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William P. Hobby Airport


ricco67

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Worst set of FUD (Fear, Uncertainty, Doubt) arguments I have ever seen. A lot of smokescreen and hand waving. Expect a complete blog post response from me soon at Houston Strategies.

In the meantime, I'll keep hammering the same simple argument: JetBlue and Spirit dramatically grew discount intl competition at Ft. Lauderdale, lowering fares and increasing demand, which forced American to nearly double the size of its Miami hub. Everybody is winning except for American's profits.

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Worst set of FUD (Fear, Uncertainty, Doubt) arguments I have ever seen. A lot of smokescreen and hand waving. Expect a complete blog post response from me soon at Houston Strategies.

In the meantime, I'll keep hammering the same simple argument: JetBlue and Spirit dramatically grew discount intl competition at Ft. Lauderdale, lowering fares and increasing demand, which forced American to nearly double the size of its Miami hub. Everybody is winning except for American's profits.

Your first sentence is a PERFECT summary. I expect no better from the current leadership of United, but I'm pretty disappointed in Mr. Bethune.

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This is big news! I would have expected them to be neutral with so much United power among their board and committees. The fact that this resolution still got through speaks to the powerful benefits of competition for the city and the business community.

http://blog.chron.com/houstonpolitics/2012/05/greater-houston-partnership-supports-hobby-expansion/

Greater Houston Partnership supports Hobby expansion

The Greater Houston Partnership is backing a plan to expand Hobby Airport that would allow for international flights.

The Partnership’s Business Issues Committee voted unanimously to support the plan to add five gates and a Customs facility to the airport. Southwest Airlines is pushing the plan so it can start flying to Mexico and the Caribbean. The Partnership’s board of directors is expected to adopt a resolution in support of Hobby expansion by the end of next week.

“This is a critically important issue for Houston. We want two vibrant airports and the benefits that go along with it: more jobs, more travelers and a competitive advantage for our city,” said Tony Chase, chairman of the Partnership. United Airlines, which dominates the Latin American market from its base at Bush Intercontinental Airport, has fought the proposal. Company officials and consultants have argued that dividing the city’s international air traffic will cost jobs and routes.

A city consultant’s study concluded that the Hobby plan will create 10,000 jobs and inject $1.6 billion into the local economy.

Having the most prominent voice in the Houston business community behind the Hobby plan is another blow to United, which merged with Houston hometown airline Continental in 2010. In pressing its case, United has been drawing on the good will and trust Continental generated as an active corporate citizen for decades.

The Partnership’s immediate past board chairman is Larry Kellner, who was CEO of Continental from 2004 to 2009. The Partnership’s airports task force is chaired by Michelle Baden, United’s managing director for international and state affairs and a registered lobbyist for the airline at City Hall.

But the Partnership still backed the Southwest position.

“GHP has carefully deliberated on how increased competition changes the landscape within airport systems, having reviewed and analyzed extensive data and listened intently to representatives from the Houston Airport System, city of Houston, United and Southwest,” said Jeff Moseley, president and CEO of the Partnership. “We intend to keep working with all airlines and parties to protect and grow our region’s airports.”

City Council is scheduled to vote next month on the Hobby expansion plan.

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This is big news! I would have expected them to be neutral with so much United power among their board and committees. The fact that this resolution still got through speaks to the powerful benefits of competition for the city and the business community.

http://blog.chron.co...obby-expansion/

Greater Houston Partnership supports Hobby expansion

The Greater Houston Partnership is backing a plan to expand Hobby Airport that would allow for international flights.

The Partnership’s Business Issues Committee voted unanimously to support the plan to add five gates and a Customs facility to the airport. Southwest Airlines is pushing the plan so it can start flying to Mexico and the Caribbean. The Partnership’s board of directors is expected to adopt a resolution in support of Hobby expansion by the end of next week.

“This is a critically important issue for Houston. We want two vibrant airports and the benefits that go along with it: more jobs, more travelers and a competitive advantage for our city,” said Tony Chase, chairman of the Partnership. United Airlines, which dominates the Latin American market from its base at Bush Intercontinental Airport, has fought the proposal. Company officials and consultants have argued that dividing the city’s international air traffic will cost jobs and routes.

A city consultant’s study concluded that the Hobby plan will create 10,000 jobs and inject $1.6 billion into the local economy.

Having the most prominent voice in the Houston business community behind the Hobby plan is another blow to United, which merged with Houston hometown airline Continental in 2010. In pressing its case, United has been drawing on the good will and trust Continental generated as an active corporate citizen for decades.

The Partnership’s immediate past board chairman is Larry Kellner, who was CEO of Continental from 2004 to 2009. The Partnership’s airports task force is chaired by Michelle Baden, United’s managing director for international and state affairs and a registered lobbyist for the airline at City Hall.

But the Partnership still backed the Southwest position.

“GHP has carefully deliberated on how increased competition changes the landscape within airport systems, having reviewed and analyzed extensive data and listened intently to representatives from the Houston Airport System, city of Houston, United and Southwest,” said Jeff Moseley, president and CEO of the Partnership. “We intend to keep working with all airlines and parties to protect and grow our region’s airports.”

City Council is scheduled to vote next month on the Hobby expansion plan.

Wow! That is huge! Way to go GHP! I've never been prouder to be a member.

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If Hobby expansion goes through, how will it affect current expansion at IAH? Aren't they currently expanding terminal B?

If anything it will probably accelerate it, based on the Miami-Ft. Lauderdale case study. Competition = lower fares = more demand = more flights.

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This may be stretching it, but with cheaper fares to/from Houston from latin america, will that encourage more latins to move here or will it have no affect?

I don't think it will have any material affect on people moving here, *but* it certainly may increase tourist visitors from Latin America to Houston, boosting our tourism economy.

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It will increase demand overall between the two airports but since United will have to share the market, their share compared to what they are getting now will not actually increase, correct?

And although this will increase demand, aren't airlines barely getting by right now cureent gas prices. If they are forced to cut their prices bc of competition, it will cut into their margins even more. They will probably have to cut more services or do something to offset things, right?

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Gordon's statement is disappointing but also factually incorrect. Splitting the Houston region in two wouldn't create two Austins. Austin doesn't have anywhere close to 3 million people in the metro and it has far fewer people in the airport's catchment area since it bleeds over into San Antonio.

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It will increase demand overall between the two airports but since United will have to share the market, their share compared to what they are getting now will not actually increase, correct?

And although this will increase demand, aren't airlines barely getting by right now cureent gas prices. If they are forced to cut their prices bc of competition, it will cut into their margins even more. They will probably have to cut more services or do something to offset things, right?

Their share will drop, but their total passengers will increase as reduced fares increase demand. It will cut their profit margins, but the flights will still be profitable, so cutting them will just hurt them further. In fact, they will have to add flights to meet the increased demand, so they end up with more flights with lower profit margins per flight.

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Southwest’s plan would create Houston competition for some flights to Latin America, the region where United posts its highest yields, or average fare per mile, according to data compiled by Bloomberg. Latin America produced a bigger gain in first-quarter yields than routes in the U.S. or across the Atlantic and Pacific, United said.

Greater access to Latin America would draw more visitors, said consultant McGinnis. “Latin America is growing and needs more lift, and to do that you need to expand facilities that will also attract more Latin carriers to Houston.”

Houston’s population also is shifting, with the share of Latino residents more than doubling to 41 percent since 1980, Klineberg said.

“This is a city of immigrants, an international city,” Klineberg said. “Passengers want to go toMexico City as much as they want to go to places like Dallas. What Southwest wants to do would establish Hobby as a real player and not just the little baby brother of the big guy.”

http://www.bloomberg.com/news/2012-05-03/united-fights-southwest-in-texas-to-keep-grip-on-busy-hub.html

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So it's interesting that this heating up and going the logical course so far - people wanting more competition, better quality or at least cheaper despite the United scare tactics. On the way to work yesterday I heard that LAX was rated the worst airport in the nation, which after the hellish experience on 3 out of 6 flights last year, I have avoided like the plague and am glad I have many other options that allow me to get cheaper and better quality airport service.

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I hope that the previous posters are right about this becoming a Miami situation where United actually grows the IAH hub instead of downsizing it. While I'm in favor of international at Hobby bringing more flights and lower fares, if these threats by United/Lufthansa/etc actually come true, and they do cut many of our international routes, not bring the A380 here, and cause more job loss, then I'm not sure that a few extra flights to Mexico/Central America from Hobby are worth it. Hopefully they are just threats with no backbone that will disappear once Southwest does get these flights (and I think they will). Both sides' arguments are ridiculously exaggerated, which is to be expected, but really, 5 international gates at Hobby are going to bring 10000 jobs to Houston? I do agree with United on one thing, which was their initial point to make it sound like this wasn't about increased competition: the customs/immigration lines at IAH can get extremely long, and if international at Hobby does siphon away some of those agents, the waits will be out of control. Hopefully they add some staff at IAH in addition to HOU, then there shouldn't be any problem from the traveler's point of view.

Edited by asubrt
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Carriers won't cut any flights until they see that they are no longer profitable. For them to suggest that they would do that in response to Hobby getting international capabilities is to scare people in the herd to try and create a frenzy of opposition to push their councilperson to vote their way.

Does the US government only assign a specific number of customs agents per city? I'd imagine that's not exactly how it works...

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The study United commissioned is finally available.

Some of the main points not already hashed by the media -

  • United has added more flts to IAH than any of its other hubs since the merger and IAH has grown more since 1996 alone than Hobby has in total current flying.
  • The comparison to the MIA/FLL situation is invalid because it neglects the fact that AA dismantled its San Juan hub during the same period to increase MIA, and that AA Latin traffic is actually down overall from where it was.
  • The comparison to ORD/MDW is also invalid since it ignores that Mexicana ceased operation in this period, that carriers were only backfilling, and total Latin traffic is actually down.
  • Comparison of multi-international airport cities in both Europe and the US show that multi-international airport cities have seen no growth or actually shrunk, while single international airport cities have seen growth.
  • United would pull 6% of current capacity and 4% of planned capacity as a result of loss of connecting traffic to support routes that Houston O&D doesn't warrant and/or are already unprofitable but supported by overall network. Future planned routes that would not be flown include Asia/Pacific, Transatlantic, and South America. Auckland and China are specifically cited as examples of routes that cannot be supported by Houston O&D alone, and would be harmed by shifting connecitng traffic on network supporting flights.

Other details include refutations of fare assumptions and traffic stimulation.

link:

http://keepiahstrong.com/docs/UnitedStudyMay3.pdf

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The study United commissioned is finally available.

Some of the main points not already hashed by the media -

  • United has added more flts to IAH than any of its other hubs since the merger and IAH has grown more since 1996 alone than Hobby has in total current flying.
  • The comparison to the MIA/FLL situation is invalid because it neglects the fact that AA dismantled its San Juan hub during the same period to increase MIA, and that AA Latin traffic is actually down overall from where it was.
  • The comparison to ORD/MDW is also invalid since it ignores that Mexicana ceased operation in this period, that carriers were only backfilling, and total Latin traffic is actually down.
  • Comparison of multi-international airport cities in both Europe and the US show that multi-international airport cities have seen no growth or actually shrunk, while single international airport cities have seen growth.
  • United would pull 6% of current capacity and 4% of planned capacity as a result of loss of connecting traffic to support routes that Houston O&D doesn't warrant and/or are already unprofitable but supported by overall network. Future planned routes that would not be flown include Asia/Pacific, Transatlantic, and South America. Auckland and China are specifically cited as examples of routes that cannot be supported by Houston O&D alone, and would be harmed by shifting connecitng traffic on network supporting flights.

Other details include refutations of fare assumptions and traffic stimulation.

link:

http://keepiahstrong...edStudyMay3.pdf

After a quick 5 minutes of perusing the document, a couple of initial thoughts.

1. With regard to connecting traffic (such as traffic between Baltimore and Mexico City they discuss in an example on P. 15. United needs to realize, they will have that competition with Southwest no matter what happens with the HOU decision. Therefore, it is essentially irrelevant to the decision. Face it, United, Southwest is going to service these Latin American markets. If they don't service them from HOU, they will service them from ATL, AUS, Orlando, who knows? But passengers from Baltimore and everywhere else on Southwest's system will be able to fly Southwest to the new Latin American destinations. It will not matter to them whether the connection is through ATL or HOU. That competition will have almost exactly the same effect on United's connecting traffic development through IAH whether the Southwest flights are connecting in HOU or in ATL or in AUS. Hey, United! We deregulated airlines in 1978! Time to get used to it.

2. On page 1 they proudly proclaim that "Since the 2010 merger with Continental, United has added 12 new nonstop routes from IAH, more than it has added from any other hub and the same number it has added at Newark Liberty (EWR), Denver International Airport (DEN) and Chicago O’Hare (ORD) combined. Then on page 10 (Exhibit 6) they have a chart that shows that, yes, they added 12 new non-stop routes at IAH. And it shows they added 8 new nonstop routes at EWR, 5 at DEN, and 3 at ORD. Hmmm... where I learned math, that adds up to 16. So . . . at the new United, 12 = 16! Kinda makes their snearing attitude towards the HAS study statistics a little hard to take.

The vast bulk of their study is about how they cannot afford to have to compete with Southwest on these flights to Latin America. It has nothing to do with opening up HOU for international service. Their arguments regarding the degradation of their network would apply just as strongly if Southwest was proposing to move their entire operation to IAH and start international service from there. (I know it is not possible. But I would LOVE to see Southwest call United's bluff and announce a wholesale move to IAH and ask for a new FIS at Terminal A to accommodate international arrivals. Just imagine the high comedy of watching United come up with new arguments!)

And fwiw, I am not even a fan of Southwest. I prefer to avoid them. I have been a Platinum OnePass card holder with Continental for years and am now whatever United calls the comparable level. I just prefer to let markets, and not governments, choose winners and losers.

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got this from Ellen Cohen---

soooooooooooooooooooooo now the opportunity to go and express your opinion. . . . . . . .

Dear Friend,

The City of Houston is currently considering a proposal that would add international service to Hobby Airport. Southwest Airlines and United Airlines are both major stakeholders in the decision, but they are not in agreement regarding the expansion. Whatever is ultimately decided could have a major impact on our City.

Public meetings are scheduled through the next several weeks so that the City can share information on this issue and solicit feedback from the community. Please don’t miss the opportunity to learn more about the Hobby expansion and to weigh in on the proposal at one of the following upcoming meetings:

City Council Chambers

Tuesday, May 8, 2012

9:00 a.m.

(MAP)

  • Presentations by HAS consultants, Southwest Airlines, and United Airlines
  • Public Comment

Doubletree Hotel JFK

Wednesday, May 9, 2012

6:00 p.m. to 8:00 p.m.

15747 JFK Boulevard

Houston, TX 77032

(MAP)

  • Presentation by Aviation Director Mario Diaz
  • Public Comment

Marriott Houston South at Hobby Airport

Tuesday, May 15, 2012

6:00 p.m. to 8:00 p.m.

9100 Gulf Freeway

Houston, TX 77017

(MAP)

  • Presentation by Aviation Director Mario Diaz
  • Public Comment

Sincerely,

Ellen Cohen

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Funny thing about "studies". They always seem to favor the group that hires them. I wonder why that is?

Clearly true for the United study, but to clarify, the original study showing large benefits for Hobby internationalization was commissioned by the Houston Airport System with independent consultants completely unaffiliated with Southwest.

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CNN/Fortune has a good article on the subject. Their premise is United moving it's headquarters to Chicago is biting them in the butt b/c now they have lost their political clout.

I don't like this, could mean a farther drive to an airport for me:

This would, invariably, force Continental to lower prices on competing routes or to even pull out of some them completely if Southwest is able to put enough pressure on its margins.

Wow

Southwest could target 85% of United's international routes out of Houston if the city signs off on the expansion at Hobby.

Yikes

United says that a Southwest expansion could force it to lay off hundreds of workers and could force it to end its support for the $1 billion expansion at Intercontinental that is already underway. The airline would also discontinue plans to introduce air service to four new international destinations and would not add to additional frequencies in existing markets in Houston over the next three years, a United spokesperson told Fortune.

http://features.blog...thwest-houston/

Are GHP leaders' pockets getting any deeper in this?

Edited by lockmat
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CNN/Fortune has a good article on the subject. Their premise is United moving it's headquarters to Chicago is biting them in the butt b/c now they have lost their political clout.

I don't like this, could mean a farther drive to an airport for me:

Are GHP leaders' pockets getting any deeper in this?

It's a stretch to believe that the GHP is being bribed. Given how ridiculous United's study was, I'm inclined to doubt any threat that they may make.

I'd be interested to see a copy of the agreement between United and the Houston Airport System regarding the terminal expansion. There is hopefully a clause that would address the penalties for one party or the other abandoning the project mid-way through.

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It will increase demand overall between the two airports but since United will have to share the market, their share compared to what they are getting now will not actually increase, correct?

And although this will increase demand, aren't airlines barely getting by right now cureent gas prices. If they are forced to cut their prices bc of competition, it will cut into their margins even more. They will probably have to cut more services or do something to offset things, right?

I've seen several articles mentioning that Houston has the highest average air fares in the nation for the last several years. And since Continental/United owns 80% or so of IAH flights - this has to be one of their most profitable hubs. If they are forced to cut prices - they will still run the planes because they will still be profitable - just not as profitable as before. Basically Houston has been subsidizing flights in other places. IAH might lose some puddle-jumper flights - like to Shreveport, Corpus Christi, etc. but basically United is crying because their gravy train in Houston is threatened.

And they know they have no one to blame but themselves.

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I wonder what those 4 additional international destinations are? One is Auckland presumably, but I haven't heard any others seriously mentioned. I guess smart money would be on Santiago, Munich, and Beijing/Shanghai, or maybe somewhere in the Dominican Republic/Caribbean.

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Blog post is up

Debunking United's anti-Hobby arguments

http://houstonstrategies.blogspot.com/2012/05/debunking-uniteds-anti-hobby-arguments.html

At the end of the day, every argument United is making against international service at Hobby could also be made against domestic service at Hobby ("it weakens IAH", "it drains traffic to support our routes", etc.), but nobody in this city (excluding United employees) would think we were better off if we closed down Hobby and eliminated the Southwest competition. When seen through this lense, all of United's arguments crumble.

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I have watched most of the Budget and Fiscal Affairs session the other day. One thing United reps said diverting international travel from IAH to Hobby would do is force some Greenspoint/north side area business to relocate. What a joke! Have they heard of the Energy Corridor, the Galleria and Westchase district?

A couple of the council members also confronted them that Houston residents pay more for one way flights to locations than places like Chicago, San Antonio, Austin etc pay for initiating their flights in those cities and using Houston as a layover and still being substantially lower than Houston.

United also said that usually a flight's profitability comes down to two or three seats. That has to be a lie.

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I went to the public hearing last night. I left after about 1/2 hour because it was just a stream of United employees parotting the lies and nonsense pumped out by their management. Felt sorry for the city council members who had to continue to sit through that nonsense for another 1 1/2 hours.

There was one slightly amusing moment. The first speaker was a 20-year United pilot. When they cut him off at the end of his 2 minute allotted time, he stood there and glared at them as if to demand they allow him to finish his pointless rant. They didn't. Pilots aren't used to being told no. ;-)

Edited by Houston19514
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