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Fri, Jun 16, 2006

Who Won In The Wright Amendment Compromise?

Everyone, And No One

Aero-News Analysis By ANN Associate Editor Rob Finfrock

In a press conference Thursday held, surely not by coincidence, at a Dallas-Fort Worth International Airport hotel, Dallas Mayor Laura Miller and Fort Worth Mayor Mike Moncrief jointly announced an agreement that could potentially bring an end to the 26-year battle over the Wright Amendment, which limits flights from neighboring airport Dallas Love Field.

The deal -- which must be approved by the respective city councils, and then by Congress -- represents an amicable agreement by the cities of Dallas and Fort Worth, American Airlines, Southwest Airlines, and those carriers' respective home airports. As with all compromises, the deal gave all parties in the Wright Amendment battle something to cheer about... and each side lost a little, too.

It was difficult finding naysayers at Thursday's conference.

"The traveling public -- 5.3 million people in the immediate 12-county area -- will see an immediate and dramatic increase in airline competition, which typically results in lower fares and more choices, which will in turn stimulate economic growth for our region," Miller said.

The details of the deal are as follows, with ANN commentary following:

  • The Wright Amendment still stands, for now... but all long-haul flight restrictions would be lifted in 2014.

ANN Take: Long-haul restrictions will be lifted eight years from the date the deal is approved by Congress... which must occur by the end of this year, or else the deal is void and all parties go back to square one. Southwest, of course, had wanted the immediate lifting of such restrictions... and executives with the airline initially balked at the eight-year timeframe. Those comments were quieted by Thursday's press conference, however... and realistically, Southwest benefits from the allowance of through-ticketing (see next item) more than it loses having to wait eight years for the Wright Amendment to, finally, disappear.

The eight-year hold also gives American Airlines time to structure a plan to compete with a non-restricted Southwest, and allows plenty of time for needed improvements to be made to Love.

  • Southwest will be allowed to begin immediate through-ticketing at Love Field

ANN Take: This is the Big One, Southwest's chief victory in this agreement... perhaps even more than the eventual repeal of Wright. Through ticketing -- meaning passengers may fly anywhere in the country, on the same ticket (even the same plane) as long as the aircraft stops first in a Wright Amendment state -- allows Southwest to compete on the same playing field as most other airlines when it comes to medium-distance routes, that typically go through a hub airport, anyway. While the airline does give up some ground to American in this regard, through-ticketing does give Southwest equal footing with other airlines operating from DFW... most notably Northwest and AirTran, whose hubs are in other cities... and most Southwest customers will likely appreciate the added convenience of only needing one ticket more than they'll grumble about a short stopover in a neighboring state. The availability of through ticketing should also, in theory, result in lower fares... as a result of both lower ticket costs, as well as greater competition for American and other airlines flying from DFW.

Some more potential big winners in through ticketing are airports in neighboring states, that will likely see an increase in the number of Southwest planes as the concept takes off among Southwest's passengers. Albuquerque, in particular, could see a jump in business, as it represents Southwest's main Wright Amendment gateway to the West Coast. Kansas City, St. Louis, and Little Rock could also see big gains; conversely, Houston's crowded Hobby Airport could see an (arguably much-needed) reduction in flights, as former "Wright flights" are more economically routed through other cities.

  • Love Field's gates would be capped at 20 beginning in 2010, giving Southwest 16 gates and two gates each to American Airlines and Continental Airlines. The remaining 12 gates would be demolished or modified so they can't be used, and airlines cannot split gates.

ANN Take: Dallas is currently negotiating to purchase the old, mothballed Legend Terminal, which represents the majority of gates that would be closed under this arrangement. Dallas plans to demolish the terminal... but these gates aren't being used anyway. The Legend terminal -- which, frankly, is far nicer than Love's main terminal -- was built to accommodate the old Legend Airlines' DC-9s... and is not useable by Southwest's 737s. Southwest also has unused gates in the airport's north concourse that would likely be shuttered, and converted into other uses.

Southwest currently maintains 14 gates at Love Field... and would likely shuffle flights to handle increased traffic for through-ticket flights, which should mean 16 is a serviceable number, at least for now.

The winners here? Neighbors around Love Field -- especially those in the Park Cities -- many of whom had expressed fear that more flights from Love Field would mean more noise and pollution. This is the primary concession to those concerns in this agreement.

  • American, which gives up one gate at Love under this plan, would not be forced to leave the smaller airport.

ANN Take: They will anyway, and in record time. With this agreement in place, American no longer has a reason to maintain a presence at Love Field; better the airline withdraw its gates and use those planes on more profitable routes out of DFW. It is no secret that American's Love Field operations have been money losers for the airline; our sources generally agree that this scenario gives American an easy way to leave Love.

  • The compromise includes $150-200 million in upgrades to Love Field, to be funded by increasing landing fees at the airport.

ANN Take: The proposed increases are steep -- from a current 55 cents per 1,000 pounds landing weight, up to a maximum of $3 -- but those fees would still be less than comparable charges at DFW, and are not likely to be met with much criticism. The improvements to Love Field mentioned at the press conference would include a much-needed remodeling the airport's 1950s-vintage terminal. A separate fee, levied on passengers, would go towards building a spur line from the airport to the Trinity River Express light rail line that runs south of the field.

  • A voluntary noise curfew would be implemented at Love Field that would prevent scheduled take-offs or landings between 11 pm and 6 am.

ANN Take: Such a de facto curfew more or less already exists at Love, as Southwest only shows two flights (one from Albuquerque, the other from Houston) that arrive after 11 (in practice, the Houston flight typically arrives later than that, closer to midnight) and no scheduled departures after 11:30.

It is unclear how the restrictions would impact the primary users of Love Field in the overnight hours -- regional freight haulers, and larger operations such as DHL. If the noise restriction sticks, those operations could eventually move to surrounding airports, such as Addison or Executive (nee Redbird).

  • Both Dallas and Fort Worth agree to oppose new commercial service at any other airport within an 80-mile radius of Love Field (except DFW, of course) for the remaining eight years the Wright Amendment is still in effect. And, Southwest would be forced to give up gates at Love Field if it chose to operate out of other local airports.

ANN Take: Fort Worth has repeatedly tried -- and failed -- to lure new carriers to the Alliance and Meacham airports. It's a non issue, especially with room still available at DFW. As far as Southwest wanting to operate from another local airport... the carrier has little reason to do so, unless it runs out of room at Love Field. But let's assume that happens, sometime between 2014 and 2025, when this stipulation expires. It is likely that by the time Southwest outgrows Love Field, it will be ready for another airport, anyway... and who knows what the political and economic climate will be then? Southwest is hedging its bets here... and we know the carrier's successful track record when it comes to hedging...

  • If Congress passes legislation that is not in line with the agreement -- and, if Southwest then starts nonstop long-haul service to or from Love Field -- the airline would then voluntarily give up control of eight gates at the airport.

ANN Take: This presents another interesting scenario, as Southwest could be penalized for any Congressional ruling on the Wright Amendment that, just one week ago, the carrier would have welcomed. Southwest has stated it could not viably operate its base of operations with only eight gates at Love. But... what if Southwest were to make good on its earlier rumblings, and move its headquarters from Dallas? It could base long haul operations from that location... while also using eight gates for long haul service out of Love Field. A promise to keep its headquarters at DAL was not part of Southwest's terms in this agreement -- only that it would abide by its terms.

Having said that, Southwest has pledged to support the agreement, along with the other players in this battle. While there has been some speculation that Southwest may shrewdly attempt to press its own agenda with lawmakers while publicly supporting the tentative agreement... truth is, there isn't a really smart reason to do so, unless Southwest still has a few more cards up its sleeves.

Which it just might...

  • International commercial service from Love Field remains prohibited

ANN Take: This is a concession to American and DFW... but Southwest has done just fine flying only domestic routes, and its codeshare agreement with ATA gives the airline access to Hawaii. Southwest could always begin international service to Mexico from ABQ, if it were so inclined. This is a nonstarter.

So, Who Won?

As with all great compromises, the answer is: everyone, and no one.

The positives -- American gets to keep Wright for another eight years; DFW -- and Fort Worth -- maintains the upper hand for travelers looking to fly nonstop to distant destinations. The city of Dallas gets to keep one of its biggest tax-paying customers happy; and, at long last, Southwest can see a light at the end of the Wright tunnel.

As far as negatives go -- American loses much of its protection from the Wright Amendment immediately, with through ticketing at Love... and the Wright Amendment shield disappears completely in eight years. DFW airport still remains attractive to long distance flyers in the metroplex, as well as customers in Fort Worth... but a more convenient Love Field will likely take customers from the larger airport. Dallas will have to foot the bill for demolishing the Legend Terminal... and still risks eventually losing Southwest at Love Field, although that is probably a longshot. And Southwest still has to live with the Wright Amendment for another eight years.

The true winners? Well, to hear the city leaders and airline CEOs tell it, the answer is: customers in North Texas, who now have two viable options for a large amount of their air travel needs.

What is the next step?

The measure must pass approval with the Dallas City Council on June 28, and Fort Worth votes on the measure July 11. Lawmakers in North Texas must also voice their support for the agreement... and then persuade their colleagues outside of Texas to support it.

The Dallas Morning News reports one holdout on the original agreement -- Senator Kay Bailey Hutchison -- plans to draft legislation based on the agreement to present to legislators. From then on, lawmakers are under the wire to pass the agreement by December 31 of this year... or else the agreement is void.

And then we start all over again.

FMI: www.aa.com, www.swa.com, www.fortworthgov.org, www.dallascityhall.com


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