United to shrink Houston hub; layoff 1,300 more employees in spat with city
United Airlines is unhappy that the city of Houston has voted to allow rival Southwest Airlines to start international expansion at the city’s secondary airport. Now the airline’s answer is to punish the City of Houston by laying off 1,300 additional employees and cutting flight capacity by ten percent.
Last week, the Houston City Council voted 16-1 in favor of letting Southwest Airlines begin international flights from Houston Hobby Airport, where it is the dominant carrier. United, the dominant carrier at Houston Bush Intercontinental, says splitting international passengers will hurt its hub-and-spoke business model at the city’s main airport.
The vote did not come as a surprise to many experts, with Southwest agreeing to pay for the additional gates and new customs facilities at Hobby, and United choosing to move its headquarters to Chicago and cut 1,500 management jobs in Houston as part of its merger with Continental.
“Unfortunately, the city of Houston will suffer the consequences of this decision for decades to come,” United CEO Jeff Smisek states in a memo that was released to employees hours after the Houston City Council approved Southwest’s plan.
The announcement of such a significant number of layoffs and a ten percent capacity cut starting with this fall’s flight schedule is unusual considering that Southwest would not likely be able to launch international flights until 2015, once the upgrades at Hobby are expected to be completed. In addition, Southwest has announced it would only fly short-haul international flights from Hobby due to the Boeing 737’s range limitations.
With at least three years until any competition could potentially begin, many industry experts think that United is using the battle with the City of Houston as a way for needed cuts under-performing flights at Intercontinental, while pinning blame on Southwest and the City of Houston.
United also announced it would ax its planned inaugural flight using the new Boeing 787 Dreamliner on a new Auckland, New Zealand-Houston route as a consequence. According to the airline, the route will now no longer be economically feasible, despite the fact that Southwest will not have the ability of operating international flights outside of the Caribbean, Mexico, and possibly northern South America.
Instead, it now appears that the inaugural Boeing 787 route for United will be from Denver to Tokyo.