What if SWA was to Move from Dallas? Pt 1

chase

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Holly Hegemann does a great job of outlining some of the issues facing the city of Dallas and local leaders about the current battle over the WA. Gary Kelly isn't sitting back for things to happen and I firmly believe as he has said, "everything is on the table." For those who say that "well they are just now adding 4 more sim bays for a total of 10 simulators....SWA isn't going anywhere." Well I would say that if a city was willing to negotiate for being called "Home to Southwest", that will be chump change in building a new facility. I too believe SWA would consider leaving Dallas if the battle for the WA takes too long but only GK & his leadership team knows that limit but like a good poker player he'll use every advantage he can (within legal limits...we don't a bankruptcy judge to lean on) to get rid of the WA. We're in the 2nd inning of a 9 inning ball game...

chase
________________________________________________

Wright Amendment: Southwest Starts Pushing the Economic and Political Hot Buttons

Suppose you owned an airline and all your recurrent training took place at your company's headquarters.
Okay, no big deal.
But also suppose that your headquarters was located next to an airport that you couldn't use to fly in employees from far-flung locations.
Well, at least not without at least one stopover.
How much time is lost because of this situation? How much extra money is spent?
And what if the city in which your headquarters was based, and to which you paid millions of tax dollars each year, refused to support your efforts to lift the current restrictions on flying in and out of that airport?
If you're Southwest Airlines, these are not insignificant questions.
There has been a lot of noise over the last few months about whether Southwest will succeed in having the Wright Amendment, which restricts where it can fly to from Dallas, removed. But for the most part, the noise seemed to be pretty much a rehash of the same old DFW International Airport/American Airlines political line in the sand.
Until now.
Tuesday, Southwest Airlines' CEO Gary Kelly said in an article in the Ft. Worth Star Telegram that the airline intends to pursue its campaign to repeal the amendment for as long as it takes, even if it takes years.
But down underneath the headline, came what I thought was the more important comment, "And [Kelly] also hinted that the company might be forced to relocate its corporate headquarters to another city if Love Field remains restricted."
Finally, if there was still anyone wandering around in the dark about the airline's new attack points, a quote by Southwest Airlines' SVP of Governmental Affairs Ron Ricks, summed it up nicely, as he said, "Southwest is a growing company, but it's not growing in Texas. The fact of the matter is, a shrinking market is not the best site to have a corporate headquarters."
This marks the beginning of a major shift in strategy.
But this was not the first time the airline had signaled the change.
First, for those who might have missed them, a little over a week ago the Dallas Morning News presented a "He said, He said" dueling pair of commentaries. In this corner, Herb Kelleher, chairman of Southwest Airlines.
In this corner, former AMR Chairman Bob Crandall.
The subject?
What do you think?

I think it would be safe to say there was not much new ground broken by Bob's comments. In fact, considering how much money American Airlines lost on its last Love Field "defensive" adventure, I had to laugh, when he wrote:
"In recent days, my successor, Gerard Arpey, has been criticized for allegedly 'threatening' to put more service into Love Field. In fact, Mr. Arpey is threatening no one. He is merely stating the obvious truth that if Dallas is to have two airports, any airline wishing to compete for Dallas travelers must serve Love Field. Moreover, Mr. Arpey knows -- as any thinking participant in the debate also knows -- that no successful business can grant a strong competitor a monopoly on the most desirable territory and hope to prosper."

While I found Bob's commentary predictably protective of American, there were two very important new points of attack in Herb's comments. Gary's comments Tuesday simply restated them.

First, Herb said:
"But Southwest still cannot even provide one-stop, single-plane or normal connecting air service between its headquarters city and points beyond the Wright/Shelby amendment states (yes, the Wright amendment can be amended: Sen. Richard Shelby, R-Ala., amended it to add three more states)."

Secondly, just in case that one didn't hit home, he came back with:
"Dallas County reaped $15 million in taxes from Southwest in 2004, since Southwest's entire aircraft fleet is taxed in Dallas, not Fort Worth. Our air services are restricted, but our tax payments aren't."

Yes, nothing says that Southwest Airlines has to keep its headquarters in Dallas.
Last fall, I wrote here more than once about how we had the impression that everything at Southwest was "on the table." And I mean everything. While publicly CEO Gary Kelly admitted as much in any number of interviews, I'm not sure that many people really understood the level of introspection going on at the airline.
But in the last month the airline has begun to reframe the situation it finds itself in. And a major part of that reframing concerns the city of Dallas, Texas, which Southwest calls home.
First, there is no doubt in my mind that the preference for Southwest Airlines at this point in time would be for the Wright Amendment to be thrown out. The airline has also made comments of late that indicate this could be done on an extended timetable --over a period of five years for instance.
But let's take a closer look at the city that Southwest Airlines calls home.
Dallas, once a leading Southwestern U.S. economic powerhouse, is struggling.
In a 2004 economic report prepared by Booz Allen Hamilton, the consulting firm said, "By all rights, Dallas should be booming like many of its peer cities that experienced population growth above the United States average over the last 50 years -- Phoenix, Austin, San Jose, and San Diego. Instead, the city is lagging behind on many key indicators. More worryingly, Dallas is falling further behind with each passing year. The city is rapidly losing its position as the region's economic core, the quality of its workforce is relatively low, and it is increasingly home to a transitional population rather than a community of middle-class families that live and work here."

Pretty damanging words.
(continued)
 

chase

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Pt 2

But one of the more troubling comments in the firm's report alluded to a Dallas Morning News survey of area executives, which made it very clear that "Dallas is becoming an increasingly unfriendly place to do business."
One of the key reasons for this, according to the study, is the city's fragmented lines of responsibility, accountability, and authority at City Hall.
As a result of this haphazard legal structure, and a "placeholder" mayor that is a relatively weak participant in this structure, there has always been a historical "way of doing things" in Dallas. Needless to say, this type of situation, according to the BAH report, has led to a city government that suffers from little strategic long-range planning, and a lot of shorter-term reactive response.
As I write this, the city is now considering a change to the city's charter. The change would accomplish much of what the BAH study advocated, removing the position of city manager and beefing up the role of the mayor.
But, as one subscriber said to me this week, the unfortunate thing that has happened is that instead of voters understanding what they are voting for, the election has become more or less a referendum on the current mayor, Laura Miller.
As a result of the pending charter change election, the issue of a change to the Wright Amendment is not on the current political agenda. At least not for Laura Miller, who I suspect does not want to say anything publicly to complicate her position in the upcoming election.
But after this election is over, no matter which way it goes, we will see Southwest Airlines start to move even more aggressively to get the city to back its attempts to overthrow the Wright Amendment.
However, back to the bigger bombshell.
Why does Southwest even have to stay in Dallas?
As I said, I don't think the airline wants to move. Then again, can you imagine the feeding frenzy that would break out between cities if the airline did decide to seriously explore new locations?
Look at all the goodies Virgin America was able to extract from a number of governmental entities for their new headquarters and operations location -- and the airline has not even flown a single mile. Heck, they don't even have any major financial backing.
And hey, let's not forget why American Airlines is now headquartered in Euless, Texas. They are there because they got an offer they couldn't refuse in the late '70s, which caused them to move lock, stock and barrel from New York City. And believe me, when this happened, people were shocked that American would ever, EVER, consider leaving New York.
But the word "free" carries a lot of weight.
So let's just have some fun and consider some of the alternatives that Southwest could dangle in front of the folks in Dallas, to whom they pay between $15 million and $20 million a year in taxes.
First on the list would have to be either Houston or San Antonio. More than one person we talked to this week was very high on a potential move to San Antonio. The feeling seems to be that while Southwest could threaten to move elsewhere, it would be very hard for the airline to desert Texas entirely. And clearly leading the intra-Texas informal poll we did this week was San Antonio.
Both Gary Kelly and Herb Kelleher also have strong ties to the San Antonio area.
The city has an excellent reputation of late, in terms of working with businesses and understanding what businesses need. It just landed the Toyota manufacturing facility, and of course, big telecom player SBC is headquartered there. It also has a large military presence. Never a bad thing for business. Some this week argued strongly that San Antonio offers a better-rounded economic base than does the city of Dallas.
As for the question of hauling employees in for training, while the airline currently does not offer a large number of long-haul flights out of San Antonio, they could always add them.
Now with Houston, this gets interesting. Actually, for tax purposes, Southwest Airlines could "move" its fleet to Houston tomorrow if it wanted to. As I understand it, Texas law allows the airline to either use Dallas as its home for tax purposes, because its headquarters is there, or Houston, because it has more flights based out of there.
Just a bit more leverage to use if the airline finds it necessary to do so. City of Dallas, are you listening?
As far as Houston is concerned for a new headquarters? Ah, well... I don't mean to insult you Continental folks, but I really don't have much good to say about Houston. It's just as hot as New Orleans, without any of the accompanying "atmosphere."
But it is in Texas.
Austin? No. Can't see it. And neither could any of our other sources we talked to this week.
Then again, we go back to the "everything is on the table" concept.
Or, as one reader wrote this week, "[Chicago's] Mayor Daley would probably see the opportunity to have a major corporate headquarters near Midway to revitalize the South Side very alluring."
One PBB subscriber who lives in Orlando and who I swear works for the Chamber of Commerce on the side said, "Please note in PBB, Holly, that Florida has no state income tax, which would mean an instant raise for anyone moving here."
Uh-huh. Texas doesn't have one either, so you need to up the ante.
But you get the picture. It would be a feeding frenzy.
Whether Southwest is successful in eliminating the Wright Amendment or not, one thing is certain. The situation the airline finds itself in now is not conducive to positive long-term economic growth on down the line.

(continued)
 

chase

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Pt 3

And while the cities of Dallas and Ft. Worth, and American Airlines, for that matter, can continue to haggle about the Wright Amendment forever, the real potential loser here is the city of Dallas.
It loses money now because Southwest (and no other airline) can fly long-haul from Love Field, which reduces the fees it can collect from the operation at Love Field, and it is going to lose in the not-too-distant future because Southwest is not going to sit around and continue to give Dallas $15 million to $20 million a year in tax payments for the privilege to stay headquartered at a location that is economically stagnant for the airline.
But it could lose even more.
There are other cities. There are other airports with no restrictions on where the airline can fly.
And they would all LUV to have Southwest call them home. After all, we are all free to move about the country, are we not?
 

NTXPilot

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Great read, thanks for the post chase. I wish this city would wake up.
 

FlyBoeingJets

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San Antonio would be good, VERY good.

Look out! Whining from Dallas Wright supporters and the anti-SWA crowd is about to begin.
 

lowecur

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Incoming

I know AMR is supposed to come out with their study very shortly. Gee, I wonder which way it's going to tilt?

Thought you might get a kick out of the shenanigans going on at Seattle. SWA has brought all the loonies out of the woodwork. Alaska is now proposing to one up SWA, and build a nicer facility at Boeing Field. For their part, AMR has said they will move all 21 of their flts to Boeing Field.

San Jose has just rolled back their expansion from $4.5B to $1.5B because SWA is sqwauking. Cost per pax was going to triple to around $17. Oh well, all this posturing is working. Airlines are putting their foot down on costs, but Gary/Herb have no argument on costs at DFW. That airport is still very cheap, and has a much better on-time record than LAS, PHL, or PHX. Go figure.:puke:

October 5, 2005


Airlines jockey for field advantage

Alaska offer to build Boeing Field terminal matches Southwest’s

The Associated Press

SEATTLE — Alaska Airlines’ parent company has proposed building a $150 million terminal, parking garage and fuel storage facility at county-run Boeing Field to compete with a similar plan from Southwest Airlines.

In a bid submitted to King County on Monday, Alaska Air Group said it doesn’t agree that large-scale passenger service at Boeing Field is a good idea. But the Seattle-based company, which operates Alaska and Horizon airlines, said that if such service is allowed, it would seek to match the number of flights granted to its competitors at the airfield, which is closer to downtown Seattle than Seattle-Tacoma International Airport.

In July, Southwest Airlines proposed spending $130 million to build a terminal, parking garage and fuel farm at the county-owned airport, and then move its flights there. Southwest says Sea- Tac is too expensive for its business model of low-cost flights.

Under Alaska’s proposal, Alaska Airlines and Horizon Air would begin service with 68 daily flights at Boeing Field, potentially expanding to 100. With Southwest’s proposal, that would exceed the 130 additional flights the county believes the airport can handle.

"We’re going to talk to both companies — we’re going to see what’s real and what’s not," said Kurt Triplett, chief of staff for King County Executive Ron Sims. Until someone requires someone to put a dollar down, the cynic in me says Alaska will keep this game going as long as possible."

Under Southwest’s proposal, it would abandon Sea-Tac entirely, while Alaska’s plan calls for moving only a portion of its service to Boeing Field. Alaska and Horizon currently offer about 280 daily departures out of Sea-Tac.

American Airlines has also said it also would consider shifting all of its 21 Sea-Tac flights to Boeing Field if other companies move, but said it couldn’t afford to build its own facilities.

Alaska’s initial proposal calls for an eight-gate, 170,000-square-foot terminal, a parking garage and a fuel-storage facility. That could handle an initial 4,550 passengers a day.

Sims’ office hopes to complete preliminary studies by the end of the year on potential noise, traffic and economic impacts from expanded commercial service at Boeing Field.

Joe Sprague, Alaska’s vice president for public and government affairs, said the company thinks it is important "that they include a full scope of what airline operations would look like at Boeing Field."

"Just studying the Southwest proposal alone in a vacuum would give them a very flawed picture," he said. Boeing Field, formally called King County International Airport, currently serves a mix of private, cargo and corporate planes.
 
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SWAnnabee

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Chase,
You have the distinction here as being one of the more rational and level headed posters on flightinfo.com. But, I have to say that the opening post has a bit of an extortionist ring to it...

"Repeal the WA, ...or else!"

Is this really the tone Southwest Airlines wants to take in this debate? Threatening the city and citizens of Dallas with leaving if you don't get your way, rather than through gaining public support and taking it to the elected officials to INSPIRE a change, is more to my liking. JMHO.
 

erj-145mech

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So, now what if the Wright Amendment is upheld? Will Southwest refuse to fly to the Dallas market? What will Southwest gain from moving from DAL to SAT? The Wright Ammendment is nothing new and Southwest knew about it from the get go.
 

FlyBoeingJets

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Extortion? I think its called good business sense. We are trying to get Dallas and North Texas to do the right thing. If they choose not to do it other alternatives should be reviewed.

Bad things happen when you don't maximize profit.
 
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FlyBoeingJets

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erj-145mech said:
1) What will Southwest gain from moving from DAL to SAT?

2) The Wright Ammendment is nothing new and Southwest knew about it from the get go.
1) We'll gain the riverwalk and other cool door prizes.

2) What? push away from the keyboard before you hurt yourself. Bone up on the history of DFW and the Wright debate and you will understand.
 

erj-145mech

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I do know about the Wright Ammendment, and what it means. Its a law, not a debate. A little history lesson. Way back in the late 60's, Dallas Love Field was land locked, still is. No room for growth. Neither the cities of Dallas or Forth Worth could afford to build a replacement airport. In order to insure the growth of the new airport, the entities had to be sure that the tennents moved to the new facility, and instilled restrictions. Good old Herb started this intra-state airline that went from Dallas to San Antonio to Houston, and didn't have a problem with these restrictions. He wanted to go to Love becasue it was closer. Now Southwest is crying that it can't fly direct to Albuquerque or Little Rock from Dallas Love. All of the other carriers have stuck to the rules. The rules say that if you want to fly to ABQ or LIT from the metroplex, you have to do it from DFW.

So, if WN can't pitch, it'll throw a fit, take its ball and go home?
 

flyhi92

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The Wrong Amendment

"And clearly leading the intra-Texas informal poll we did this week was San Antonio."



Chase, we would welcome you and the entire operation to San Antonio, the rising star of Texas.
 

chase

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Bozt45,

Thanks for the kind words...not sure if the reputation is deserved but thanks. As for the quote you use below....I don't believe I used that phrase but I think you are saying that is the tone of the approach that SWA is using, am I correct?

I believe Southwest has taken a very thoughtout & respectful approach for working within the system to get the point across that the WA is unfair (in the eyes of Southwest) & should be repealed, i.e. making presentations to local officials, lobbying elected officials in DC, making public appeals through advertisements & explaining our point of view. Southwest isn't asking for handouts from the government for good reasons, we're healthy but what they have asked for is a level playing field. The merits of which have been debated on here for months....lots of sane discussions, pros & cons...I respect them all quite frankly but those who have vested interests (me included) aren't going to agree anytime soon. So what is the solution?

If a negotiation with someone over your house isn't going well even after months/years of doing it, does one finally capitulate & give in to a solution one doesn't prefer or should one have the legal & moral right to look after one's own interest & simply say, "maybe I'll exercise a third option". I'll rent the house or lease it out & move somewhere else....maybe your neighbors don't like the idea of having renters next door or the value of the property may decrease due to the rental unit in a nice neighborhood but isn't within my right to exercise this option if it is in the best interest of my family? Is that extortion? I'd say it is looking after one's family & doing what is in the best long term interest of the folks closest to me.

Southwest is trying everything...if DFW said tomorrow, "we'll phase it in"....I'd bet SWA would go for it? Would AA? Who knows but I haven't heard that option. Yes we could move to DFW but that makes the issue dead forever in my view.

Folks complained about DAL leaving DFW but no one said it was extortion...it was a good business decision on their part & everyone understood that. Would SWA need to lose money for several quarters/years to justify to some folks "it wasn't a good idea & now we'll let you fly out of Love...our mistake, sorry"....I'm sure you would agree that isn't realistic & wouldn't happen either.

This gets down to a business decision. I don't blame AA at all to going to all the little cities around DFW & other places & telling the airport officials that if the WA goes away these small airports may lose air service....is that extortion? I don't believe so, it is simply telling folks that things won't remain the same & we don't know what will happen....it is simply a business decision on the part of SWA & AA to take the stances they are taking. SWA took what some may seem is extortionist action against El Paso when they raised their landing fees 8 years ago....we reduced service...was that extortionist? I don't believe so, it was a business decision. The same goes for KCI, SEA or DFW & Love....if the local officials don't wish to respond I believe the company has an obligation to its shareholders, employees & customers to look at every option when it comes to finding ways to save money & keep fares low....I believe no one will judge us guilty of extortion if that happens.

I hope the length of my reply doesn't give the impression I've taken offense at your comment....it is a valid concern you've stated & is worthy of consideration. We're trying to work through elected officials but if that doesn't work we'd rather control our own destiny than relying on a bankruptcy judge or a crisis to force us into decisions. My apologies in advance if my tone is over the top....I hope my reputation isn't too tainted with my reply....thanks for the comment.
bozt45 said:
Chase,
You have the distinction here as being one of the more rational and level headed posters on flightinfo.com. But, I have to say that the opening post has a bit of an extortionist ring to it...

"Repeal the WA, ...or else!"

Is this really the tone Southwest Airlines wants to take in this debate? Threatening the city and citizens of Dallas with leaving if you don't get your way, rather than through gaining public support and taking it to the elected officials to INSPIRE a change, is more to my liking. JMHO.
 

NEDude

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So, now what if the Wright Amendment is upheld? Will Southwest refuse to fly to the Dallas market? What will Southwest gain from moving from DAL to SAT? The Wright Ammendment is nothing new and Southwest knew about it from the get go.
Ummm, Southwest began operations in 1971, the Wright Ammendment was enacted in response to de-regulation in 1978. Southwest DID NOT know about if from the get go.
 

SWA/FO

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WA is gone!!!! Or SWA moves to DTW....and moves into a new terminal that Northwest recently built for us.
 

Wingsweep

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This isn't rocket science

I say run the buisness like you fly the airplane: If you can save one mile, one gallon of gas, one minute, or one dollar, while keeping the customers happy, then do it if it's safe and legal. If I were a Texas legislator, I'd spend about 5 minutes on the same calculations SWA management is looking at. Then, I would do the right thing...so to speak...
 

SWAnnabee

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Chase,
Yes, it was just a question of the tone. Thanks for not comming out with both barrels blasting. It was an honest question. I think that it would be ill advised to bring this issue up as a "repeal or we will leave" platform. Just wanted to illustrate how it was sounding. Regardless of anyone's position on the WA, please help SWA keep its integrity. It's one of the few carriers that hasn't compromised that.
 

NTXPilot

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Not counting any crazy incentive being offered like the article talks about, if you had to guess at this point, what do you think the order for new cities would be? If SWA did move just curious if they would stay in Texas.

1)SAT
2)HOU
3)MDW
 

chase

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Botz45,

I would agree the tone or I should say, the approach that SWA is taking in this endeavor is definitely different & some would say, aggressive in how it has been marketed....SWA has developed over the years a reputation of good will & being an honest broker with a smile on their face whenever they have dealt with difficult issues. I hope our customer service is done with a smile but as illustrated with the recent incident with the lady who was removed from the flight for wearing an obscene shirt, SWA isn't afraid to wave the "logic test" flag to say...this doesn't make sense....sorry if we offend you but you've got to get off our airplane.


To some that would appear to be "non-luvish" when in reality it staying true to what the company believes in...the golden rule (no we're not puritanical & holy-than-though I believe)......I wouldn't want my mother to see me wearing a shirt like that so why would I want my customers to see it!!!!

We're trying our best to work with the local folks/companies to come around to our view but at the end of the day Southwest will do what it has to do to honor its shareholders, employees & customers....I'm glad they do have the courage & not be "blackmailed" by the city of Dallas into doing something that doesn't make economic sense.

We'd still fly out of Dallas & DFW would grow, Love would shrink & more LLC would go into DFW but what happened then if we decided to move into Alliance Field...does anyone think for a moment that Ross Perot wouldn't love to have a major airline out there? What would Dallas say then? We let the Cowboys get away & now SWA? What were we thinking? (BTW, I'm not for public spending to keep the Cowboys inside of Dallas, many are)...the bottom line is that the city of Dallas & the residents of North Texas need to keep all of this in mind...would you prefer to depend on AA to continue providing air service to everywhere in the US with some marginal LLC flying out there or would folks rather have a healthy LLC like SWA flying out Love to all over, have other carriers out of Love & probably in turn have more competition & lower air fares at DFW in the long run to points around....the choice will be made for them if they don't speak up & out....the sad thing is that folks in other parts of the country who fly into DFW don't realized they are being taken...they aren't even aware they are paying some of the highest fares in the country.

Sorry for the long windedness & thanks again for taking my comments the right way....I believe most of us at SWA are very grateful & thankful for the fortunate situation we're in...we are constantly reminded of it & recognize the blessing I believe. I think we'd just like to be left alone to do what we do best, compete with as few restrictions as possible.....if that is unfair to AA I'd like to understand why if it is wrong to change the rules now, why they didn't feel that way years ago when the rules were "changed" to benefit them? Seems a return to status quo would be a "fair" thing to do but that argument is still going on....good luck to you in your aviation pursuit & thanks for the open & honest debate...cheers,
 

erj-145mech

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NEDude said:
Ummm, Southwest began operations in 1971, the Wright Ammendment was enacted in response to de-regulation in 1978. Southwest DID NOT know about if from the get go.
They were bound by the Civil Aeronautics Board (CAB) regs until de-regulation which happened in 1978. The Wright Ammendment is an extension of the CAB.

Some people love the taste of company kool aid.
 
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