United Airlines will cut 1,300 jobs and reduce flying in Houston after losing a fight to block Southwest Airlines from adding international flights there.
United uses Bush Intercontinental Airport to funnel passengers between U.S. destinations and to Latin America. On Wednesday, the city council ignored United's protests and voted to let Southwest offer international flights from Hobby Airport if it will pay the $100 million cost of adding new gates and a customs facility.
Southwest says its first flights to Latin America and the Caribbean won't leave Hobby until 2015, but United's reaction to the city council decision was much quicker.
In a memo to employees, United CEO Jeff Smisek said the airline will cut passenger-carrying capacity in Houston by 10 percent starting this fall, which will result in 1,300 lost jobs.
"Unfortunately, the city of Houston will suffer the consequences of this decision for decades to come," Smisek said.
United also said it will scrap a planned route between Houston and Auckland, New Zealand, which was to be the airline's first using Boeing's new 787 aircraft. United said the route won't be economically feasible now. Instead it's selling its first 787 tickets for Denver to Tokyo.
United, the world's biggest airline, says dividing international traffic between two Houston airports will reduce connecting traffic at Bush, its biggest hub. United also warned that a project to renovate one of its Bush terminals might never be completed because traffic won't grow enough to support it.
Some Houston flights are losing money now and United only kept them because future international growth might make them profitable, Brian Znotins, the airline's managing director for international planning, said in an interview.
Some passengers fly to Bush airport on another airline then connect to a United international flight. With international service split between Bush and Hobby, that won't happen as often, Znotins said.
Houston was the longtime headquarters for Continental Airlines, but when it combined with United to form United Continental Holdings, the new company moved its headquarters to Chicago and scrubbed the Continental name from its planes.
Mayor Annise Parker, who helped broker the deal with Southwest, was asked if the city council have rejected Southwest's plan if United were based in Houston. "The discussion might have been very different," she said.
Parker questioned whether United's job cuts were really related to the fight over international flights.
"That competition (from Southwest) is at least three years away, so for United to say there are going to be 1,300 people laid off next week or so, that's just not reasonable," she said. "There is no competition today, so any decisions that they make on personnel are based on other things."
Alan Bender, who teaches airline economics at Embry-Riddle Aeronautical University, said United will have to cut flights "because they're inefficient and they can't compete with Southwest."
Robert Mann, an aviation consultant in Port Washington, N.Y., said United was going to reduce flights anyway as it increases efficiency in the combined networks of United and Continental. He said United was "just looking for the moment and an excuse to blame someone."