Continental exerts a pull on the city

Dec. 3, 2006, 10:24AM
Continental exerts a pull on the city
A merger could affect more than transportation

By PURVA PATEL and NANCY SARNOFF
Copyright 2006 Houston Chronicle

FACTS AND FIGURES
• Revenue: $11.2 billion in 2005
• Ranking: Ninth-largest Houston-based public company by 2005 revenue
• Headquarters: Moved to Houston in 1982
• Houston employees: Nearly 20,000
• Total employees: More than 43,000
• Harris County property tax bill: $8.2 million in 2005
• Ranking: 17th-largest in property tax values in Harris County
• Largest hub: Bush Intercontinental Airport
Sources: Company, Harris County Tax Office, Chronicle 100

Big corporate headquarters bring ripples of economic development to their home cities. But having a hometown airline can bring waves. And that is exactly what Continental Airlines has meant for the Houston area, business and civic leaders said last week as merger speculation buffeted the airline industry.

Over the years, Continental, which has a major domestic hub of connecting flights here, has seen its presence grow. And in turn it's spurred change in areas beyond its orbit. "There's no other single company that is as important to Houston's image and strategic interests as Continental Airlines," Houston City Councilman Michael Berry said. "They're a major employer, a major charitable contributor, and our airport wouldn't be what it is without them."

Today the company employs nearly 20,000 workers in the Houston area and has been a major contributor to the arts, the United Way and often has donated airline tickets to various causes. It also owns a large amount of real estate, including a 118,000-square-foot building in north Houston, and leases 682,000 square feet in Continental Centers I and II at 1600 Smith and 600 Jefferson. And where it goes, so goes business.

When Continental moved its headquarters downtown in 1998, it was a catalyst for other businesses to relocate to the city center, said Paul Layne, executive vice president of Brookfield Properties, a downtown property owner that leases space to the airline.

It's also a major taxpayer, forking over $8.2 million in local property taxes last year, and it ranks 17th in Harris County in terms of property tax value, according to the Harris County Tax Office.

So what would a merger of Continental and some other major carrier mean to Houston?

Downtown would not be hurt significantly, even if a merger resulted in a reduction in office space, Layne said. Occupancy downtown has been increasing, and some real estate experts peg the vacancy rate at less than 10 percent. If Continental were to vacate some of its space, "it would be an opportunity for expansions for other companies," Layne said.

But Houston is more than just its downtown.

Paul Bettencourt, Harris County tax assessor-collector, said any merger could result in job losses and fewer taxpayers. "In merger scenarios, you want to be the headquarters and the hub," Bettencourt said.

Driving airport growth

Continental's growth has also been responsible for much of the expansion at Bush Intercontinental Airport. In 1998, the city announced a $1.4 billion expansion program as then-Continental-owned regional jet service Continental Express took off.

The plans included a new federal inspection building, a parking garage for terminals A and B, a consolidated rental car facility, a north runway and other projects.

Continental contributed millions of dollars to the project and oversaw construction of Terminal E, which it manages. It also leases Terminal C, although those concessions are contracted with the city, and uses all gates in terminals C and E.

Proposition campaign

The airline also ran a campaign this year to pass a proposition that would keep city funds for airport-related uses from being capped. "They're driving a ton of growth at the airport. We've had very little growth from other carriers," said Rick Vacar, director of the Houston Airport System.

He noted that the airline's operation in turn has spurred job growth at the airport by creating the need for catering, cleaning, fuel servicing, concessions and security, among other jobs.

Although the airline represented 48 percent of the airport system's operating revenue during the last fiscal year, Vacar isn't too worried about the loss of Continental's dominance should a merger materialize.

The city has a lot of departing traffic, something airlines find attractive. "If there's a market to be served, somebody will serve it," he said. Beyond the headquarters, having a Continental hub, or connecting point, here has attracted other businesses to the city.

"We talk about the fact that Continental is based here. That's certainly an attribute we use to market this region," said Jeff Moseley, head of the Greater Houston Partnership. "We have so many international and foreign companies based here, so it has a lot to do with this critical hub that the Houston airport provides."

Fewer plane changes

For local business travelers, having a hub airport means nonstop service to many other domestic and international cities. The hub service makes the city compelling to businesses whose executives or employees travel often.

Continental averages 798 departures on weekdays from Houston.

"If you're in a nonhub city and have to change planes to get places, it's more costly to do business because it takes you more time to get there," said Fiona Sigalla, an economist at the Federal Reserve Bank of Dallas.

When companies move, one of the things they want is good transportation, and to a large extent that means airlines. Continental is one of the main reasons Venezuelan-owned Citgo moved its headquarters from Tulsa to Houston two years ago, spokesman David McCollum said. "Continental provides service to Caracas from Houston, so that's very important for us in terms of going back and forth when we need to," he said.

"But also, the domestic service and not having to go through Dallas or Atlanta makes it very worthwhile for our executives."

purva.patel@chron.com
nancy.sarnoff@chron.com