Mayor Parker Strikes Deal for Southwest to Pay for Entire Hobby Expansion
23-May-2012 Mayor Annise Parker today announced her support for international service at Hobby Airport and released details of a proposed agreement under which Southwest Airlines (SWA) will cover all costs related to the $100 million expansion. The Memorandum of Agreement (MOA) requires SWA to design and build the five new gates and customs facility to the City's specifications. When finished, the City will own the improvements debt free. In return for its investment, SWA will have preferential scheduling rights and pay no rent for its use of four of the five new international gates, and will also pay no rent for its use of the customs facility. The fifth additional gate and the customs facility will be available for use by all other airlines at Hobby, but unlike SWA, the other airlines will pay rent.
"This will be financed with no City debt and no Passenger Facility Charges (PFC)," said Mayor Parker. "SWA will bear the risk. "They will also have to abide by our minority and small business contracting requirements and Hire Houston Fire policy. That helps guarantee our local workers get a chance at the construction jobs. From the beginning, I have said that my decision would be based not on what is best for one or another airline, but rather on what is best for the City, the local business community and the traveling public. There is no question we have done that."
"Houston stood tall in 1971 when its leaders fought opposition from selfish interests and courageously said yes to the question of re-opening Hobby Airport," said Gary Kelly, Southwest Airlines Chairman, President and CEO. "Today, Mayor Parker and other leaders honor that heritage by once again affirming that the interests of all Houstonians must come first. And that means it is time to Free Hobby!"
An independent study commissioned by the Houston Airport System indicated that increased competition will lower fares that entice additional passengers to travel through Hobby. Many of these additional travelers will be visitors to Houston and this will drive job growth in Houston's tourism, hotel, retail and restaurant sectors. The overall impact is job creation and an annual net positive economic impact for the greater Houston metropolitan area.
The addition of international service at Hobby will mean approximately 20 more departures daily, which is still far below the historical record-setting activity levels of 1997. SWA intends to utilize new 737 aircraft that are more efficient and quieter than older models, thus eliminating impact on the surrounding neighborhood.
As an additional incentive for airlines who agree to a long-term lease at Hobby, the agreement allows a rebate of airport revenues for every additional passenger they bring to the airport above the base passenger levels in the year price to the start of international service, with a cap of $3.9 million annually. This is based solely on an anticipated increase in concession sales inside the airport from additional passenger growth. The rebate is not automatic; if there is not increase in number of passengers through the airport, there are not payments.
The proposed MOA is subject to approval by Houston City Council and SWA management. City Council consideration is expected May 30, 2012. Construction is planned for the spring of 2013. In the interim, the City will work closely with SWA and Washington to obtain the necessary federal approvals as well as a commitment for an adequate number of customs and border patrol agents at both of our airports.
"Again, this is not about one airline over another," said Mayor Parker. "My goal is to ensure the millions of international travelers who pass through Houston receive adequate customs service no matter which airport they use."