When United decided to fight Southwest’s effort to get international facilities at Houston’s Hobby airport, I didn’t blame the airline. After all, wouldn’t you want to fight anything that had the potential to hurt your business even a little? But now that the decision has been made to move forward, United has 
embarrassed itself thoroughly. What the airline has done is try to blame Southwest and the city of Houston for massive cuts that probably were going to happen anyway. This unprofessional behavior is akin to a three year old having a tantrum for not getting his way. For this, United, you most certainly deserve a Cranky Jackass award.
As I wrote a couple weeks ago, the original fight had been over the right to have international flights go in and out of Hobby airport, on the south side of the city. Southwest has been driving this as it finally ramps up to start a push into near-international markets. United said it would mean gloom and doom for its flights at Intercontinental because Southwest flying internationally would ruin its business forever. The end result would be 10 percent less capacity and 1,300 fewer jobs.
This seemed like posturing designed to pressure the city to walk away from the project, but the odds were against United from the start. And when Southwest agreed to pay for the required facility itself, there was no way this wasn’t going to happen. I figured that the hollow threats from United would just disappear. I guess I was wrong.
In a lengthy employee bulletin, United outlined what is now going to happen since the facility has been approved.
- “We expect to begin a 10 percent reduction in planned IAH capacity beginning with the fall 2012 schedule change … including not flying our previously announced service from IAH to Auckland, New Zealand”
- “… we will be forced to reduce employment at IAH as a direct result of the Mayor’s and Council’s action.”
- “… this decision puts the need for the remaining $600 million investment [into Terminal B’s redevelopment] in significant doubt.”
Could United get any whinier? The reality here is that these are things United probably needed to do anyway. But it was in the middle of a political game and it figured that it had found a way to deflect the fallout. Blame this minor blip of an international facility issue and then it could walk away acting like it was the good guy in all of this. The problem is that this scenario is so implausible that nobody is going to believe it.
Keep in mind that Southwest doesn’t anticipate starting international service until 2015 from Hobby, and we really don’t know exactly where the airline will go, but it will be short haul. If the impact was known in advance, then I would expect to see reductions like this. We see that when airports build expensive new terminals. The extra cost won’t come down the line for a few years in those cases, but it’s a definite cost and the airline decides to operate assuming that cost going forward.
But this is very different. United has no idea where Southwest will operate three years from now, and it doesn’t know the impact. All it can rely on is the questionable results of a study showing how terrible it’s going to be. That is not something that’s actionable. It’s just a random guess. (And it should be noted there are two different studies with insanely opposite conclusions.)
So for United to make any moves now based on what may or may not happen in three years is just silly. Instead, what we see here is United trying to find a way to make changes it wants to make without looking like a bad guy.
787 Lost
Two years ago, Continental announced it would launch 787 flights from Houston to Auckland. This was an exciting prospect that was without question meant to drum up support for the merger with United that it was working on at the time. It used the 787 route to show that the merger would help create enough traffic that it could grow into great new routes like these. Whether this was ever an actual plan or not remains to be seen, but it’s clear the route had fallen out of favor with United as it announced Denver to Tokyo would be the first route for the 787. That’s decidedly less sexy since it doesn’t add a new city to the network – just connects two dots that weren’t connected nonstop before.
So instead of saying, “you know, this route isn’t going to work as well as we thought,” United is blaming the Hobby international issue for its demise. Oh please. According to United, the airline is going to be forced to cut a bunch of service domestically and elsewhere, and that means there won’t be enough connections generated to support the Auckland flight anymore.
Overdue Broader Cuts
The same rationale is given for other routes both international and domestic. The threat of Southwest is going to cause a 10 percent reduction in flights? That’s what United wants us to believe. It says that the prospect of future growth was going to turn currently unprofitable flights profitable. Now those hopes of growth are dashed so the routes will be cut. Were I an investor in United, I would be livid. Why the heck would the airline continue to operate unprofitable routes today simply because it thought the flights would eventually be profitable in the future? It’s not like these are slots that it gives up if it stops flying. More importantly, if 10 percent of the operation is living on that prayer, then United is mis-managing its network.
And that leads me to a point of clarification. I have no problem with United making these changes. It sounds like they’re overdue to me. But I have a problem with United trying to blame Southwest and, more importantly, the City of Houston. United already angered the city by moving the corporate headquarters up to Chicago, but this has to be the last straw. I can’t imagine the city wanting to go out of its way to help United at all if this is the thanks it gets for trying to do what’s right for the people of Houston.
This really is a sorry effort by United. The airline’s leadership should act like adults and explain the real reasons that these changes need to be made.
74 comments on “United Blames Southwest, City of Houston for Its Own Problems in Houston, Earns the Cranky Jackass Award”
I can totally see how Southwest flying from Hobby to Mexico totally puts the kybosh on IAH to Auckland. Clearly United expected a significant traffic of hobbits traveling from NZ to Mexico via Houston. Moral of the story? Southwest are in league with Sauron. Or something like that. One day these jokers will stop trying to sell me a credit card every five minutes and actually focus on running a half decent airline. Wouldn’t that be refreshing?
Well now that Southwest has 737-800s, I’m sure UA expected them to start IAH-AKL (via SAN, HNL, and PPT of course) as soon as Hobby FIS opened…
:-P
lol, hence the ridiculousness
I know everyone is joking, but the rationale being given by United is not that Southwest will fly to Auckland but rather that Southwest is forcing them reduce capacity which will in turn reduce the number of connections that will be generated to feed the Auckland flight. And without those connections, the Auckland flight fails. Yep, that’s it.
but Cranky, lets be honest, especially in the short run, there should be no competitive reaction that drops capacity as it will be 3+ years until WN gets HOU ready. UA is just skapegoating.
And realistically, whats the pax count that Untied is losing? UA will not pull out of CUN, so connectors are still around, and is UA really relying on Caribbean originating traffic to connect to NZ through IAH? I can’t imagine enough people connecting without competition, so even if they lose a flight or two I doubt they lose that many potential pax…anyone know the CUN/Jamaica-AKL PDEW?
I agree, when I heard what UA said I thought “what a bunch of babies”. WN flying internation routes from Hobby to Mexico/Caribbean/Central America would not hurt giant UA/CO out of IAH as a whole.
Like you said UA was going to do this anyway and tried to smooth things over by blaming the cities actions.
So if WN were to start flying to Mexico or Canada from Denver would UA cut back 10pct of its flight at DEN and lay off a thousand people? So everytime another airline says they will start a new route from a city UA serves they cut back 10pct of flights and layoff a bunch of workers…..I don’t think so.
I think the Cranky Jackass Award is to good to give UA, is their a Cry Baby Liars Award to give?
The whole United argument was a red herring from the start. They made the argument that Southwest should come to IAH for international, know that there was probably not the gate availability or capacity to handle it besides the huge cost to change airports. Then United said they would have to split their operations resulting in fewer international flights at IAH, which was an obvious bluff since we know how well AA has fared at Love Field.
In Chicago, Southwest is adding international out of Midway (taking over some of Frontier’s route authorities) and there is no talk of United pulling back from O’Hare (although there is not as much capacity at Midway as at Hobby).
International flights by WN from DEN wouldn’t bring the same reaction from UA because we already bought off UA here to the tune of $22 million/yr to stay put and increase capacity. Apparently Houston don’t know how to bribe their airline correctly, HA!
Or rather, the city does not need to bribe United. It has enough O&D so that, if United leaves, someone else will come in
OK, a bit off subject, but what happened to Johosofat’s jackass rendering?
I thought I’d shake things up this time. Don’t worry, his jackass shall return again.
An award well deserved. United is being really childish about this whole thing. I find it rather interesting that the airline was able to put together such a detailed plan in such a short time.
When I first read about United’s cuts late last week, I had hoped that you would bestow the Cranky Jackass on them. In no way do the ends justify the stated means. At least one city council member had mentioned last week that the old Continental had been a friend of Houston, but that jury was still out on whether the new United was or not. After this, I have to believe that it is leaning towards the ‘not’ column.
The NEW United is a friend to no one. Their first act was to give the CEO millions for producing a merger, the second was to decimate long held and earned benefits for retirees, their third was to put the “new” passenger system in place. A system incapable of handling the volume and problems of the nation’s largest airline. UA had a system in place that could and did handle, but “powers that be” opted for an system that cost less and performed miserably. Next mistake, referring to time honored commitments to most valuable flyers as “over entitled.” And the list goes on……. The NEW United is NOT the old United, nor is it the old Continental. The merger produced a third entity.
Thanks for accepting my nomination!!
Yeah, no question UA deserves this award. It’s impossible to logically “justify” UA’s actions based on the WN move.
There’s been a lot of speculation that this hissy fit is related to a souring of relations between UA and Houston’s gov’t and business leaders. Apparently, there is considerable unhappiness directed at Smisek for “selling out” Houston in the UA merger and decamping for Chicago. So the Houston bigwigs are allegedly no longer willing to allow UA to keep their near-monopoly on Houston air service.
From Houston’s perspective, it’s hard to see how they would not be better off with some “south of the border” competition. There’s little doubt that Houstonians now pay higher-than-they-should fares to fly south because there is no competition. BTW, I have little doubt of UA’s ability to successfully compete with WN in the future. These routes are just going to be slightly less lucrative for them.
I also wonder if UA’s operation at IAH has simply grown too large in recent years — at least too large in a world where there’s more competition. I’ve been regularly passing through IAH for more than 20 years, and it’s been somewhat astonishing to see how large the CO/UA operation has grown during that time. I can’t recall any other hub operation in the USA that seems to have expanded so rapidly. And it’s not like IAH is a PERFECT connecting hub for that many people (DFW would seem to have a logical geographic/demographic advantage). So I’m not surprised that the merger would necessitate a bit of consolidation. Blaming it all on WN is more than a little too convenient!
Something tells me the new UA might retire this award permanently.
Not surprised, given United’s heavy reliance on ERJ’s out of IAH. Very different from AA’s operation up at DFW where mainline MD-80’s are the heavy haulers. Even places like Des Moines and Huntsville get mainline service, ditto for Houston.
I would guess the cost of fuel and Qantas starting DFW service are the real reasons for dropping plans for Auckland. If UA really wanted to serve that market, it would use its LAX or SFO hubs instead.
Agreed. QF to DFW are the reason that IAH-AKL is not happening. And that UA wants everyone on ANZ via LAX or SFO.
At IAH the geography (too far south), too many ERJ’s, no other route choice for pmCO, has been a cause for these changes as well. IAH is right sizing for its own good.
Zack – My guess is that Houston to Auckland was probably questionable at best in the first place. UA/CO rushed out the announcement in order to curry favor with the powers that be in the government so they could get the merger through, at least that’s my guess. So this could very well just be a public realization of a route that wasn’t going to be flown anyway. We’ll probably never know for sure.
Typical airline politics. United pulled Continental’s HEADQUARTERS out. the City of IAH responsed with increased competition from Southwest. That cozy relationship is OVER.
Any chance UA pulls the plug on the Houston hub at some point?
Doubt it – there’s WAY too much O&D traffic at IAH, much of it nice yielding business traffic thanks to Houston’s position as an energy hub, to de-hub the place. Keep in mind that in addition to its ties to the energy industry, Houston will probably soon be the 3rd largest city in the country, and metro Houston is just behind metro DFW in terms of population. If UA does something stupid like de-hub IAH, someone else will swoop in and take all that traffic.
SEAN – Houston is a great hub. I can’t see the airline pulling out.
Have you ever wondered? If Cranky is feeling a wee-bit ?randy? in the afternoon, does he then hope for a little ?Cranky Panky? after work?
Has anyone heard the latest rumor? UA is going to de-hub IAD, because of Southwest at BWI and de-hub EWR because of JetBlue at JFK. They’re going to move all of their international hubbing operations to MOT because they’re pretty sure nobody will open up a new hub at PIR.
Sorry Alan, but with Allegiant in Minot with a couple of flights, United has probably already crossed that one off the list . . . ;)
Talk about petty on the part of UA. I think this is borderline Flaming Red Cranky Jackass territory.
Much as it shocks me to heap any kind of praise on the aviation outfit in Ft. Worth, UA really should have followed the example of their neighbors up I-45. AA postured similarly back when WN wanted to “Set Love Free”, prophesying gloom and doom and the death of DFW if the Dallas City Council dared to allow long-haul flights at DAL. Ultimately, they saw they were going to lose the PR battle, cut as good a deal as they could with the city, and went off to bother someone else. Everyone went home happy, and AA didn’t look like a bunch of jackwagons for a change.
Granted, AA’s relationship with Dallas at the time had to have been better than UA’s with Houston after they moved their HQ to Chicago, and Dallas had that pesky DAL-area neighborhood association problem that gave everyone an added incentive to deal – but still, UA screwed the pooch on this one, if you ask me.
Cranky, I disagree.
Houston, you have a problem. Doesn’t anyone on the city council realize the issue goes beyond Southwest writing a $100 million check? The airline industry is capital intensive with long lead times for new equipment and facilities. Its two largest costs of operation are labor and fuel, and fuel is highly variable. What an airline doesn’t need is more uncertainty such as a new competing international airport a few miles away. With the exception of mega-sized New York, no other major metro area in this country has two high volume, major international airports for the same reason you don’t have two two mass transit systems or two cable TV systems, economies of scale. (I know Washington has IAD and BWI, but international out of BWI is nearly non-existent.) United just sent Denver the 787 flight originally slated for IAH — only it’s going to Tokyo instead of New Zealand. DEN will never be an international gateway like IAH, but it’s a more efficient east-west connection point. If more IAH routes decamp for Denver the city will welcome them with open arms.
Except that the facility is going to be 5 gates, and Southwest only gets 4. How does that make Hobby a “high volume, major international airport?”
By that definition, the Humphrey Terminal at MSP with its international capacity should be destroying DL’s operation across the field at Lindbergh. But, it’s not.
SFO / SJC / OAK
Thanks for playing….
I don’t agree. SFO is the major international airport in the bay area. SJC and OAK are primary domestic airports. SJC and OAK each have a handful of Mexico flights, SJC has had sporadic service to Japan (previously AA, now ANA coming soon) and OAK gets a few seasonal charters to Europe. But neither compares to SFO the way Newark compares to Kennedy.
BTW, Cranky, noticed this post is missing the “Cranky Jackass” tag.
David M – But that’s the point. Hobby is going to be more like San Jose and Oakland, not like Newark and JFK.
Thanks for pointing out the tag issue – it’s fixed.
I was reading jeremy’s post as saying SFO/SJC/OAK was a counterexample to Paul-Denver’s claim that New York is the only metro area with multiple high volume, major international airports.
I agree with CF that HOU is similar to SJC/OAK in that it will have a handful of international flights but IAH will remain, like SFO, the region’s primary international airport.
Paul-Denver – I couldn’t disagree more. As Ted says, there are only 5 gates with Southwest controlling 4. This isn’t going to be a major international airport. Rather it will be like Midway to O’Hare, Ontario and now Orange County to LAX, San Jose and Oakland to San Francisco, etc. This is not going to have a major impact, at least not the extent United predicts.
How many turns can Southwest put on 4 gates? I know international needs longer, but with a 60 minute turn time, Southwest can do about 15 turns per gate per day (assuming spacing, padding time a bit)…thats huge potential–60 international flights per day!
Will b6 open any international flights? Now that they have to pay higher per pax fees, would SDQ, or CUN come around? Domestic service to SJU?
FLL/MIA is another market that is seeing 2 airports with a lot of international flights. In FLL, you can fly to the Caribbean, South America, and the Bahamas on Jet Blue, Avianca (LAN), Caribbean, Bahamasair, United Express,and Spirit; To Canada on Westjet, Air Canada, and Canjet; and to Europe (Germany) on Condor. In MIA, you have all the International airlines as well as AA that fly all over the world. As FLL expands the South Runway (9R/27L), you will see more larger jets being able to land, thus allowing more International Airlines to move operations to FLL.
Actually that”s not true. The DEN-NRT route was known internally months before WN approached the City of Houston about Hobby services…The real question is what route will the formally destined AKL 787s go on…
Houston Hobby and Bush Intercontinental may only seem like they are “miles” apart on a map (actually they are 30 miles apart), but with Houston traffic, they are world’s apart. Remember, Houston is the country’s 4th largest city, behind Chicago, who has 2 successful international airports on different ends of town. Southwest could only make international operations work at IAH if they had their entire operation there. So taxpayers or passengers would have to pay to build more gate space at Bush, while paying off the debt on a new terminal at Hobby, which would be empty without Southwest. Sounds like the only people who would benefit from such a move would be United. Then again, you are from a city that just cut United a sweetheart deal
United & American like to tie-up under used gates at ORD and they’ve actually placed just enough flights in those gates to not have them placed under Chicago DOA control. United & American don’t want airlines like; Jet Blue, Virgin America, Spirit or Frontier at ORD.
Jet Blue began serving ORD only because they were able to use TWA’s Old Gates E8 & E10 by leasing them from then Northwest (Delta).
Spirit began serving ORD and expanded their operation only because Delta sub-leased them gates on the “L” Concourse that American wasn’t already sub-leasing.
When Delta merged with Northwest they moved over to the “E” Concourse and Continental moved over to United’s “B” Concourse instead of sub-leasing gates from Delta.
Delta held the lease of the “L” Concourse from Chicago DOA. American always wanted all of this Concourse, but Chicago DOA wanted more Carriers with lower fares. Gates in “L” Concourse are now City Controlled. This is why Spirit Airlines, Jet Blue Airways, Virgin America & Frontier dba for Apple Vacations (Departures) now have gates and serve ORD.
Untied & American always get cranky when low fare carriers creep in on their territory. United didn’t like it when Frontier became Big in Denver and then Southwest raided there.
Well, now UA can use some freed-up resources to buy themselves a nice, little Houston refinery. Just staying competitive!
Right on, Cranky! The Jackass award is even more deserved when one considers that UA serves only nine Latin American destinations out of IAH virtually without competition (not counting Mexico which I don’t think has been mentioned in the reporting and is not normally considered Latin American). Not all of those nine are even daily and some are regional jets. And as you point out, WN hasn’t yet specified its choice of destinations and in any case it’s three years off. Finally, linking the AKL route to all of this makes absolutely no sense whatsoever. To UA i say shame, shame, shame!
Cranky, I was never really convinced that the United/Continental merger was a positive thing. This current United reaction confirms that the merger will have a negative impact on consumers. United management is over riding the Continental people who joined the “team”. Less competition allows for questionable decisions like this with minimal alternatives for consumers.
This is why, in my opinion, it would be a disaster for anyone (including Cranky) to champion a merger of US AIR and AA. Things would go from bad to worse over night for consumers. Less competition ALWAYS screws the consumers.
The alternative for some struggling airlines is liquidation. I’m not saying AA is heading that way, but if the decision is between liquidation and US taking over I would go for the US takeover any day. Just be careful what you wish for.
The difference between UACO and USAA is that the route networks of AA vs. US are even more disparate than those of CO vs. UA. This is why CLE is shrinking. The only potential issue with US-AA would be PHX-DFW. But AA and US are intelligent enough not to throw a UA hissy fit, after moving HQs (though I’ll bet that the combined American Airlines will end up in Fort Worth).
Also, AA is bankrupt. Faced with ceasing to exist or being acquired, I’d choose the path with more passenger continuity :)
Just for the record though, I liked CO and UA better separate, though I never flew UA pre-merger.
Most of the existing airlines have been through bankruptcy and appear to have weathered it more or less well. Those that are giving AA the last rites may well have tunnel vision or very short memories. Time and events have shown that on occasion painful business moves do need to take place to improve the survivability and competitive profile of an airline.
This is not to say that AA management does not have its fill of Jackasses. They probably have as many as United with a couple to spare. However, even a broken clock has the correct time twice a day. Hopefully AA will survive to fight another day.
Consumer Mike – Your assertion about United management “over riding the Continental people” is actually quite the opposite of what’s happening. It’s the United folks who are being marginalized by the ex-Continental people more often that not.
I think it’s a stretch to say that this move proves mergers are bad for consumers. In fact, if Continental had not merged with United, its relations with the city might have remained stronger and it’s possible the facility at Hobby would have been shot down. Then consumers would have been worse off without the merger.
I agree that mergers are not always bad for consumers, and that defunct airlines might be worse than mega-airlines….BUT, we have never really seen quantitative evidence that ANY of these mergers are good for consumers. The argument that fares are reduced is BS on face value, the idea that there are redundancy savings are unlikely relative to the total cost of the operation, and based on straight P&L, Im not even sure if its a good thing.
The Atlantic and Pacific are now dominated by alliances with antitrust immunity, basically down to 3 alliances and minimal emerging presence from the middle east carriers.
SHOW ME THE DATA!
This comes from that same place in a network planner’s bag of tricks that tells them its a good idea to immediately put planes on the exact same new brand new route just announced by a competitor, no matter how obscure, instead of a different under-served market.
LOL, so true. Then the market is so overserved that neither airline can make money (due to the imminent fare wars) and both end up pulling out!
Here was United’s comment after the city council vote:
United issued this statement Wednesday afternoon:
?We believe that splitting Houston?s international air service is the wrong decision for the city?s future, but we respect the fact that City Council did not agree. We will continue to be a strong partner for Houston with the help of our almost 17,000 employees, who work hard every day for our customers and our community.?
Cranky, I completely agree with all of your observations above. As I was reading the memo, all I could see in my mind was Jeff Smisek stomping his feet and crying like a spoiled brat who didn’t get what he wanted. Quite frankly, it’s and embarrassing and juvenile response to the decision of the Houston City Council. Man up, Jeff, and move on. Don’t blame your problems on others, take some responsibility. I expected more of you…guess I was wrong.
Agree and easily.
United is my carrier of choice, but this makes me angry. Their management should be ashamed by this action.
This may be retaliation on United’s part, but I think the Houston City Council’s move was also retaliation for United putting their hub in Chicago. I highly doubt that the city council would have permitted Southwest to start international flights from Hobby 3 years ago when Continental was based in Houston. How come they don’t get an award too?
Meh, it’s retaliation for something that hurt the city. United no longer bases its headquarters in Houston, so why does it need to be treated like a hometown airline? Plus, the added competition that international service from Houston-Southwest International Airport…er…Hobby will create is a good thing for the entire city.
As for arguments that splitting international service is bad, it’s not like people regularly cross-connect between Southwest and another airline anyway. They don’t codeshare or interline with anyone, so not much is lost by having two international gateways, one of which is mostly an extension of Southwest’s network, and one of which is a hub for Star Alliance partners.
Jim – The council doesn’t get an award because they made the right decision. Whether the motivations were pure or not, that’s a different story. But in the end, the right decision was made.
United looks like an ass. Retreat when you face competition. Sad.
the irony is that UA will likely try to dump capacity on the routes for 2 months before cutting its losses
CF, I know you’ve discussed this with Consumer Mike up above, but I really wonder if this is an issue of the PMUA middle management not handling this well, but I’m kinda curious if theres any guess if as to the pre-merger employer of the folks who made and communicated this decision. It really feels like a PMUA stupidity move versus a PMCO move..
Nick, my understanding is that the majority of upper-level management came from Continental, not United. At middle level it’s probably a mix, but such a significant decision has to come from higher up.
Nick – I’m with Jim. Something like this definitely comes from up high.
I’ll stand up for United here.
Given the deal that Denver Airport has given United, which some could argue is a $22 million subsidy for DEN-NRT, I’d say DEN is showing United a whole lot of love.
Ands generally, in life and in business, we respond better to being shown some love. :-)
United likes to cry about everything, they should be thankful they’re still in business as a going concern after their visit in Chapter 11.
United is acting like American (with the help of Dallas & Ft Worth City Council’s) did when DFW opened and CAPS were placed on DAL Flights. Southwest doing International Flying out of HOU is good for business and will lower airfares. United is just scared they’ll get their you know what handed to them.
Southwest flies only the 737 Series A/C after the 717’s head to Delta. United flies both their fleet & Continental’s fleet since the merger & can always put on larger equipment to routes to Central & South America.
United will most likely start crying again when Southwest flies to Hawaii in a few months or year(s).
It’s United’s turn in the barrel as the airline everyone loves to hate. Including me. After a decade as a 1K, I’ve never disliked this carrier more. Lots of travel dollars are going elsewhere while they work out their issues and become the airline Smisek says they are. 2-3 years and they’ll be back. Maybe.
United post merger has been a disappointment for many, and service wise there has been a noticeable decrease in customer service, but I have to say that this is the case with all airlines since fuel prices jumped to the moon and post-9/11. I will choose a airline like United/Delta/American over southwest anyday of the week, its pretty simple, I travel for business, live an organized life and like to pick my seat. Fees non-withstanding, a passenger has a choice of who they fly.
I completely disagree on giving a cranky jackass award to United because of their actions in Houston, give it to them for bad service, for lost reservations(i recently had an PEK-EWR BF flight lost(they fixed it after an hour on the phone and several agents who kept questioning whether or not i had a ticket, I did), or for the outrageous compensation given to Jeff Smisek, who did a good job at Continental, but is unproven and should not be compensated until United is able to turn a solid profit, and provide the service they hinted at being able to provide. From a business standpoint, what they did is completely legitimate, it is simple they bring more money, more passengers, and provide more facility development and revenue to the City of Houston, its related Airport Authority and vendors at the airport than southwest could ever bring, do remember SW operates one fleet type which has a distance limitation that is completely different than lets say a 777. They may have acted irrationally by blaming southwest for the cuts directly, but why should they not, they have an invested interest in the community that is mutually beneficial and one party to that relationship in a business standpoint put part of their business at risk, they reacted, simple business, Houston decided to allow a competitor acccess, and they in turn decided that capacity has been met, or is in excess and are cancelling future investments that will help the community(might i remind you, more than anything that Southwest is financially capable of supporting). I would haphazard a guess that they hope that the decision will be changed, which could happen, for the benefit of the customer more airlines is better, but it is not always the best.
It’s interesting to see more and more airlines adopting the Ryanair/Michael O’Leary model of public relations. If they don’t agree with a decision, go after the politicians, slash ‘n’ burn service at the offending airports and invest devestating numbers out of thin air. Pity.
Now you see what UAL employees must endure on a daily basis from upper management.
When the facts, opinion and conjecture surrounding HOU expansion were chewed up and spit out into one gelatinous mess the results were / are: passengers expecting $133 ow fares on WN from HOU to BOG; WN to offer discounted fares from HOU across Europe and Asia; and this article.
The only reason United and Continental merged was that United craved Continental’s operations to Latin America, which Houston served as the gateway to. If Southwest starts flying to Central and South America from Hobby, this will eat enough of that traffic to make the merger pointless to United. I shed no tears for United. It simply thought it could leverage its dominance at IAH into ultra-high fares. SWA is just busting up that party. Viva the free market.
For a look at the macro economic issues, and why Houston made the wrong decision about Hobby, consider this analysis:
http://www.thestreet.com/story/11572615/1/houston-you-blew-it-on-united-hub.html
Eh, IMHO that article ate the United message hook line and sinker! There isn’t much more of an analysis other than what United has provided.
“In the hub system, you bring in passengers to connect.” is wrong. Its been tried. If it was true Pittsburgh would be a thriving hub. I know there are other examples as well.
If anything, “71% of hub passengers connect” shows Houston is overbuilt as a hub. There is no pricing power on connecting traffic, there is pricing power on local traffic..