Friday, March 25, 2016

Will the oil bust cost Houston its international air connections?

Anybody who follows this blog knows that I have been obsessively covering the additions (and subtractions) to the list of international air connections from Bush Intercontinental (and Hobby) airport to the rest of the world. As Houston's population and economy have grown, so has the city's status as an international air travel hub. However, problems in the energy sector could slow or even reverse that trend.
Declining demand for business-class tickets due to the slumping oil business could make it more difficult for the Houston Airport System to continue luring international airlines.

"It won't be as easy as it was in the past," system director Mario Diaz said Monday after a State of the Airport event sponsored by the Greater Houston Partnership.

More than 10 international airlines - including Air China in 2013 and Air New Zealand last year - have added flights to Bush Intercontinental Airport since 2013. Many of those airlines were drawn by the chance to sell higher-margin seats to business travelers during the height of the oil boom.
They and other airlines remain committed to Houston, although some are now flying smaller planes or reducing the frequency of flights, Diaz said. Scandinavian Airlines stopped its nonstop flights between Bush Intercontinental and Stavanger, Norway, in late October.
Emirates, likewise, has discontinued using the double-decker A380 on its flights between Houston and Dubai, opting to use a smaller 777 instead. And by virtue of being Houston's largest single carrier, United is especially exposed to the pinch:
United Airlines, the major carrier at Bush, said Monday that low oil prices had disproportionately affected its business travel. Earlier this year, United said it would shift capacity from Houston to more robust airports.

If low oil prices persist for more than a year and a half, Diaz said, some of the smaller airlines may be "rethinking the value of remaining in Houston."
Unfortunately, the prospects for recovery in the price of crude, at least in the short-term, are highly dubious. And while I appreciate Diaz's desire to put a positive spin on the situation, I'm not sure I'm buying this:
But there is a silver lining for tourists or the friends-and-family traveler. With low fuel prices, he said some airlines are offering cheaper economy tickets to help offset the decline in business travel.

"I think the Houston public can expect a really, really good vacation," he said.
Selling cheaper economy tickets will not likely recoup the revenue lost from selling pricey business-class tickets, unfortunately.

While I'd hope that Houston's population is large enough, and its economy diversified enough, to continue to make this city a lucrative destination for international carriers, it's possible that we will see at least a few airlines discontinue service to Houston before things get better.

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