Yesterday the City of Houston voted to approve a project to expand the city's second airport, Hobby, to include international flights. The city already has a very large international airport on the north end of town, Intercontinental. But the motivation to add international capacities at Hobby were driven by Southwest, who consolidated all of their Houston operations at Hobby a few years back.
Southwest plans to launch flights into Central America and the Carribean challenging United's dominant position in Houston in those markets.
Southwest has made some rather ludicrous claims as to the number of jobs they will add and the revenue they will bring to the city, thus proving that you get numbers to say anything you want. On the flip side, United also "used" numbers to prove the impact they would see and that they would have no choice to cut service and reduce their presence at Intercontinental, currently United's largest hub.
Apparently the city is still bitter for losing Continetal and the headquarters for the combined airline.
Southwest no longer has the pricing power it used to after all of its fuel hedges expired. The fact that Southwest brings lower fares and competition is a myth in a lot of cases, Southwest isn't that aggresive on pricing, they just have amazing marketing that makes people feel they are getting a deal because they are on a Southwest plane. To further complicate things, Southwest has never had international service. Unlike domestic service, there are a lot more intracies and challenges when dealing with international service, particularly to places in Latin America. All of these factors will add complexity to the Southwest operation going against the very thing that makes them succesful - simplicity.
The city feels that United is bluffing and they went ahead and approved the vote. But, the city's decision was very short sighted. While the expansion at Hobby is three years away, United is likely to start moving its operations much sooner and thus hitting the city pretty hard as landing fees dwindle while its citizens are left with fewer and fewer options.
In the wake of the decision, United announced cuts of 1,300 jobs and the formal cancelation of the Houston - Auckland route. This is just the begining. Just like Delta abandoned Cincinatti (once on of their highest yield hubs at the time), American with St. Louis, Continental with Denver and United rolling up the carpet at Miami, the city of Houston should be ready for a major downfall. United could very easily move a lot of the Houston operations to Denver or Chicago and both of those cities would love the extra traffic and revenue that comes with it.