Hobby expansion passes; Southwest wins fight with United

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by Doug Miller / KHOU 11 News

khou.com

Posted on May 30, 2012 at 12:43 PM

Updated Wednesday, May 30 at 6:24 PM

HOUSTON—Southwest Airlines has won its hard-fought political battle for international gates at Hobby Airport.

The Houston City Council overwhelmingly voted Wednesday to accept Southwest’s $100 million offer to build international facilities at Hobby, defeating an intense lobbying effort by its crosstown rivals at United Airlines.

Now federal regulators must decide whether to grant Southwest permission to fly to Mexico, the Caribbean and South America. The airline hopes to begin flying those international routes in about three years.

Only one council member, Jerry Davis, voted against the idea.  His district includes Bush Intercontinental Airport and many of his constituents work for United, which claims it will now have to eliminate about 1,300 jobs.

The lopsided council vote ends a high-stakes fight between Houston’s largest air carriers.  Southwest, which convinced the city to reopen Hobby Airport to passenger traffic in the early 1970s, now flies only domestic routes and sees international traffic as its best hope for expansion. United, which dominates air travel out of Bush Intercontinental Airport, argued that opening Hobby to international traffic would essentially pit the city’s two airports against each other and ultimately cost the city jobs.

United hired a small army of City Hall insiders to lobby council members, many of whom had received political contributions from the airline. Southwest, which generally hadn’t played the game of spreading money around local politicians, quickly hired its own crew of lobbyists and political consultants.

United faced an uphill fight from the beginning, partly because of lingering resentments over its merger with Houston-based Continental Airlines. A number of council members voiced irritation over the merger, under which the newly formed airline based itself in Chicago and Houston lost what was arguably its most prestigious corporate headquarters.

"Continental has done great things for this city," said Councilmember Andrew Burks. "On the other hand, United is new to this city."

Employees of both airlines, wearing colorful shirts that council members could see across the room, have packed city council chambers for weeks now. Southwest CEO Gary Kelly has sat on the front row of the council’s spectator section, leading some council members to question why United CEO Jeff Smisek never dropped by.

But the opposition to the deal collapsed when Southwest made a $100 million commitment to bankroll the facility itself. The deal calls for Southwest to build five gates and a federal inspections station that includes customs facilities. Southwest will receive rent-free use of four of those gates, while the fifth will be open for other airlines. 

Southwest will pay all costs for the expansion, but it stands to receive significant payments from the city. Under a complicated formula, the airline will receive up to $3.9 million a year based upon the growth of all passenger traffic flying through Hobby in future years.

The original plan would have bankrolled construction of the new facility with a $1.50 fee assessed on every passenger who flew through Hobby. That was dropped when Southwest agreed to bankroll the project, but at least one council member voiced skepticism.

"We’re not going to pay through the $1.50, but we’re going to pay another way, right?" said Council Member Davis.

Mayor Annise Parker pointed out that the new deal gives Southwest free rent on four of the five new international gates. For the airline, that basically makes the elimination of the $1.50 ticket fee a wash.

 

 

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