A Case Of The Dueling Studies

United Airlines hopes a new study will convince Houston City Council that allowing a new Southwest Airlines International terminal at Hobby Airport is bad for the local economy.

It’s a case of the dueling studies.

Several weeks ago the city’s aviation department released a study that predicted thousands of new jobs and a huge impact on the local economy if the terminal is built. Now, United says in reality, it’s the complete opposite.

United says the Hobby expansion would actually cost Houston 3,700 jobs and negatively impact the economy to the tune of nearly $300 million.

John Gebo is Sr. Vice President of Financial Planning at United.

“Houston has built a very, very strong connecting hub complex at Intercontinental over the course of the last 40 years and what that hub complex brings to the city is for the ability for airlines, including United, to offer a larger number of flights and a larger number of direct destinations than would be possible from the population of the city alone.”

Intercontinental has been Houston’s only international airport since 1969 and is United’s largest hub. The airline has started on a new $700 million expansion at the big airport. Gebo says moving some of that business to Hobby would force United to cut flights at Bush.

“Airlines in general make about 3 percent in a good year, at least that’s been the recent history. And so what that means is for every 100 passengers on an aircraft, about 3 of those people are actually contributing profitability. So if you siphon off a very small number of passengers from the main connecting hub, the result is that the entire flight becomes unprofitable and needs to be relocated to another airport or another city where it can do better.”

Gebo says the airport system’s study was what he called “terribly misleading” and was based on faulty assumptions. He says customers who might like an international option on the south side of town would actually lose options if the new terminal is built.

“We’d like to be able to offer convenient departure times and convenient flights to everyone as would Southwest and as would all the other carriers that fly out of Intercontinental but I think what I would tell the customers on the south side of the city is that you will get more service to more destinations with a strong hub than with a split hub, so while you might get some additional destinations from the Hobby expansion, you’ll lose more destinations from Intercontinental and on the whole, the city will not have as many options as it does today.”
Southwest has countered that competition will actually lower the cost of international flights and benefit customers. City council is expected to make a decision on the expansion plan by the end of the month.