Travel

Southwest will pay for $100M expansion in Houston

Southwest Airlines Co. promises to pay for $100 million in airport improvements so that it can launch international flights from Houston’s Hobby Airport.

With the Southwest pledge, Houston Mayor Annise Parker endorsed the expansion of Hobby, which is smaller but closer to downtown than Bush Intercontinental Airport. The city council could decide whether to approve the deal as soon as next week.

Parker said at a news conference Wednesday that customs and other facilities could be built at Hobby with no city debt or special taxes on airport passengers.

The mayor’s endorsement could help Southwest win in a battle against United Airlines, the world’s biggest carrier, which flies to and from Bush airport to U.S. and international destinations.

“We haven’t seen the proposal, but there is no funding plan that makes this proposal good for Houston,” said United spokeswoman Mary Clark. “Splitting the city’s international air service will harm the city’s competitive advantage and cost jobs” at Bush airport.

Consultants hired by the city said international service at Hobby would boost travel to and through Houston and lead to lower fares to Latin America, and Southwest CEO Gary Kelly made the same case.

“We will bring lower fares, we will bring more competition,” Kelly said. “It will mean more jobs.”

Southwest runs more than 130 daily departures from Hobby, its sixth-busiest airport. Southwest doesn’t fly beyond U.S. borders but its AirTran Airways subsidiary goes to Mexico and the Caribbean from Atlanta, Baltimore, Los Angeles and other U.S. cities. Later this week it will launch flights to Mexico from Austin and San Antonio, Texas.

Dallas-based Southwest plans to fold AirTran into the Southwest brand over the next several years and operate those AirTran international flights with Southwest planes.

Southwest, the nation’s fourth-largest airline by passenger traffic, has said it could begin international flights from Hobby in 2015.

If the city council approves Southwest’s agreement with the mayor, the airline would pay to build five new gates and a customs facility, all of which would be owned by the city.

Southwest would gain preferential scheduling and pay nothing more to use four of the gates and the customs facility. The fifth gate would be available for other airlines, but they would pay rent.

Other airlines left Hobby after Bush airport opened 20 miles north of downtown in 1969, but Southwest pushed the city to reopen Hobby in 1971. It’s similar to Southwest’s long fight to stay at Dallas Love Field while other airlines moved to much larger Dallas-Fort Worth International Airport. The locations of Hobby and Love Field make them attractive to business travelers in downtown Houston and Dallas and were critical to Southwest’s early growth.

Southwest’s commitment to spend $100 million at Hobby comes just a week after the airline announced that it would defer deliveries of 30 Boeing aircraft for several years to save about $1 billion through 2014.

If the city council sides with Southwest, it would be a setback for United, which has roots in Houston. Continental Airlines was based in Houston and considered the city’s hometown airline until it combined with United to form United Continental Holdings Inc. in 2010.

Southwest shares rose a penny to $8.28 per share in afternoon trading Wednesday, while United Continental Holdings shares rose 19 cents to $22.02.

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