WASHINGTON (dpa-AFX) - Southwest Airlines Co. (LUV) has agreed to fund a $100 million expansion of Houston's William P. Hobby Airport's international service. The plan has the backing of City of Houston's Mayor Annise Parker.
As per an agreement reached with the City of Houston, the airline will design and build five new gates and customs facility to the City's specifications. When the work is complete, the City will own the improvements debt free.
In return, Southwest will have preferential scheduling rights and need not pay rent for its use of four of the five new international gates. It also need not pay rent for its use of the customs facility.
The fifth additional gate and the customs facility will be available to other airlines for use and these carriers will have to pay rent.
The agreement is subject to approval by Houston City Council and the airline's management. City Council consideration is expected on May 30 and construction is planned for the spring of 2013.
Southwest plans to utilize new 737 aircraft that are more efficient and quieter, thus eliminating impact on the surrounding neighborhood.
As an incentive for airlines agreeing to a long-term lease at Hobby, there may be 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 on an expected increase in concession sales inside the airport from additional passenger growth.
LUV closed on Wednesday at $8.36, up $0.09 or 1.09 percent, on a volume of 11.99 million shares.
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© 2012 AFX News
