Off the Kuff Rotating Header Image

United’s study predicts doom and disaster if Hobby expands

Well, what did you expect it to say?

You are NOT free to move around the country

Expanding Hobby Airport to allow for international flights will cost the Houston area 3,700 jobs and $295 million in economic activity, according to a study released by United Airlines Thursday afternoon.

United’s conclusions contrast starkly with the projections of a study commissioned by the Houston Airport System that an international Hobby would create 10,000 jobs and inject $1.6 billion into the local economy annually.

[...]

The United study attempts to dissect the city study by challenging several assumptions, including what United considers unrealistically low fares on new routes. Much has been made of the city study’s finding that fares to Bogota would decrease from $739 to $133. Although it concedes the average fare would decrease, United finds that the city study overstates current fares and understates the projected fares.

Southwest and the city study assert that new low-fare routes would increase passengers at both airports.

“Competition is always good, but there is already plenty of competition at Bush where it can take advantage of the enormous economies of scale associated with a large hub,” said Barton Smith, one of the United study’s authors and professor emeritus of economics at the University of Houston. “Diminishing the volume of connecting flights through Bush could be very damaging. The HAS study finding that Southwest Airlines proposal would actually increase trips through Bush is just sheer nonsense.”

You can find United’s study here and a summary of its findings here. I guess United’s claim of 1300 lost jobs wasn’t sexy enough. This was posted late yesterday and I have not had the time to give it a read-through, but clearly United’s economists and whoever did the HAS study were operating under two completely different sets of assumptions. One or both of them must be wrong. I still think Darren Bush wimped out by not offering an actual opinion on this matter, but his advice to Council to “trust no one” sure seems apt. Let’s have one more study to break the tie!

The United study came out as the Greater Houston Partnership formally endorsed Hobby expansion.

“We want two vibrant airports and the benefits that go along with it: more jobs, more travelers and a competitive advantage for our city,” Greater Houston Partnership chairman Tony Chase said in a statement after a unanimous vote by one of the group’s 60 committees.

[...]

Partnership president Jeff Moseley said in the Wednesday statement that the organization “carefully deliberated on how increased competition changes the landscape within airport systems.”

More on that here and here. I’ll leave the wisecracks about who put these words in their mouth as an exercise for the reader. So, is anyone convinced by United’s study? Let me know in the comments.

Related Posts:

9 Comments

  1. Jj says:

    So, what would happen if Houston renovated Minute Maid park and allowed the Astros to bring in a second football team to compete with the Texans? Sports fans?

  2. Josh Verde says:

    Individual airlines need to be removed from this discussion. This is about expanding facilities and allowing for competition among various airlines – it’s not (or shouldn’t be) UA vs. WN.

    Think ahead five, ten, or twenty years. No one knows what condition these airlines will be in. Some may merge, fold, or decide to pull out. To base this decision on the statements of the interested airlines is a mistake that shows a lack of foresight.

  3. Greg Wythe says:

    JJ,

    As someone old enough to remember individual USFL games with too much detail, that hypothetical only moves me to support Hobby/SWA’s position.

  4. Jj says:

    USFL played during NFL’s off season, so I don’t think you can really use the actual USFL experience here to compare.

    I was just thinking of a 2nd team taking some % of the Texans’ revenue away, either lost crowds or lower prices. Seems like the Texans wouldn’t be able to afford as good players and the number of wins would go down. Parallels would be fewer destinations, fewer flights, etc. (Surely service can’t get worse! I am no United fan.) Sure, individual fans would have lower ticket prices, but overall would Houston be better off with two mediocre teams, or with higher prices but a single better team?

    I don’t know. This is by no means a perfect or completely thought-out hypothetical. Just throwing it out there.

  5. Greg Wythe says:

    Tell that to the Tampa Bay Buccaneers, who drafted Bo Jackson. Or Bud Adams when his post-Earl teams were “up against” the infinitely more exciting Gamblers teams. If a repeat of that experience were to ever possibly play out, I’d take the bet that the Texans would view even an off-season competitor for their dollars as blasphemous.

    And I don’t think its a difficult analogy since I’m not sure you’d see the international volume out of Hobby really threaten IAH. Sure, I can see a price war on flights to Central & South America. But beyond that, how much more could Hobby really increase to be on even terms with IAH?

    I don’t travel much, so I don’t particularly care about the end result one way or the other. At least beyond the prospect of some more job opps for construction and airport workers, I suppose. But I do generally side with more competition and less with monopolies. Its certainly a little amusing to see some of the right-wingers sounding exactly like the anti-developer peeps in Austin.

    Hard to take either study at face value, though. The advice to “trust no one” seems to be the smart play.

  6. joshua bullard says:

    this is the problem for mayor parker, with this issue,first,i dont think she will get the votes off council,second,this really hurts me pocket book,ouch,we need as much money jammed into our citys commerce as we can,this action-if the mayor takes it will cut off millions of dollars that already flows into our city plus it will personally jam me up for 2000$ annually,lastly,what the mayor hasnt been informed of is why 60% percent of the current travelers fly in and out of hobby each week from interstate——-its because they enjoy a slow paced airport-easy access,easy boarding, short lines,etc etc etc,if mayor parker flips the switch then where all about 200 million short-personally i wouldnt give a damn if the mayor does activate – just cut me a personall check each year for 2000$ bucks and have your way with it,otherwise we may need to get the mayor to eye other opportunitys-my view is this, every council member should vote this down-even you ellen cohen,lets hope you start defineing yourself as an independent thinker soon…

    eric wineman-spell check all this will ya????????????????

    joshua ben bullard

  7. JJ says:

    I am still trying to figure out why no other city in the country thinks it is a good idea to have two true international airports. The Annise Parker pro-SW report cited five examples, but they were all false. Which makes me suspicious.

  8. Mainstream says:

    Not sure this is on point, but Continental used to offer weekend specials to Central America in the $300 to $400 range. The new United has been pricing those last minute specials in the $700 range the last few weeks.

    Surely competition would prove to be a benefit to the traveler.

    I have not finished studying this issue, but opening Hobby for international travel seems the stronger position to me.

  9. Phil says:

    I appreciate the Texas Pride, however, Houston is not big enough nor does it have the international traffic that LAX and the NYC Airports. SW hasn’t done anything at Chicago Midway Airport for International travel, so it has hasn’t work with Chicago! Each and every passenger will pay an extra $1.50 for Passenger Facility Charges, and where are all the JOBS. Southwest CEO Kelly stated that SW would probably only add 50 to 100 jobs at Hobby! Think the strength of the city first, Dallas, Atlanta and Miami would all love to have Houston drop back out of the competition for International Passengers!

    http://www.khou.com/news/local/Fight-continues-between-Bush-Hobby-over-international-flights-150643545.html

Bookmark and Share