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.
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.