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Houston mayor Annise Parker has endorsed Southwest Airline’s bid to fully fund a $100 million dollar expansion to Hobby Airport. She made her announcement in a press conference on May 23 while standing next to Southwest Airlines CEO and chairman Gary C. Kelly, surrounded by cheering Southwest employees.
While the airport currently has no international commercial flights, Southwest plans to add five international gates and a customs facility, with routes to Latin America and the Carribbean. Southwest is also expanding into the international market with its recent acquisition of AirTran.
The move to expand Hobby is aggressively fought by United-Continental, who recently announced its plan to expand its international presence in Houston’s main international airport, George Bush Intercontinental Airport. Houston is the airline’s gateway to Latin America. It is a central hub, previously the headquarters of Continental Airlines before it merged with United Airlines and moved the headquarters to Chicago, Illinois.
United-Continental claims that making Hobby international will draw a great number of passengers away from Intercontinental Airport, causing the airline to cut back on approximately 3,700 jobs. Southwest counters that the Hobby expansion could add 10,000 jobs. Southwest also claims that the addition of international routes from Hobby will increase competition and decrease fares, breaking up the monopoly that United-Continental holds.
The Houston City Council still needs to vote on the matter. The vote is set for May 30. Both airlines have added numerous lobbyists to their payroll in order to wage their public battle. The new international gates and customs facility would be fully funded by Southwest Airlines; Houston would front no money for the infrastructure.
All of the new facilities would be fully owned by the city of Houston. In return, Southwest would use four of the five gates free of charge. The fifth gate could be used by any airline that pays rent. As an incentive, airlines will receive a rebate for every passenger they bring to Houston who would have otherwise flown through a different city, at a maximum of $3.9 million annually. Houston would benefit an estimated $1.6 billion a year, without having to put up any money.
Southwest plans to start construction in 2013 and end construction in 2015. Southwest has also recently decided to defer an order of 30 new Boeing aircraft in order to save about $1 billion. Both Southwest’s and United-Continental Holding Inc.’s shares rose shortly after the announcement but then fell about two percent after hours.
Image Courtesy of Annise Parker