In Employee newsletter
United explains why Houston City Council-approved Hobby expansion has theairline cutting jobs now
When United Airlines announced plans to lay off 1,300 employees almost immediately after Houston City Council voted to allow international service from Hobby Airport, it struck many observers, including Mayor Annise Parker, as unreasonable and spiteful, since Southwest Airlines doesn't plan to fly to Mexico until 2015.
However, in a newsletter to employees on Friday, United officials insisted the job cuts are part of a business decision that the company was forced to make to ensure profitablity in the cutthroat airline industry. The explanation:
Throughout the debate on the development of HOU (Hobby-Houston) as an international airport, United has made the point that a competing international airport at HOU would result in a diversion of passengers we carry today to Hobby.
This would drive a reduction of 1,300 jobs at United and our partner airlines at IAH (roughly 800 jobs today and 500 jobs in the future). We expect to begin a 10 percent reduction in planned IAH capacity beginning with the fall 2012 schedule change.
Some of you have asked, “Why so soon, if Southwest does not intend to fly international flights out of HOU until 2015?”
Here’s why: There is a segment of our operation at IAH that is not profitable today. We have operated these flights expecting that future growth will improve the routes and make them profitable. As a result of the city’s decision to develop HOU as a competing international airport, the growth will not occur and, as a result, we will cut unprofitable flying in our schedule now rather than continue to lose money with no expectation of improvement.
“These are the kind of tough decisions we make every day,” said Network SVP Greg Hart. “We have a responsibility to our investors and all of our employees to invest where we have the best opportunity of generating profits.”
The changes would reduce current capacity at IAH by about 6 percent with reductions planned for several domestic and international markets. The other 4 percent of the 10 percent reduction in planned capacity will come as a result of not starting service that was part of our longer-term plan for IAH. A competing international airport will have a material impact on the long-term profitability of IAH and the planned-for growth won’t generate the necessary profits to justify the investment in the flying."
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