Off the Kuff Rotating Header Image

Paying for Hobby expansion

At last week’s Council hearing on the proposed expansion of Hobby Airport, Southwest Airlines CEO Gary Kelly made the statement that if the proposal were to be accepted, Southwest would pay for the $100 million project. The Chron looks at what this means.

Because the Houston Airport System is an enterprise fund separate from the rest of city government, its budget comes from landing fees and ticket surcharges, not from tax dollars that pay the salaries of police officers and firefighters.

Kelly’s declaration does not mean Southwest is offering to build the facilities at its own cost, however. There is no financing proposal from the airline yet. Houston Airport System Director Mario Diaz told City Council last month that putting an extra $1.50 surcharge on the ticket of every passenger who takes off from Hobby would pay for the expansion. It is called a passenger facility charge, and it is money Houston’s publicly owned airports and others across the country collect from airlines to build runways, gates, people movers and concourses.

The fee would be paid not only by Southwest’s passengers, but those of American, Delta, and JetBlue, which also fly from Hobby. So, although Southwest accounts for roughly 87 percent of Hobby’s passengers, other airlines would be chipping in under the surcharge model. American and Delta declined comment. JetBlue issued a statement in support of Hobby expansion, but did not comment specifically on the prospect of increasing the per-ticket fee from $3 to $4.50.

The collected surcharges are not the airlines’ money to spend as they please. The fees must be kept in a segregated account and turned over to the airport system, which decides how to spend it.

[…]

United contrasts an expansion of Hobby paid for entirely with ticket fees with United’s approach of paying from its own pocket for a massive expansion of Terminal B at Bush. The deal signed last year calls for United to put up $686 million while the city ponies up $264 million it raises from passenger facility fees, which remain at $3 a head at Bush, and which are paid by 17 airlines. United has “skin in the game” at Bush, a company spokeswoman said, whereas if Hobby expansion is funded by passenger fees, Southwest does not.

On the other hand, United gained a financial windfall at Terminal B by acquiring its exclusive use. It even controls the concessions. The facilities at Hobby would be shared by any carrier that wants to compete with Southwest there. And passenger fees, not United, are paying for Bush’s Federal Inspection Services facility.

It was less than a year ago that Council approved the deal to refurbish and expand Terminal B at IAH. That deal included United getting the lowest gate fees of any airline at IAH, as well as 90% of concession revenue, both of which will go a long way towards taking the sting out of the money that United is putting up for the construction. United is on the hook for Phase One of this project, but can back out of Phases Two and Three; they have to make a decision about that in 2017. At the time this was being debated, the Service Employees International Union was arguing that United got a sweetheart deal from the city. Ah, memories.

This doesn’t have anything to do with whether or not the Southwest proposal is worthwhile in and of itself, or with whether accepting that proposal will lead to millions of jobs and ponies for everyone or a plague of locusts and seven years’ bad luck. It’s just to note that United hasn’t exactly been treated shabbily by the city. The amount of fuss they’ve kicked up about this is out of proportion to the small number of international flights that would result from Hobby being expanded.

Related Posts:

4 Comments

  1. Jj says:

    As long as CMs Burks and Brown are out front supporting the Southwest plan as a good one, then I am sure it will be the best thing for the city.

    I think the key with this part of the story is that SW says “we will pay for the entire cost ourselves” by which they mean “the city will put an extra $1.50 fee on everyone’s ticket, then we will get that money and use it to pay the cost.” Do you find that sort of “spin” comforting? So the Southwest statement “this will be a positive benefit for Houston” — what does that really mean? We should trust Southwest on that statement, too? Or should we examine all the possible ramifications?

  2. joshua bullard says:

    we have to stop doing what the northern cities do-we do not need the expansion-i dont want it and i dont like it because it will cause our city revenue loss,,,,on the other hand if the ceo of southwest wants to cut me a check round back, then thats a whole other story, untill then, hell no

    and i am not doing spellcheck ever for anyone,we live in a text age,misspelled is the new age,if you know what it means,thats good enough,…………..joshua ben bullard

  3. robert says:

    Joshua, there so many things I could say about your post…. but 1 question, how much international travel do you do and does this affect you?

  4. […] see what that amounts to. Southwest has been pretty aggressive about this, with CEO Gary Kelly sort of promising to pay for it all. Whatever the deal is, Council will have to vote on it, presumably next week. In […]

Bookmark and Share