CO777DAL
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United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 8:38 pm

"FORTUNE -- United Continental Holdings is learning the hard way that it isn't wise to mess with Texas. The recently merged airline's decision to choose Chicago as its corporate headquarters over Continental's hometown of Houston appears to have resulted in a big loss of political capital with the city and its airport authority. "

http://features.blogs.fortune.cnn.co...12/04/17/united-southwest-houston/

I have to say I agree with the article. It doesn’t take a rocket scientist to figure that out. COdbaUA shot themselves in the foot when they took the United name and moved the Headquarters from Houston to Chicago. Look no further than the comments on new stories in CLE, EWR, and IAH. CO was like greatly and owned their markets. The last thing any company does is to do anything that can jeopardize that. That is exactly what happened. There are a lot of people not happy with “UA taking over CO” –their words in CO markets.

UA hubs are highly competitive and UA Elite base seems to really not like COdbaUA, so there really isn’t much lost than what they are losing now had they just kept CO name.
CO would have had half an airline to fix…the PMUA side…now the new UA has one big mess of an airline to fix. Just about everyone is not happy PMUA/PMCO.

Being from Texas, I know many in Houston that feel burned by new UA. It doesn’t make sense to leave one of the most pro business States with low taxes to go high tax Chicago. Not to mention the hit to Texas pride which I can see is going to cost the UA dearly.

I believe Southwest would never have tried this if CO was still HQ in Houston. There is a lot of rivalry between Dallas and Houston. If and that’s a big if Southwest would have tired this while CO was HQ in Houston, I have no doubt the City of Houston would have stop them at the door, and told them to take their luggage and whatever they are selling back to Dallas. Look no further than Dallas as to all the trouble Southwest had expanding. The City of Houston would not let anything happen that could damage their hometown airline, especially any special request from a Dallas based airline.

Depending on how the new UA ends up. It will make a great business book on mega mergers. From what I’m seeing so far, it doesn’t appear to be a good one.
Worked Hard. Flew Right. Farewell, Continental. Thanks for the memories.
 
MAH4546
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 8:42 pm

Why any state would choose business unfriendly Illinois is beyond me. Just that alone was idiotic, forgetting any potential loyalty issues, which are negligible, IMO.
a.
 
frmrCapCadet
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 8:48 pm

The assumption that tax levels is the only consideration for business in locating headquarters is naive.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
phxa340
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 8:50 pm

Quoting MAH4546 (Reply 1):
Why any state would choose business unfriendly Illinois is beyond me. Just that alone was idiotic, forgetting any potential loyalty issues, which are negligible, IMO.

Because the City of Chicago fought hard for United and offered them concessions.
 
FWAERJ
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 8:53 pm

I read once in an interview with Glenn Tilton that he made two conditions to Jeff Smisek for the UA/CO merger:

1) The airline had to be called United
2) The headquarters had to stay in Chicago

Everything else was negotiable.

True, Houston may have been (and probably is) the better location from a business climate perspective. But I don't think that Smisek wanted to walk away from a transformative merger deal and much-needed industry consolidation over the location of the HQ.
"Did he really need the triple bypass? Or was it the miles?"
 
SANFan
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:00 pm

Seems to me every time there is a merger, one city wins (and remains the hq) and one city loses. Sorry Houston (and Texas) -- maybe next time...

Maybe time would be better spent worrying about trying to keep Dallas as the hq of whatever entity emerges from AA's Chapter 11.

bb
 
MaverickM11
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:03 pm

Quoting FWAERJ (Reply 4):
I read once in an interview with Glenn Tilton that he made two conditions to Jeff Smisek for the UA/CO merger:

1) The airline had to be called United
2) The headquarters had to stay in Chicago

I find that hard to believe. Glenn was so desperate and focused to sell/merge the carrier he would have done so with an Alpaca farm in Kalamazoo.
E pur si muove -Galileo
 
mogandoCI
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:03 pm

WN's tiny operation at HOU is not even remotely a threat to that gigantic fortress hub down the road at IAH.

On the other hand, UA is still in a true 3-way battle in ORD+MDW with AA and WN, so they need to stay on the city and airport's good side. The last thing UA wants to see to have Chicago end up like LAX that everyone has a piece of the pie but no one has critical mass.

Quoting MAH4546 (Reply 1):
Why any state would choose business unfriendly Illinois is beyond me. Just that alone was idiotic, forgetting any potential loyalty issues, which are negligible, IMO.

You can call Boeing that too.
 
drerx7
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:17 pm

Yea, UA is paying for this. In the end they can reallocate resources to other hubs if they want to - another airline will fill that void. I think Houston and United now have a marriage on the rocks and UA can't get a divorce.

Quoting PHXA340 (Reply 3):
Because the City of Chicago fought hard for United and offered them concessions.

I heard the same. When all the dominoes fell UA approached Houston with a "This is what Chicago has done - beat this. as well as pay for us to break the Willis Tower lease (which was an obscene amount)"

Quoting FWAERJ (Reply 4):
True, Houston may have been (and probably is) the better location from a business climate perspective. But I don't think that Smisek wanted to walk away from a transformative merger deal and much-needed industry consolidation over the location of the HQ.

I agree.

Quoting mogandoCI (Reply 7):
WN's tiny operation at HOU is not even remotely a threat to that gigantic fortress hub down the road at IAH.

That's not a tiny operation...

I was a loyal UA and CO flyer; but, having just returned to IAH on UA230 from LGA yesterday I can honestly say this is not the same airline. With every flight I am becoming more and more disenchanted with UA, the level of service has deteriorated in my opinion...on both sides - and by the way...the zone boarding is an absolute clusterf&$k and no one on this board can convince me that it makes more sense than boarding from the rear forward. They also are loosing the precious checked bag revenue by having to gate check so much.
Third Coast born, means I'm Texas raised
 
style
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:26 pm

Quoting FWAERJ (Reply 4):
I read once in an interview with Glenn Tilton that he made two conditions to Jeff Smisek for the UA/CO merger:

1) The airline had to be called United
2) The headquarters had to stay in Chicago

I read this as well and believe it to be true. But lets not kid ourselves, EVERYTHING is negotiable in business. I bet if Smisek held his own and said the airline had to be called CO and the HQ had to stay in IAH that he would be the victor in that battle. UA would have never fit in as well with US as it did with CO.

Either way, a well written article and one I totally agree with.
 
MountainFlyer
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:29 pm

Quoting mogandoCI (Reply 7):
Quoting MAH4546 (Reply 1):
Why any state would choose business unfriendly Illinois is beyond me. Just that alone was idiotic, forgetting any potential loyalty issues, which are negligible, IMO.

You can call Boeing that too.

Seattle isn't much better than Chicago when it comes to business. At least when compared to Texas.
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ordbosewr
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:31 pm

Quoting drerx7 (Reply 8):
I heard the same. When all the dominoes fell UA approached Houston with a "This is what Chicago has done - beat this. as well as pay for us to break the Willis Tower lease (which was an obscene amount)"

PMUA got HUGE tax breaks and dollars from the city of Chicago to move the HQ from out by ORD to downtown (the wacker dr office) then they got an even bigger allowance when they were looking to relocate the operations. That ended up going into the Willis Tower (aka Sears Tower). Each of those decisions was not popular with the UA employees as the commute to from the existing office to downtown could be well over an hour in average afternoon/morning traffic. During the Operations move the time that employees would leave (overnight) and the location of Willis was a concern for security.
Both of these contracts were very long and had VERY big penalties in them for termination, so any it was a question during the merger negotiation to take a HUGE real $ hit that would have to be paid for with merger synergies or accept that Chicago is the home of the airline!

(I worked from the willis tower for the time it was announced that UA was moving the ops center there, did not make it to the time they actually moved in as it was well over a year to build out the necessary facilities.)

I can confirm this part 100% but I believe the state also agreed to reduced state tax burden in keeping UA in IL.

While I understand that Texas may be mad, I am not sure that PMCO had much of a real choice to make.
 
durangomac
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:33 pm

Quoting PHXA340 (Reply 3):

Because the City of Chicago fought hard for United and offered them concessions.

And probably the state also. I do know that there were more HQ employeees in Chicago than in Houston so choosing the larger of two locations probably had something to do with it.
 
drerx7
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:38 pm

Quoting durangomac (Reply 13):
And probably the state also. I do know that there were more HQ employeees in Chicago than in Houston so choosing the larger of two locations probably had something to do with it.

Well, they gave up the political clout they had in Texas. Its funny because I remember when I was young in the 80s we religiously avoided Continental and flew almost exclusively on WN here in Houston (with a little DL in between) due to CO's piss poor reputation. The 90s came and I have been a loyal CO flier with more and more UA in there...then the merger happened - and it looks like WN will be getting more and more of my business...again. Its sad, I was a big proponent of this merger, so I hope alot of my issues with the airline are merger teething issues.
Third Coast born, means I'm Texas raised
 
gigneil
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:42 pm

Quoting CO777DAL (Thread starter):
It doesn’t make sense to leave one of the most pro business States with low taxes to go high tax Chicago
Quoting MAH4546 (Reply 1):
Why any state would choose business unfriendly Illinois is beyond me. Just that alone was idiotic, forgetting any potential loyalty issues, which are negligible, IMO.

I assure you're they're not paying Illinois a penny.

Quoting MountainFlyer (Reply 14):
They pulled a bait and switch on me a couple years ago. I purchased an economy ticket; got to the counter to check in and there were only economy plus seats left. They told me I'd have to pay more to board the flight I already had a ticket for.

I'm not calling you a liar, but I don't believe you. And if it did happen, then it was just because the gate agent was a douche - which is the case of many employees of any company.

NS
 
drerx7
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:49 pm

Quoting gigneil (Reply 16):
I assure you're they're not paying Illinois a penny.

Can't be paying them any money, there is no other customary reason to leave Houston for Chicago. There is a reason why New York is the ONLY other US city with more foreign consulates and Fortune 500 companies than Houston.
Third Coast born, means I'm Texas raised
 
roseflyer
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:51 pm

I think that article is making the claim that if United/Continental had chosen Houston instead of Chicago, they'd have enough lobbying power to keep Hobby as a domestic only airport. That is some rather slimy political rhetoric in my opinion. Yes the headquarters move did reduce the political influence, but there is another factor. Before the Southwest/Airtran merger, Southwest had no intention of launching international routes so there was no one pressuring to make Hobby an international airport. I don't know if having the headquarters in Houston or not could have had enough lobbying power to bully Southwest. As we have seen in the past with DAL, Southwest is pretty good at lobbying politicians in its own right.

PMUA did have a history about not caring about employees when deciding corporate locations. They choose everything based on the bottom line. That has resulted in management/salaried employees having to relocate. UA was already in the process of moving everyone from Elk Grove Village, which was a relatively nice campus near the airport to West Wacker or Willis Tower. They were also relocating engineering from San Francisco where it had been since the 1950s to Chicago. Forcing the relocation of people from Houston as well to Chicago meant that basically everyone at the company was forced to relocate. They lost a lot of good people by making such changes.
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kgaiflyer
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:57 pm

Quoting Reply 9):
EVERYTHING is negotiable in business


Still is and always will be, so what's the problem?

With an international airport virtually full of blue tails and gold globes, someone will have to explain to me how Houston is some kind of a loser.
 
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fxramper
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 9:59 pm

Smisek got the job if Chicago was HQ.

Quoting Roseflyer (Reply 18):

WN affecting IAH ops on internationals is comical imho. Just sayin'...
 
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kgaiflyer
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:05 pm

Quoting Roseflyer (Reply 18):
I think that article is making the claim that if United/Continental had chosen Houston instead of Chicago, they'd have enough lobbying power to keep Hobby as a domestic only airport.

Yes -- in all other cities with multiple airports, only one of the airports has international service.

Oh wait, that not true. Houston is simply catching up with the rest of the US  
 
gunsontheroof
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:06 pm

Quoting MountainFlyer (Reply 10):
Seattle isn't much better than Chicago when it comes to business. At least when compared to Texas.

Yeah, because no major businesses are making money in the Seattle area, let alone Chicago   

In any case, this article has much less to do with the regulatory climate in Texas than it does with the loyalty CO (rightfully) earned from the city of Houston being squandered by UA. There's nary a mention of lower taxes, less regulation, etc. in Texas v.s. Illinois in the article, so I'm not sure why everyone keeps bringing it up.
 
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yellowtail
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:09 pm

The whole UA-CO merger has actually been a gift to WN and its international plans. If WN plays its cards right and positions itself on the side of the consumer (vs threatening like UA), they just might end up with a very nice profitable international operation in a very quickly growing (and well travelled) International city.

They are well on their it would seem.
When in doubt, hold on to your altitude. No-one has ever collided with the sky.
 
DfwRevolution
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:24 pm

Quoting CO777DAL (Thread starter):
Not to mention the hit to Texas pride which I can see is going to cost the UA dearly.

IMO, pride in Texas has nothing to do with it. If you talk to anyone in Dallas, San Antonio, Austin, etc, their opinion of the UA/CO merger seems to be a big "meh." The real issue is that CO had major roots tying themselves to the Houston community, perhaps second only to DL's relationship with ATL. When I lived in Houston, it seemed like everyone knew someone who worked at CO. I can't say the same thing about AA/WN and DFW.

There is a matter of pride at hand, but it's the pride that CO employees took in what they built and what they feel the merger is squandering.
 
Josh32121
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:26 pm

COUA (whatever it is) will still be paying Texas and Houston a hell of a lot of taxes (Corporate Franchise, Sales, Property) whether their corporate headquarters is there or not. This ego blow is overblown, IMHO.
 
AADC10
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:27 pm

Quoting CO777DAL (Thread starter):
It doesn’t make sense to leave one of the most pro business States with low taxes to go high tax Chicago.

The tax situation at the headquarters is irrelevant to the corporation. Like most of the major airlines, United Continental Holdings is incorporated in Delaware. The state tax based upon revenue in that state and since World Headquarters generates little, if any revenue by itself, the location of the headquarters has no significant impact on taxes. The executives may grouse about it since it might raise their personal taxes but only a small number of employees would actually change cities.

Moving out of Houston may have hurt UA's influence at city hall but IAH and UA still have a symbiotic relationship. If UA balked at the IAH master plan, the airport authority would have a difficult time proceeding. WN will undermine them with international routes out of HOU but I find it hard to believe that WN would be shut out even if UA moved WHQ to Houston. ORD on the other hand is clearly contested and maintaining UA's narrow lead there is critical.
 
Type-Rated
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:33 pm

And Frank Lorenzo promised CO workers way back when that he wouldn't move the HQ from LA either......
I'm just sayin.....
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boeing773er
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:33 pm

Quoting MaverickM11 (Reply 6):

                 
Work Hard, Fly Right.
 
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redzeppelin
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:38 pm

I vaguely remember something about Boeing moving their HQ to Chicago in part so that they could try to cozy up with United... Was there any truth to that? Either way, would Boeing have any reason to feel snubbed if UA went to Houston?
 
AirframeAS
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:39 pm

Quoting dfwrevolution (Reply 24):
IMO, pride in Texas has nothing to do with it. If you talk to anyone in Dallas, San Antonio, Austin, etc, their opinion of the UA/CO merger seems to be a big "meh." The real issue is that CO had major roots tying themselves to the Houston community, perhaps second only to DL's relationship with ATL. When I lived in Houston, it seemed like everyone knew someone who worked at CO. I can't say the same thing about AA/WN and DFW.

At least the state of Texas has AA and WN. But I do agree, the "Don't Mess With Texas" thing has nothing to do with the relocation of the HQ or relocation of anything. The "Don't Mess With Texas" is more than a pride thing than anything else.
A Safe Flight Begins With Quality Maintenance On The Ground.
 
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kgaiflyer
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 10:55 pm

Quoting AirframeAS (Reply 30):
The "Don't Mess With Texas" is more than a pride thing than anything else.
Quoting SANFan (Reply 5):
Maybe time would be better spent worrying about trying to keep Dallas as the hq of whatever entity emerges from AA's Chapter 11.

Nothing wrong with the logic in either of these statements.
 
kfitz
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RE: United May Be Paying For Leaving Houston - For

Tue Apr 17, 2012 11:05 pm

First, Tilton did in fact stipulate that the new company would be located in Chicago and named United. These were non negotiable; Houston was never in the running. He left for JP Morgan to take Bill Daily's old job as head of the Midwest. Not a coincidence. Tilton had no intention of seeing the worlds largest carrier be located in anywhere but Chicago, and be named anything but United.

Second, the article reaks of a slimy business relationship with the city, complete with Texas good old boy arrangements and all. Reality is CO had a fortress hub with no competition in IAH, one that allowed them to control airfares and provide take it or leave it services (disastrous CO IRROPs compensation comes to mind). UA was able to compete with other carriers at its hubs and still remain profitable - I'm not convinced CO could, having only 2 hubs and not having ever competed at either. If the only way CO can operate a profitable hub at IAH is by controlling 80% of the market and having their HQ based there, then you have some issues.

Third, let's be honest about the merger beyond the sometimes alternate reality created by the CO PR machine - Without UA, CO was on its way to being crushed by DL in NY, and as the WN situation now shows, had a lot to loose at their other fortress hub. They had an uncertain future at best, and would have been unable to compete with a merged UA/US. Remember, it was Smisek who called up to Chicago asking to start merger dialogue after he saw reports in the WSJ of an impending US deal, not Tilton. The UA board, who were still rattled by the arrogance they saw from Keller two years prior (pulling out of discussions late only to bash UA in the press) was about to green light a UA/US transaction that would have left CO strategically weak without any suitor. Smisek, to his credit, knew the future was bleak at that point and a UA transaction was in the best interest for the company and all of its employees.

Fourthly, CO never had the number of high level elites that UA has. They had nothing like Global Services, had limited domestic hubs, no intl. F cabin, and lacked the corporate contracts UA had. But most of all, CO had never competed in highly competitive markets where they share the airport. CO came in and immediately started enacting their policies and procedures, which are rightfully angering and driving away UA's most valuable GS/1K customers. The downgrades are too long to list here. Smisek's laser focus on milking ever last synergy will come back to hurt both subsidiaries - you can't cut your way to growth.

[Edited 2012-04-17 16:23:14]
 
SonomaFlyer
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:16 pm

UA made their bed....

Houston also made their bed in the fact that they didn't want to pay the absurd amount of money in incentives and further breaks in order to pull the combined headquarters to Houston.

The competition in Houston will drive down fares with WN positioned at HOU to impact UA profits in Mexico, Central America and the Caribbean. Whether it will result in UA packing its bags and leaving is another story; IAH is well positioned geographically for operations in Latin America.

In the end, most metro areas with multiple airports have competing international service. (SF Bay, LA Basin, NYC etc).
 
max999
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:30 pm

Quoting CO777DAL (Thread starter):
Being from Texas, I know many in Houston that feel burned by new UA. It doesn’t make sense to leave one of the most pro business States with low taxes to go high tax Chicago.
Quoting MAH4546 (Reply 1):
Why any state would choose business unfriendly Illinois is beyond me. Just that alone was idiotic, forgetting any potential loyalty issues, which are negligible, IMO.

If that kind of binary, black and white attitude about locating businesses were true, then high-tax New York (where I live) would be a barren wasteland.

While I can't argue that other places have a lower tax rate, businesses look at many factors when choosing to locate. I know because I've been involved with location strategy work at my Firm. The correct mix of locations takes into consideration many factors, some of them are subjective rather than objective (like taxes).

The New York metro area still leads the country in the number of corporate HQs by a far margin...that must say something that taxes aren't the only thing involved.
All the things I really like to do are either immoral, illegal, or fattening.
 
drerx7
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:37 pm

Quoting kfitz (Reply 32):
Without UA, CO was on its way to being crushed by DL in NY, and as the WN situation now shows, had a lot to loose at their other fortress hub.

How do you figure?

Quoting kfitz (Reply 32):
Remember, it was Smisek who called up to Chicago asking to start merger dialogue after he saw reports in the WSJ of an impending US deal, not Tilton.

No, I don't remember

Quoting kfitz (Reply 32):
CO came in and immediately started enacting their policies and procedures, which are rightfully angering and driving away UA's most valuable GS/1K customers.

 
Third Coast born, means I'm Texas raised
 
COflyerBOS
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:40 pm

How in the world could you argue that the tax structure in the State of Illinois wont matter?

Sure, it might not matter to the corporate pushers who incorporated in Delaware, but it will certainly matter to the thousand or so folks who have been asked to leave Houston for Chicago!

Airline salaries aren't high to begin with, even within the corporate offices.

The cost of living index is 37.0% higher in Chicago than Houston and that's without factoring in the 5% state income tax in Illinois.

That's a big deal to someone like a mid-level accountant, a flight coordinator, and a senior engineer, etc...

The fact of the matter is that an airline is nothing if the frontline employees are unhappy. Asking folks to take a dip in their standard of living while the CEO/CFOs cash out, isn't going to create a positive work environment.

Funniest part of all is that Smisek's own wife refuses to move to Chicago. She loves it in Houston as did the many thousands of loyal CO employees who proudly called this city home. While many might think the article a bit silly, it's not a stretch to see why CO was the strongest legacy carrier with the best reputation year after year. Houston is an incredible city to live in on a modest salary.
 
traindoc
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:41 pm

As a Texan and with a million miles on CO I am disappointed with the name change and the HQ change. However, I am more than disappointed with the new UA. First, the new combined computer system continues to mess up both my wife and's and my seat assignments. I am a 1K and my wife is a Platinum and this has no benefit when it comes to keeping our seat assignments. Second, the UA fleet is way behind when it comes to amenities and clean planes. Third, a lot of the UA staff (from the PMUA side) have attitude.

If they don't get their act together, I am sure that Delta would be glad to have us back as frequent flyers.
 
cmb320
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:47 pm

Quoting traindoc (Reply 37):
If they don't get their act together, I am sure that Delta would be glad to have us back as frequent flyers.

Yes, come back to us. We are running a solid operation and would love to have your business!
 
kfitz
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:49 pm

Quoting drerx7 (Reply 35):

Oh you don't ? maybe you should go pull the quotes where smisek himself discusses these realities.

The sealed CO PR vacuum is no longer effective at the new carrier. Facts are now being let out.

This reads like a bunch of chest pumping. CO had proud employees and a high perception of itself due to its snarky, arrogant, and self commending PR machine. They would shamelessly tell their workforce how superior they were to everybody else, they would buy awards and speak to the world about how magnificent they were, and they would rub on competitors for being inferior. They tried to run on the fumes of the Gordon legacy for as long as they could, attempting to cover up the cost cutting Kellner was in fact brought in for after Gordon was fired.

Behind this alternate reality was a carrier with many fundamental structural issues, along with a multitude of customer unfriendly policies and procedures. You wouldn't know it from a community like this, which played as a lighthouse of sorts for the employees and fans to idolize the company over the last decade.

[Edited 2012-04-17 17:03:22]
 
drerx7
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RE: United May Be Paying For Leaving Houston - Fortune

Tue Apr 17, 2012 11:56 pm

Quoting kfitz (Reply 39):
The sealed CO PR vacuum is no longer effective at the new carrier. Facts are now being let out.

Do you have any links? I'd like to be reminded of these facts.
Third Coast born, means I'm Texas raised
 
kfitz
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:13 am

"CEO says Continental needed a perfect partnership"

Quoting Chron:
Four months after taking over Continental's top job, Smisek also witnessed the financial and operational strides United Airlines had made in the two years since it had discussed merging with Continental. Continental backed out of the talks amid a worsening U.S. economy.

Now, he also worried about how the competitive landscape was changing. Continental didn't have the global route network to attract higher-paying business travelers and faced an increasingly competitive domestic market.

“Network carriers like Continental may never make money again domestically,” Smisek said.


Delta, which merged with Northwest Airlines in 2008, had lower costs and a bigger market share, which left Continental vulnerable. Smisek weighed Continental's future as a stand-alone carrier versus combining with another carrier in the wake of Delta's merger and competition from foreign rivals.

On April 7, Smisek saw news that Chicago-based United was in merger talks with US Airways. Smisek didn't know if the reports were accurate but feared a merger would limit Continental's strategic options.

“If United merges with US Airways, we have just lost the only strategic partner that we could possibly have,” he recalled thinking. He sent an e-mail to United CEO Glenn Tilton.

Two days later, on Tilton's 62nd birthday, the two talked on the phone, putting into motion a conversation that would lead to Monday's announcement to create the world's largest airline. For legal reasons, Tilton could not acknowledge the talks with US Airways.

“He did let me know that if we were indeed serious that time was not our friend,” Smisek said.

The Continental team quickly organized and began negotiating with United. On April 22, Tempe, Ariz.-based US Airways said it ended talks with United.

With the threat of a competing offer removed, Continental and United began hammering
www.chron.com/business/article/CEO-s...-a-perfect-partnership-1702335.php

[Edited 2012-04-17 17:15:28]
 
boilerla
Posts: 347
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:14 am

This has been beat to death.

1. Chicago offered UA $30 million in incentives in 2006 to move to Chicago from Elk Grove.
2. UA had already signed long-term, cheap leases in downtown Chicago.
3. UA had already built a very expensive, very up to date operations center in downtown Chicago.
4. Houston did not offer any incentives to stay in Houston.
5. UA would have to pay significant penalties if they renigged on their deal with Chicago to keep HQ in Chicago. Houston did not offer to pay for those penalties.

Whats the mystery here? Houston lost because they didn't offer anything.

Also, who cares? You really think somebody chooses to fly based on where the corporate HQ are? If that were the case, Virgin America would be the largest airline in the country given that more F500 companies are in California, and more people, than anywhere else. And conversely, AA wouldn't be in bankruptcy.

The same is true with any business. Are people buying iPhones because Apple is in California? Are people buying Boeing planes because they're located in Chicago? A very small percentage give a fart. Most people buy based on price and performance.

People vote with their pocketbooks. United Continental Holdings has made a very nice profit being located in Chicago.

[Edited 2012-04-17 17:17:42]

[Edited 2012-04-17 17:24:38]
 
MaverickM11
Posts: 15252
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:18 am

Quoting kfitz (Reply 39):
This reads like a bunch of chest pumping. CO had proud employees and a high perception of itself due to its snarky, arrogant, and self commending PR machine

Well, that and just about every survey and data point backed it up as well.

Quoting kfitz (Reply 32):
First, Tilton did in fact stipulate that the new company would be located in Chicago and named United. These were non negotiable

Tilton barely knew where he was. All he knew is he had a company that he may or may not have known was an airline, and he wanted to offload it. Nothing was going to get in the way of that. He wanted to merge with US for chrissakes.

Quoting boilerla (Reply 42):
1. Chicago offered UA $30 million in incentives in 2006 to move to Chicago from Elk Grove.
2. UA had already signed long-term, cheap leases in downtown Chicago.
3. UA had already built a very expensive, very up to date operations center in downtown Chicago.
4. Houston did not offer any incentives to stay in Houston.
5. UA would have to pay significant penalties if they renigged on their deal with Chicago to keep HQ in Chicago. Houston did not offer to pay for those penalties.

   Oh. Facts. How refreshing.
E pur si muove -Galileo
 
drerx7
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:20 am

Quoting kfitz (Reply 41):

That'll work.
Third Coast born, means I'm Texas raised
 
User avatar
kgaiflyer
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:31 am

Quoting traindoc (Reply 37):
First, the new combined computer system continues to mess up both my wife and's and my seat assignments. I am a 1K and my wife is a Platinum and this has no benefit when it comes to keeping our seat assignments

This week for the first time since March 3rd, I won an upgrade without trading an electronic certificate for it. So there is hope.

It still takes a calender week to get miles credited, however (used to be done overnight).
 
caljn
Posts: 146
Joined: Sun Oct 14, 2007 9:37 pm

RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:34 am

For those fantasizing about Illinois and Chicago as having some anti business environment versus Texas, please cite specific laws, reasons, tax rates to support your argument.

I hear people make such charges frequently, but they never provide evidence. "If they say so, it must be true!"
 
ckfred
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Joined: Wed Apr 25, 2001 12:50 pm

RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:35 am

Quoting MAH4546 (Reply 1):
Why any state would choose business unfriendly Illinois is beyond me. Just that alone was idiotic, forgetting any potential loyalty issues, which are negligible, IMO.

First, UA got some concessions from Chicago to move corporate from Elk Grove Township back to the Loop. Second, the latest trend in Illinois is threaten to leave unless you get concessions. Then, the General Assembly grants the concessions. CME Group got concessions. Navistar (International trucks) wanted to move its headquarters a few miles down the road and build a test track facility. When the Village of Lisle said no, Navistar theatened to move HQ to a friendlier state. Then, the State offered concessions and funding to build sound barriers around the test track.

Quoting MaverickM11 (Reply 6):
I find that hard to believe. Glenn was so desperate and focused to sell/merge the carrier he would have done so with an Alpaca farm in Kalamazoo.

I believe that keeping the United name and Chicago HQ was reported in the Chicago papers.

Considering that both UA and AA have been butting heads with the City over ORD expansion and landing fees, the belief is that the combined carrier had more to lose by becoming CO headquartered in Houston, rather than United headquartered in Chicago. If the combined carrier had moved to Houston, the lawsuit that UA and AA filed would probably still be going.

Further, CO was one of three Texas carriers. CO's interests may not be the same as AA's and WN's interests. On the other hand, despite AA and WN having large operations in Chicago, UA is the only airlines headquartered in Illinois. Thus, pretty much every member of Congress from Illinois, and the political leaders at the state and city level listen to what UA has to say. And, both Barack Obama and Dick Durbin, the Senate Majority Whip, are from Illinois. Those are very powerful people who will go to bat for UA. No one in Texas has the same level of influence.
 
MaverickM11
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:39 am

Quoting ckfred (Reply 47):
Considering that both UA and AA have been butting heads with the City over ORD expansion and landing fees, the belief is that the combined carrier had more to lose by becoming CO headquartered in Houston, rather than United headquartered in Chicago. If the combined carrier had moved to Houston, the lawsuit that UA and AA filed would probably still be going.

Further, CO was one of three Texas carriers. CO's interests may not be the same as AA's and WN's interests. On the other hand, despite AA and WN having large operations in Chicago, UA is the only airlines headquartered in Illinois. Thus, pretty much every member of Congress from Illinois, and the political leaders at the state and city level listen to what UA has to say. And, both Barack Obama and Dick Durbin, the Senate Majority Whip, are from Illinois. Those are very powerful people who will go to bat for UA. No one in Texas has the same level of influence.

These all make lots of sense; all I'm saying is that the HQ moved/stayed in Chicago for good reasons, not because it was a non negotiable demand from Tilton.
E pur si muove -Galileo
 
nycdave
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:44 am

Is it just me, or does this:

Quoting CO777DAL (Thread starter):
It doesn’t make sense to leave one of the most pro business States...

Seem to contradict THIS:

Quoting CO777DAL (Thread starter):
The City of Houston would not let anything happen that could damage their hometown airline, especially any special request from a Dallas based airline.

That sounds more like a political and business culture more corrupt than even Chicago's has been for a while! Helping to protect a local monopoly? Tsk tsk!

Look, if "low taxes" or "low cost of living" were the only thing that mattered to people, or businesses, the NYC metro area would be a ghost town, businesses would be HQ'd in Delaware as well as being incorporated there, and the hottest business locations would be in the Dakotas.

Low taxes are usually what, in development plans, you offer when you don't have sufficient *quality* to offer... the same way that people won't pay the same amount for a down comforter from Wal-Mart as they would from Frette. Some cities that have abundant *non*-tax revenue or choose to shift their fee base to other sources (port operations, car registrations, you name it) also sometimes use that to cut taxes to spur growth.

In a recent survey of what the "Global 1%" most value in choosing to move to a specific location, Education and Culture were in the top 5, while "taxes" didn't even crack that barrier. While Houston is hardly the backwater some coastal elites may like to imagine, it also doesn't have the density of educational and cultural opportunities Chicago has. It has Montrose, but it doesn't have the sort of dense, active downtown that attracts what demographers term the "creative elites" -- the ambitious kids and entrepreneurs who'd rather cram into a 5th floor walkup in NYC than live someplace "less exciting", and has made Chicago the city with the densest concentration of startups in the country. It has awful traffic with no real mass transit to speak of. While Chicago has brutally cold winters with the winds whipping off the lake, Houston has nearly half a year of feeling like an armpit, with an off-chance of hurricanes. Houston has home prices that give you a lot more for your money... but Texas schools also aren't keen on teaching evolution, sex ed, or anything to do with Thomas Jefferson. Texas has looser gun laws and concealed carry, Illinois doesn't (and there's one where which you think is better greatly depends on your point of view on guns!).

My point is, you can go back and forth on the relative qualities of cities, and different people are going to weigh things differently, and even see somethin as a drawback that someone else sees as an advantage. Bashing Chicago as some tax-heavy, crime-ridden, expensive freezerbox misses out on a lot of its assets, just as touting Houston as a boom town with a ton of energy company HQ's misses some of its failings.

I don't think UA is about to lose its death-grip on the Houston area, though I'm sure WN will put a dent in its VFR draw. They control too much gate space at IAH for anything horrible to happen to them. Though....

As I noted in an earlier thread, in the latest airline quality rankings, based on data post-merger, but pre-SOC, showed CO dropping down towards UA's level near the bottom of the pack, rather than UA moving up. The main reason? Poor customer service/relations... which might just be caused by all the highly irked and upset employees on both sides. Most UA elites I know think CO has wrecked their favorite airline, and most CO elites I know think UA is dumping an inferior product and service on them. Most non-elites are happy to get E+, and to get seatback IFE... but they'll still pay whoever charges the least!
 
kfitz
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:47 am

Quoting MaverickM11 (Reply 43):
Well, that and just about every survey and data point backed it up as well.

Incorrect; The CO fans love to push this line as a mea culpa for any and all criticism of their airline but it's far more indicitive of the spin CO was able to bathe themselves in than a definitive sign of unquestioned superiority.

In reality, Mileage Plus (not MileagePlus) was consistently voted the best FF program by business travelers/coporate sales teams. UA "won" more business/elite traveler awards than CO did. These are the "awards" that mater if any actually do, given they actually drive high margin customers. For "data points", UA contstently outperformed CO from an operational perspective (IDB/on time/baggage/etc).

CO also went out of their way to broadcast their customer awards (which again, many were paid for outright) to bolster their line of superiority. To be fair, CO did well in populist surveys like JD Power where results come from fickle low yeild low spending travelers, and are heavily influenced from general perception than the actual reality. For example, CO is the only US carrier other than WN to not give the full can of soda, the only legacy to not have pillows in domestic F, flew a fleetwide 31-32" Y product with what many agree are harder seat cushions than competitors. CO also had a multitude of customer unfriendly policies like lowball VDB/Irrops offers. The "spin" on all this was to repeat buzz words over and over again like "respect" and "clean". It worked for years, but you can only coverup for actual deficiecies for so long before perceptions change.

Quoting MaverickM11 (Reply 43):
Tilton barely knew where he was. All he knew is he had a company that he may or may not have known was an airline, and he wanted to offload it. Nothing was going to get in the way of that. He wanted to merge with US for chrissakes.

Tilton successfully ran United through the most complex and lengthy Ch.11 filling of any airline in history. I know it goes against the CO grain to have to admit that CO needed UA, but that is exactly what happened. A UA/US deal may have had less upside than a CO deal, but it was far from being the disastrous idea that a.netters continuously like to make it out to be. Make no mistake, Tilton had the upper hand in negotiations in 2010; CO had exausted their bargaining power in 2006 and 2008, and UA was on the tip of going ahead with a US deal while CO had no potential suitor. The upfront non negotiable stipulations were real so it's puzzling that you continue to insist that they weren't, offering up nothing in the way of facts to prove this.

[Edited 2012-04-17 18:07:11]
 
nomorerjs
Posts: 581
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RE: United May Be Paying For Leaving Houston - Fortune

Wed Apr 18, 2012 12:52 am

Illinois is one of the most unfriendly business states in the country (raised corporate taxes last year, high state income tax, and just not friendly to business). That being said, even the dumb asses running Illinois know when to give a special tax break / holiday to a business. UA was one of the few fortunate recepients of this (and Boeing a few years back). Look at all of the businesses leaving CA, IL, NY, etc. to TX and FL! There is a reason to this, no state income tax and a right to work state. If you choose to stay, you are the benefit of the state caving in.

This is why I moved to Dallas from Chicago. Totally diferrent business climate, and a chance to get forward without big brother taking my hard work!