Sunday, April 01, 2012

Hobby to close, IAH turned over to United

In a stunning development, the City of Houston announced today that it will begin the process of closing Hobby airport, while shifting control of Intercontinental to United, which will further enable the closing of the city's aviation department yielding substantial savings to taxpayers.  The new plan emerged from discussions with United regarding Southwest's request to allow competing international service at Hobby.  United pointed out that competition from Southwest would reduce the obscenely profitable fares they charge Houston residents on most international nonstops from Houston, meaning they might have to reduce some service.  The City, easily convinced by this argument, asked if they might get more international service if they removed international competition at IAH from carriers like British Airways, KLM, Air France, and Emirates.  United assured them they would.  The City, intrigued by this possibility, asked if the same would be true for domestic service.  United assured them that it also would, although the competition from Southwest at Hobby would limit the potential for additional domestic service.  To maximize the potential, Hobby would need to be closed too.

So a plan was developed to close Hobby and turn over complete, exclusive control of IAH to United.  Giving United a monopoly franchise on all air service to Houston will allow United to substantially increase the size of their hub here.  As an added benefit to the citizens of Houston, the "very modest" fare increases that United expects will reduce the crowding on flights, allowing even half-empty flights to be profitable for the airline.  Residents that can afford the $700 fares will enjoy their roomy, comfortable flights to Dallas.

Spokespersons for both the City and United called the landmark agreement a "win?-WIN!!!" for both sides.

Hope you enjoyed this year's April Fools post (after I skipped a few years). Here are previous years if you missed 'em and would like a chuckle:

Getting serious, Kuff's wife has a great analysis of the United vs. Southwest controversy over internationalizing Hobby.  My own thoughts: The bottom line is that this will lower fares for Houstonians, and that's a good thing.  Yes, United will no longer be able to gouge the locals with the only nonstops to a few nearby destinations - it will mildly hit their profitability.  But they have no other hub even remotely as well positioned to serve the Latin America market, and as the world's largest airline, they have to serve it just for the sake of their network.  So they're not going anywhere.  And I do want to see them continue to do well and grow here, but I think they burned their goodwill here when they moved the HQ (both executive and operations) to Chicago.  On the other hand, Southwest has plenty of other options to connect people to Mexico, Central America and the Caribbean, including Orlando, Ft. Lauderdale, Atlanta, Austin, or San Antonio.  It will definitely be our loss if we turn them away.  In fact, I can't really believe this is up for serious debate.  If city council does anything other than heartily endorse Southwest's generous offer to fund their own international expansion at Hobby, I will be sorely disappointed.  It would mean that United has successfully exported Chicago's infamous government corruption back to Houston.

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At 12:27 PM, April 01, 2012, Blogger Rail Claimore said...

Surely the overall business community in Houston would have something to say for this: Even if most of them do not fly WN, lower fares on UA are a good for both their personal and corporate pocketbooks.

At 3:19 PM, April 01, 2012, Anonymous awp said...

"In fact, I can't really believe this is up for serious debate. If city council does anything other than heartily endorse Southwest's generous offer to fund their own international expansion at Hobby, I will be sorely disappointed."

I have to completely agree. When I first heard this story I immediately said to myself "Awesome we are going to get international flights out of hobby by Southwest". I was completely flabbergasted when the news story continued and revealed that this was actually up for debate by the politicians.

At 3:20 PM, April 01, 2012, Anonymous I AM SO ANGRY said...

This comes as absolutely no surprise.

Some in-the-know folks have been talking about this deal for a while. While Rick Perry and Obama may feud publicly, some of their influential friends have bridged gaps between Houston and Chicago to make this happen. Classic case of follow the money.

Of course when the dust settles the "guilty" parties will be a few sideline investors. Some court, probably the 7th Circuit bench in Chicago, will approve the deal and all will be well for both sets of donors. Classic indeed.

At 4:57 PM, April 01, 2012, Anonymous Anonymous said...

Excellent post, Tory. It's pretty hilarious watching United sanctimoniously claim they are against the international service at Hobby because it might draw customs agents aware from Bush. Funny, isn't it, that there was no similar concern about a separate Terminal B FIS facility drawing customs agents away from the primary FIS facility at Bush airport.

At 5:11 PM, April 01, 2012, Blogger Tory Gattis said...

Ha! That's a really excellent point! I hope Southwest adds that one to their case.

At 6:13 PM, April 04, 2012, Anonymous Neal Meyer said...

And Tory,

speaking of United Airlines, Southwest, and flights in and out of Hobby and Intercontinental, it seems that Mayor Parker has told City Council that a consultant has done feasibility reports on the matter, but that Mayor Parker hasn't given any such reports to City Council. It seems Mayor Parker is demanding that Council approve a memorandum of understanding over the matter next month.

You and your blog visitors can make of that what you wish.


At 6:28 PM, April 04, 2012, Blogger Tory Gattis said...

Thanks, Neal. Interesting. I'm guessing the draft reports were given to the airlines to integrate their feedback, then the final reports will go to council.

At 11:40 AM, April 01, 2013, Anonymous Anonymous said...

Nice one for April 1st


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