Houston Airport System Update

Transcript

Mario Diaz:The presentation was really about providing world-leading passenger experience, and the whole idea is that if you think about it in the framework of a structure, one that comes best to mind is Maslow's theory of hierarchy of needs. Change it a little bit around and you can make it the hierarchy of passenger satisfaction, starting at the base foundational with safety, then moving on to having to provide capacity and then efficiency. You then go to service. And then finally, if you can do all those things, you get to experience, which is that unique feeling, some awe-inspiring, just something that is unexpected by the passenger that they encounter and that you cannot move to a level above until you have satisfied all the support levels below. And then given some examples of that. For example, when it comes to capacity, things like modular construction or these new aircraft that are being manufactured today, like the Dreamliner and the A380, to balance things out. Or when you talk about customer experience, just the beauty of terminal buildings. And I mentioned, for example, terminals in India, of all places, Mumbai and New Delhi. Terminal 3 in Mumbai and Indira Gandhi International Airport in Delhi, because I wanted to make the point that it's not about having your airport reside in the, in the country with the largest, most powerful economy. It's about the intent to provide service, the intent to provide awe-inspiring service to the passengers that come through the airport. And it's the calling card of the city. It's the calling card of a state, or indeed it can be the calling card of a nation. So here's what's interesting. First, we have to talk about the economy because you really can't talk about an airport without talking about the economy in which it's providing service. And as you know, Houston is the energy capital of the world. We've had an energy slump now for over a year, and the energy slump is having— starting to have an impact on premier business class travel. So what is happening at Bush Intercontinental, what you're seeing is that you're seeing a reduction United passengers, domestic connecting passengers, but you're seeing an awful increase in international passengers with all the new airlines we have brought to Intercontinental. And at Hobby, we've got growth of 9% and 10% compounded annually, doing very, very well. There, it's essentially United Airlines, that they're the major hub carrier, 55%, almost 58% of the traffic at the airport, but we're making some of the domestic drop-off with increases in international because over the last, oh, 3 to 5 years we have brought 10 new international carriers to the Houston Airport System. Well, you really can't. And again, what we did was we diversified the portfolio, which I thought was a good strategy some 3, 4 years ago. I realized that Houston being the 4th largest city in the United States with a population that is the most diverse in the country needed more than a single airline to provide international service. And so we set forward as a strategy to bring in new airlines. We first brought in Turkish Airlines with direct service between Houston and Istanbul, and then Air China, Houston to Beijing. That was followed by Korean Air, Scandinavian Air Services, Stavanger, Norway, EVA to Taiwan. We've got All Nippon Airways to Tokyo. So we brought in a number— we got Volaris, Interjet from Mexico, WestJet to Canada. So we've got all these new airlines and they're providing service by reducing fares overall to Europe, to Asia, to Africa. And it's really making a difference. And now we have Air New Zealand. Started last December, December 15th, and it really has made Houston I tend to boast a little bit about Houston, the only airport and city in North America, indeed in the Americas, that has direct service to all 6 inhabited continents. And I stand today before you in Australia, and I can be— I can assure you that is true. Qantas, of course, is a Oneworld partner, and so might have a little bit of a difficult time in Houston given that Air New Zealand is a Star Alliance partner and can receive the feed before and after feed from United Airlines. And so it really does help in providing the traffic. I can tell you that on the flight down here, the aircraft was full. It had a very, very healthy— I think of all the business class, there were maybe 2 seats that were empty. Every other business class seat was full. So Qantas might have a little bit difficult time because you don't have the kind of connecting aggregation point that American Airlines provides in Houston. But we would welcome discussions with Qantas just the same, and I'm sure we could put together a package for them that they would love. I think that had to do, I think, as much with politics than it did with economics. Singapore was— their load factors had dipped. They had dropped below 50%. With United now, they also recently, you remember, they formed this codesharing with United, something that had evaded— eluded them for a long time. So now they have a codeshare with United. Now they can do things that they couldn't do before. And they were having difficulties with the U.S. State Department in flying through Moscow. And so it really made sense. And perhaps it's just temporary, but it really did make sense. And I believe that the whole strategy was to provide service that United would like to provide to Europe out of Houston. Manchester that they are not providing today, do that through Singapore, provide them with the feed that makes that segment of the flight work, and then direct service between Manchester and Singapore. And so it's a win-win for everyone. I think it's going to be a grand flight for them. And we do lament losing the Moscow flight, but maybe in a little while things will get better and the economy will turn around and there will be, again, a need for oil exploration and energy. That will really justify the returning of Singapore to Moscow.

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