if you think about: way too much expensive infrastructure for the limited demand.

 
At 5:16 PM, February 23, 2008, Anonymous neil said...

John - There's a selection effect at work: DC has three airports, as you know, Reagan being the smallest, and the majority of business travelers flying to Dulles or BWI and, indeed, renting a car or taking a taxi, while the business ridership to Reagan is boosted because travelers who pay special attention to mass transit are already going to have booked their flight to Reagan. As for convenience, it is that because Rosslyn, Farragut West, and K Street are about a ten minute ride away. I am a young single and loyal Southwest customer, so a couple of years ago, without anybody to pick me up, I took my flight to BWI and then proceeded the less than 20 miles to my transit-accessible destination in Virginia via surface transit. I won't ever be doing that again (and this having put up with the unspeakably dysfunctional and inimitable Boston T for two years on either side of the experience), and, needless to say, this second situation is profoundly more like what Houston Airport Mass Transit would be than the Reagan scenario is.

mike - Part of Chicago culture has such a sick cutthroat side to it. Houston wildcatting has a speck of good-humored humanity to its occasional bombast that the Windy City's self-aggrandizing grease and graft, and just plain self-aggrandizing, just doesn't. If I owned a national business, I just wouldn't want to send anybody to live in that kind of kingdom.

Michael - I'm not a snide person, but... you semi-waste an entire post going over reasons not to trust a source - culminating with sources of known bias - and then post an authoritative link to a casual piece in Railway Age magazine? I'm thankful for the points, and I'm as eager to learn from them as from anything else I study without demanding that they meet a greater or lesser standard of rigor to be admitted to the discussion, yet if your side of the truth speaks for itself so persuasively, then would you please consider devoting less of your passion to socking it to the rubes on the other side? I'm sure you and mike both have a lot of good things to say for Houston without using the perceived opposition's failings as a foil. What do you love about Houston?

 
At 6:57 PM, February 23, 2008, Blogger Michael said...

Neal,

My point was: there was no source for the comment about low rail ridership to airports.

My link was not meant to be authoritative, but it does seem more reputable than "Kevin said so" or whatever Tory's point was. It has a real date on it, real people are interviewed, etc. I would tend to trust the figures they are using. Obviously Tory can't source everything, and my own article doesn't dispute that American ridership figures may be in the low double digits, but I would still like to see sources.

As for what I like about Houston? Well, that is pretty irrelevant. But for the purposes of this board, what I like is that we are getting a chance to live through the golden age of this city - that is - the era in which this city makes its final transition from "cowboy/oil town" to a major world city. And I get to be there and watch it happen - pretty cool. This age has already happened in other major cities like Chicago etc. We are making choices now that will affect Houston for the next 100 years.

-Mike

 
At 10:20 PM, February 23, 2008, Blogger Tory Gattis said...

> what I like is that we are getting a chance to live through the golden age of this city - that is - the era in which this city makes its final transition from "cowboy/oil town" to a major world city. And I get to be there and watch it happen - pretty cool.

I'll second that. Pretty cool...

 
At 1:12 PM, February 24, 2008, Anonymous mike said...

What do I like about Houston?

Good question. I think naivete - but in a good way. When I went to college in Chicago after growing up here was I think the first time I ever experienced jadedness on a large scale. I had no idea that different cities, even different parts of the country, could have such a personality difference.

Example: a few years ago I'm sitting at a pancake breakfast at Houston First Baptist (I was exploring churches at the time). There was an exhibition at MFAH that included Renoir's famous Boat Party Luncheon, and a few people were talking about it, and a woman who had seen it exclaims, "I had no idea a painting could be so beautiful!"

You would never hear that in Chicago. Not even if they brought in the whole Sistine Chapel and set it down in Grant Park. You would hear something more like, "That was the best Renaissance exhibit the museum has done in twenty years." But never, "I had no idea a painting could be so beautiful!"

I think Houston's at a point where we're discovering a lot of things that other great cities have that were never available here before. Like the Hermann Park makeover - probably most people had no idea what a great park could be like. And a lot of people before the Super Bowl had no idea what an exciting downtown could be like. And the look in some of my friends' eyes the first time they rode light rail.

I guess I could just go to those other cities and enjoy their paintings and parks, but it would be like dancing with the bored 28-year-old instead of the charming debutante, who doesn't know all the steps but is still full of wonder at each one. And plus, I'm from Houston... she's my girl.

 
At 3:29 PM, February 26, 2008, Anonymous Paul R. said...

Jgriff:

" Our airports are in very affordable neighborhoods, there is no reason for them to live downtown or in the medical center. "

This comment is terrible...kind-of insulting....

 

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