Military makes Continental's hub in Guam more valuable
By BILL HENSEL JR.
May 30, 2008
The military is the reason Continental Airlines has a hub on Guam, and the military is the reason it could get a big boost soon.
Continental Micronesia, which began in 1968 as an offshoot of the carrier's troop transport business during the Vietnam War, is expected to benefit over the next few years as the U.S. territory plays a central role in the realignment of U.S. forces in the region.
Some 170,000 people live on the Pacific island now, but the population is expected to swell by nearly one-third to roughly 225,000 by 2014, according to David Cohen, former deputy assistant secretary of the Interior Department.
That will mean Guam will have to be better equipped to handle the influx, said Cohen, the federal representative to the U.S. Pacific community from 2005 to 2007.
"The military buildup is going to require that Guam's civilian infrastructure be significantly upgraded and significantly expanded," said Cohen, a lawyer who returned to private practice earlier this year.
"The public infrastructure on Guam is not adequate to meet the needs of the current population."
The buildup will require thousands of additional skilled workers, and that is expected to trigger more business for Continental Micronesia, a subsidiary of Houston-based Continental.
Known as Air Mike, the carrier has 30 departures a day to 23 cities across the Pacific Rim, Micronesia and Hawaii.
Continental Micronesia is the dominant carrier in the region and the largest private employer in Guam, with more than 1,500 workers.
Northwest Airlines, Japan Airlines, China Airlines and All Nippon Airways also serve the island.
The carrier already is seeing a "slight uptick" in travelers, said Mark Erwin, its president and chief executive.
He expects that to accelerate quickly, with an increase of about 12,000 more people than normal during the next year. The carrier now flies about 1.5 million people annually.
"We see this as a great growth opportunity for our fourth hub," he said.
Guam Gov. Felix Camacho said during a recent news conference related to Air Mike's 40th anniversary on the island that the carrier, which has a payroll of more than $90 million, is part of Guam's family.
"We do recognize that the privilege of having Continental here on Guam establishes a main transportation hub," the governor said.
"It's not only people who come in and out of Guam. It's also the cargo that comes in daily that affects our lives."
Camacho cited heavy investment at Guam's A.B. Won Pat International Airport that Air Mike has helped attract, and the Federal Aviation Administration recently approved an additional runway.
The Pacific region for Continental, which includes Guam, saw growth of
12 percent during the first quarter of this year compared with last year, according to a recent regulatory filing by the airline. The region generated $257 million in revenue during the quarter, compared with $462 million for Latin America, $606 million for the trans-Atlantic region and $1.3 billion domestically.
Guam often isn't mentioned as a Continental hub alongside Houston, Cleveland and Newark, although that could change as the military shifts some 8,000 Marines — along with about 9,000 dependents — from Okinawa, Japan.
The U.S. has long had a military presence in Guam, located on the other side of the International Date Line from the U.S mainland, spurring the slogan "Where America's Day Begins."
The entire island would fit inside Houston's Beltway 8, noted Walter Dias, staff vice president of sales and marketing. Dias has worked for Continental both in Houston and in Guam, where he has lived for the past 15 years.
The relocation of the Marines will cost more than $10 billion and will involve the construction of a new base, housing and improved utilities.
Plans call for billions more to be spent for the Army, Navy and Air Force. Japan will foot about 60 percent of the relocation bill, Cohen said.
The U.S. and Japan came to an agreement to realign U.S. forces and determined it would be in the best interest of both countries if troops were shifted from Okinawa, he said.
"Guam is strategically located but on U.S. soil, which gives the military greater room for maneuvering than is usually the case in foreign nations," Cohen said.
Erwin said Continental could have a Houston-to-Guam flight or Los Angeles-to-Guam flight within about three years. For now, flights from the U.S. mainland stop in Hawaii.
The carrier already has a big presence on Guam, with pilots and flight attendants and others living there, he noted.
Continental Micronesia takes its presence in Guam seriously and is an integral part of the community, Erwin said. That includes donating computers to schools and operating medical evacuation flights when a Guamanian suffers emergency health issues. Those flights are conducted using miles donated by frequent fliers.
Air Mike pilots and flight attendants also largely live there.
"So a lot of money stays on the island," he said.
In addition to the Marines, the buildup is expected to attract an influx of foreign workers, many from the Philippines, as there should be more work available than there are locals to do it as port facilities, the electrical system and wastewater plants will need upgrades.
President Bush signed a bill earlier this month that lifted some caps on temporary foreign workers, although that law may have to be tweaked again, Cohen said.
"But it is certainly a good start to help the military attract the workers it needs to make this happen," he said.
A growing reach
As for Continental, the growth will enhance Continental's international expansion program. Air Mike recently ran a charter flight from China to Guam, which already is a major tourist destination for Japan.
Without naming names, Continental Micronesia's Erwin said Guam's reach will only grow in the coming years.
"This gives us additional opportunities to expand to other international destinations from Guam," he said.