United Blames Southwest, City of Houston for Its Own Problems in Houston, Earns the Cranky Jackass Award

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 Cranky Jackassembarrassed 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.

Get Posts via Email When They Go Live or in a Weekly Digest

Leave a Reply

74 Comments on "United Blames Southwest, City of Houston for Its Own Problems in Houston, Earns the Cranky Jackass Award"

avatar
Sort by:   newest | oldest | most voted
Dan Hill
Guest

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?

XJT DX
Guest

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

noahkimmel
Member

lol, hence the ridiculousness

David SF eastbay
Member
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… Read more »
Shane
Guest
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… Read more »
Jason H
Guest

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!

Viu Bannes
Guest

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

XJT DX
Guest

OK, a bit off subject, but what happened to Johosofat’s jackass rendering?

DesertGhost
Guest

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.

Ben
Guest

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.

JSS
Guest
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… Read more »
Ted
Guest

Thanks for accepting my nomination!!

Wayne Rutman
Guest
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… Read more »
Bill from DC
Guest

Something tells me the new UA might retire this award permanently.

Zack Rules
Guest

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.

Sanjeev M
Guest

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.

FRANK
Guest

Typical airline politics. United pulled Continental’s HEADQUARTERS out. the City of IAH responsed with increased competition from Southwest. That cozy relationship is OVER.

SEAN
Guest

Any chance UA pulls the plug on the Houston hub at some point?

MeanMeosh
Guest

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.

hawes.daryl
Member

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?

Alan
Guest

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.

MeanMeosh
Guest
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… Read more »
Paul-Denver
Guest
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… Read more »
Ted
Guest

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.

jeremy
Guest

SFO / SJC / OAK

Thanks for playing….

David M
Guest

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.

TC
Guest

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.

DrJordan1911
Guest

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…

Ben
Guest
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… Read more »
Ozark
Guest
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… Read more »
jaybru
Member

Well, now UA can use some freed-up resources to buy themselves a nice, little Houston refinery. Just staying competitive!

BCH
Guest
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,… Read more »
Consumer Mike
Guest

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.

Jason H
Guest

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.

Ian L
Member
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… Read more »
Consumer Mike
Guest
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… Read more »
Danie
Member

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.

Bill from DC
Guest

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!

obmark1
Member

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.?

matt_hardebeck
Member

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.

Cook
Guest

Agree and easily.

wdcguy
Guest

United is my carrier of choice, but this makes me angry. Their management should be ashamed by this action.

Jim
Guest

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?

Ian L
Member
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… Read more »
RF
Guest

United looks like an ass. Retreat when you face competition. Sad.

noahkimmel
Member

the irony is that UA will likely try to dump capacity on the routes for 2 months before cutting its losses

Nick Barnard
Member

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..

Jim
Guest

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.

Davywavy
Member

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. :-)

Ozark
Guest
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… Read more »
Steve
Guest

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.

Matt
Guest
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… Read more »
EAG
Guest

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.

747 Flyer
Guest

Now you see what UAL employees must endure on a daily basis from upper management.

IntlHotMale
Guest

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.

Hobbyist
Guest

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.

Paul-Denver
Guest

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

Nick Barnard
Member

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..

trackback

[…] city provided.” But Smisek tries to deflect the blame on to others. This reminded me of the whole dust-up in Houston where Smisek blamed the city allowing Southwest to build a customs facility at Hobby Airport for […]

wpDiscuz