MIAMI — Conventional wisdom would say that a large international hub airport like Houston’s George Bush Intercontinental Airport wouldn’t need to attract new service. But Houston Airport System’s (HAS) Air Service Development Team works continuously to target new passenger and cargo air service for the growing region and boost frequencies on existing routes.
HAS’s commercial airports – Bush and William P. Hobby — handled a record 53.1 million passengers in 2014, up 4.5 percent from 2013. The airports handled 43.3 million domestic passengers in 2014, up 3.5 percent.
The secret to the airports’ success is the fact that Houston has business and population growth with an international flavor. The city is known worldwide for industries including energy production, financial investment, biomedical research/nanotechnology, software development and cargo transportation and distribution. The Houston metro area is home to more than 3,500 international companies, 23 Fortune 500 companies, 21 foreign banks, nearly 1,000 freight forwarders and 86 foreign consulates.
Houston is the fifth-largest Hispanic community in the U.S., and has the ninth-largest Asian population in the country, including Chinese, Taiwanese, Vietnamese, Japanese, Koreans, Asian Indians and Pakistanis. Among its five million residents, the city is home to a rich culture of multiple international backgrounds, including people from 100 different nationalities who speak 90 different languages, accounting for 13 percent of its population.
Molly Waits, HAS’s director of air service development, says that it’s only natural that Houston has become such an attractive city for new and expanded air service. “The markets that have come into Houston in the past two years were underserved out of Intercontinental,” she said. “We were underserved by Asia, and we got Air China in 2013 and Korean Air in 2014. In 2015, we’re getting ANA and Eva Air. Our underserved markets in Asia are finally giving us the service that Houston demanded.”
In general terms, Houston’s success is being driven by the economic strength of the region, said Waits. “When the global economy went into recession, we were the last to go in, and when the recession was over, we were among the first to come out and recover all the jobs we lost,” she said.
Houston is a strong market for business, said Waits. “But we’re also seeing an increase in leisure and convention traffic, along with medical tourism. We have a large medical center here in Houston where patients and family members travel to use,” she said.
Among the 53 million passengers served in 2014, nearly 10 million of them were international travelers, on both business and tourism trips. Looking into the numbers, Bush Airport reported record highs in both combined passenger totals — more than 41.2 million in both domestic and international passengers, a 3.6 percent increase — and in the number of international passengers — more than 9.8 million, a 9.2 percent increase from 2013’s 8.9 million. Hobby Airport also set a new high in passenger totals for the fifth consecutive year, seeing more than 11.9 million passengers, a 7.5 percent increase over the previous record of 11.1 million in 2013.
Incentives At Work
HAS created a new incentives program in January 2014, split between flights to new international markets and new-entrant airlines and cargo operators.
For new scheduled domestic passenger service out of Intercontinental or Hobby, HAS will give airlines a one-time payment of $250,000 for starting daily service, prorating the pay if the service is less than daily. For scheduled international passenger service from the two airports, HAS will pay $400,000 for daily service, also prorated for less than daily. It will also offer a one-year abatement of turn charges, arrival area charge and departure area charge and the ticketing area fee.
For new scheduled international passenger service out of the two airports, airlines can get a two-year abatement, with HAS paying out $400,000 for scheduled daily service that is prorated if flights are less than daily, along with a two-year abatement of the central Federal Inspection Service charge. For new scheduled or scheduled charter international cargo service from Bush airport, airlines receive a two-year abatement, with up to $125,000 for scheduled daily service, also prorated if less than daily flights.
HAS is proud of the program it has put in place, said Waits. “What we did when we developed this program was see what other airports were offering and ensured that we were among the top when it came to bringing service to Houston,” she said. “For airlines looking at new service, Houston is willing to share the risk with fee waivers and marketing money.”
New carriers coming to Bush Intercontinental in 2014 were: Korean Air, to Seoul; Buzz Airways to Branson, Missouri; SAS to Stavenger, Norway; and Interjet to Monterrey, Mexico. The airport also landed cargo flights from Emirates and Qatar Airways. Coming in 2015 are: Volaris, Vacation Express, All Nippon Airways, EVA Airways and WestJet. And Hobby Airport is scheduled to open a new $156 million, five-gate facility toward the end of the year that will handle international flights to Latin America for Southwest Airlines.
But that doesn’t mean that HAS neglected the needs of its main tenant, United Airlines, which has a hub at Intercontinental. “We work with their network planning team to explore new and existing markets,” said Waits. “We wanted markets like Munich and Santiago, Chile, for awhile. And there are some markets that will only work with United.”
On a bigger scale, HAS works with its main tenants at Intercontinental and Hobby — United and Southwest, respectively, said Waits. “We want to ensure that they have what they need from us to run successful large hub operations,” she said.
As long as demand is there and new services are stimulating additional demand, there’s no end to the possibilities, said Waits. “So it’s not necessary to go after markets where there is no demand,” she said. “We don’t want to diminish the service we already have with the airlines.”
Airports can’t ever get behind the eight ball on pursuing new and expanded service, said Waits. “Traffic drives what our work does. Demand is driven by what companies and business, leisure and ethnic travelers want, so it makes sense for us to pursue that,” she said. “We look at traffic and where the opportunities are and what’s good for Houston. But we don’t want to put in so much service that we hurt the markets we’re already in. We’re only actively pursuing marketing where we see a need.”
2015 will be more of a maintenance period for HAS, said Waits. “We’ve had a lot of growth in the past two years. I’ve been here 10 years and have been working on some of this new service for that long,” she said. “It’s all coming to fruition because of hard work. So we’re going to focus on the airlines that have come in recently and those coming in 2015 and support those routes. This year, it’s really all about the markets already in the hopper.”