WSJ Article: Wright is Wrong 30 Nov

[chase]

Attempting to provide some insight into the discussion that maybe effecting AA & Southwest. A thread for those wishing to discuss the topic vs. ranting about other non-related issues.

THE MIDDLE SEAT
By SCOTT MCCARTNEY
Wright Amendment Is Wrong
November 30, 2004; Page D7

You may have never heard of the Wright Amendment, but if you've ever flown to Dallas, you've probably paid for it.

The Wright Amendment is a federal law that puts heavy limits on commercial flights out of Dallas Love Field: Airlines can fly large planes from Love Field only to states that surround Texas. This bizarre rule was established in 1979 to protect the big new international airport built 10 miles west of Love Field, Dallas-Fort Worth International Airport.

The discount carrier Southwest Airlines, preferring Dallas Love for its closer location to the city, refused to move its operations to DFW. So a regulatory fence was built around Dallas Love.
LOVE IS (NOT) IN THE AIR

Under antiquated rules, big aircraft that fly from Love Field in Dallas can serve only these states.

For years, the status quo was comfortable for everyone -- but now as Delta Air Lines closes its DFW hub and low-cost airlines gain clout, Southwest is challenging the law. It's a move that has significant ramifications for air travel nationwide since Dallas is a key destination.

The law is one of the strange quirks of aviation that sometimes confound and cost travelers. For instance, if you need to travel between Nashville, Tenn., and Dallas, the lowest unrestricted, nonstop fare is $1,291 on American Airlines. But if you want to fly between Nashville and Houston nonstop, you'd pay no more than $356 for a round-trip ticket on Southwest. Southwest can fly to Nashville from Houston, but not from Dallas.

Studies have shown repeatedly that travelers going to and from Dallas pay a hefty premium for the lack of a free market. In fact, from Dallas, Southwest can't even sell a connecting ticket to cities outside the bounds of the Wright Amendment.

Southwest's decision to try to tear down this regulatory fence is sparking a nasty debate in the industry. Local officials, DFW Airport and AMR Corp.'s American are fighting to keep it; some in Congress living outside the fence are trying to punch holes in it. It's another case where the interests of airlines and airports clash with consumers. Congress will get to decide.

Over the years, the Dallas restriction has benefited both American and Southwest. American's huge hub at DFW has been protected against long-haul competition from Southwest, and American has been able to charge higher prices.

At the same time, Southwest has benefited because the restriction has left it a virtual monopoly at Love Field. The inability to fly longer trips beyond Texas and nearby states kept other airlines out, and helped Southwest make a lot of money shuttling folks between Dallas and Houston, and points nearby. For years Southwest has professed to be "passionately neutral" about the fence. Now, however, with Delta closing its DFW hub, Southwest sees a big opportunity to grow in Dallas. With Delta's move remaking the landscape, Southwest now says the Wright Amendment has outlived its purpose of protecting DFW Airport and should be killed.

"It is anticompetitive," says Southwest Chief Executive Gary Kelly. At the least, a new hole is likely to be cut in the fence. In 1997, Congress added Kansas, Alabama and Mississippi to Love Field's large-plane reach. This fall, the Tennessee congressional delegation, which includes Senate Majority Leader Bill Frist, introduced a measure to allow flights from Love Field to Tennessee. That would bring cheaper fares to Nashville.

DFW Airport, on the other hand, has rallied local politicians to oppose any change. Even Republicans who tend to loathe government interference in business embrace this restriction. "A deal is a deal," says Kevin Cox, DFW's chief operating officer.

Mr. Cox claims that Southwest's rumblings have already hurt DFW's chances to bring in new discount-airline service. Right after Mr. Kelly told a local chamber-of-commerce breakfast he wanted changes, one discount airline quashed talks with DFW about leasing some of Delta's soon-to-be-vacant gates, Mr. Cox says.

"None of the low-cost carriers are interested in a substantial increase in service as long as Southwest is threatening to end the Wright Amendment," he says.

That reluctance has a lot more to do with American than with Southwest, however. Executives from the likely suspects -- America West Airlines, Spirit Airlines and JetBlue Airways -- all said in interviews they had no interest in building a DFW hub, regardless of the Wright Amendment. Battling American at its home fortress is a tough challenge.

AirTran Airways is tangling with American right now, bringing inexpensive fares on some routes like Dallas-Los Angeles. But AirTran has seen a very strong response from American. AirTran's prospects might improve once Delta shuts down its hub, but for now, AirTran has pinned its growth prospects on Chicago, where it is trying to buy gates currently leased to bankrupt ATA Airlines. AirTran will have to battle Southwest at Midway, preferable to battling American at DFW.

Rather than banking on another discounter tangling with American, Dallas would be better served letting Southwest pick up the slack left by Delta's pullout. If Southwest were able to offer cheaper long-haul service, American would be forced to bring its prices down. That would stimulate more traffic, which, in the long run, is good for both airports and consumers.

After all, airports collect more revenue when more people are traveling. Standard & Poor's airports analyst Kurt Forsgren says opening up Love wouldn't have a big impact on DFW's credit. And UBS airline analyst Robert Ashcroft goes further: "DFW's objections seem particularly odd to us -- we believe eliminating the Wright Amendment might be the best thing that ever happened to DFW."

But the biggest beneficiary "would be John Q. Business Traveler," says Tom Parsons, president of Bestfares.com. "I'm not sure why we have to protect the third-largest airport in the world [in terms of flights]."

Many big metropolitan areas, including New York, Los Angeles, Chicago, Houston and Washington, have extensive service from two or more airports. Growth at Long Beach, Calif., hasn't hurt Los Angeles International; growth at Chicago Midway hasn't caused a shortage of service at Chicago O'Hare. Often a nearby airport is the best way to give people a low-cost carrier option even when there's a fortress hub in town.

Competition is good for businesses, and for travelers. It's time for aviation fences, and artificially high fares, to come down.

 

[JetDude]

Yep...Wright IS Wrong

Not mentioned in the article was the intense lobbying effort by the (then) dominant air carriers who opposed and fought SWA's startup every step of the way. I'm from Texas and remember the battles surrounding the "big DFW vs. Love controversy." After Southwest won their case to operate from Love (remember...Herb Kelleher was a lawyer in San Antonio), the Wright Amendment came into existence. The end result was a political favor to large contributors.

While the cities of both Dallas and Fort Worth were also aggressive parties to all of the litigation, their vision established DFW as a powerful commercial aviation center which resulted in (the desired) surge of economic growth in the region.

However, 35 years is enough political protection (unless yo live in NJ like I do where "protection" vis-a-vis "corruption" is rampant).

Just my 10 cents worth (2 cents isn't worth as much these days due to the inflation in the '80s).

 

[Juvat]

When reading about the Wright Amendment, I can't avoid thinking that this law is the same thing as "affirmative action for airports." In traditional affirmative action law, one group of people is seen as more disadvantaged than another, and thus merits extra statutory measures to open doors and promote "equality."

The Wright Amendment seems to be working off of the same concept. The question is, when does this type of "affirmative action" law stop being a protection for a disadvantaged party (in this case, DFW airport), and start becoming a barrier to free market trade? I would argue that Texas crossed that threshhold several years ago. It's too bad that the original Wright Amendment wasn't written with an additional clause mandating the law's revocation upon DFW passing certain economic milestones.

The Wright Amendment has outlived its usefulness, and is now just an anticompetitive nuisance. I hope that clear thinking will prevail on Capitol Hill, and have already expressed my sentiments to my representatives in Congress. I encourage everyone here to do the same.

 

[chase]

My thoughts

Several directions this could go, in my opinion.

1. Other congressional legislative groups will model their approach after the Tenn. approach & begin trading their votes for support of their particular bills to allow nonstop flights from respective cities to Love. This will take time, probably several years.

2. No interest currently in "helping Texas" out by Congress by getting rid of WA but after other cracks in the dam occur (other bills like TN's) it will get broader visibility & other states will simply ask themselves why not do away with the bill to help all states who are interested...again several years

3. Fares from DFW will remain high and the argument that SWA will make will have validity. Small LCC growth, Frontier, AirTran but nothing significant to change the current balance between LCC & legacy (AA mostly).

4. Continue visibility on the issue by SWA to push this issue on to the plate for others to see.

Was told SWA was looking at all 25 gates & was close to finalizing but factors such as price & others didn't pan out and the decision was made to go offensive....it does appear to be working to some degree. Other LCC have declined interest....DFW is in a tough spot.....all of this won't impact the future of DFW significantly but all the negative publicity is causing bond ratings for the airport bonds to look less than desireable...not good for DFW & AA as those costs will go up.

I suspect SWA will settle for the states to attack the problem & not expend anything other than political goodwill & press ink to push the issue....this keeps SWA on the high ground & minimizes the expenditure of much needed money on other more pressing needs. With MDW & PHL being 1 & 2 as airports that need attention in terms of market share increase DFW is not a market that is one that SWA really wants to tackle right now anyway...however, in 2 years or so the MDW & PHL expansion will be more mature & with more aircraft coming on board the WA discussion will have matured & something will have occurred which will probably result in more flights allowed out of Love...then SWA will be ready to expand in this area.

The problem for SWA is having too many opportunities coming all up at the same time, i.e. MDW, PHL, DFW, CLT & PIT with USair cutbacks....being larger means choices & where are assets focussed to take the most advantage. Now that USAir, Delta have obtained some short term extensions of their fiscal problems this extends their deadlines by 6 months to a year....SWA has a plan in place to handle this but any negative turns for these guys will be taken advantaged of....hopefully they don't all come up at once. Regardless SWA will grow next year at a very nice clip, 10% at least & yes there is much talk about more airplanes coming, the source is hard to determine....waiting 6 months to a year to obtain the extra aircraft when leases maybe lower is always an option also.

For those getting ready for the interview (yes this is an interview board), the calls for Jan will be going out shortly so get your stuff together & be prepared. Paperwork, references, phone numbers, addresses, interview questions, yada, yada, yada.....start making those phone calls now to those friends, former employers that you may need to contact...the holidays are a tough time to get in touch with folks for lthose much needed letters...find out where they will be or some way to get in touch with them if something comes up at the last minute. Good luck to all & enjoy the holiday. Good luck & God Bless

 

[chase]

Impact on North Texas w/Delta cutbacks at DFW

Press Release

Source: DFW International Airport
​

North Texas Region, DFW International Airport to Lose Nearly $800M Annually With Delta Air Lines' Departure
Wednesday December 1, 11:00 am ET





Region to Lose More Than 7,000 Jobs; Airport Continues Search for Low-Fare Carrier to Fill 24 Gates

DFW INTERNATIONAL AIRPORT, Dec. 1 /PRNewswire/ -- Describing the commercial aviation industry as being "at a perilous juncture," an economic impact report prepared by renowned economist Dr. Bernard Weinstein from the University of North Texas estimates that North Texas and DFW International Airport will lose $782 million annually when Delta Air Lines completes its announced reduction in flights at DFW in early 2005.

The reduction will cost the regional economy over 7,000 jobs paying more than $344 million in annual wages, salaries, and benefits. Property income from rents, dividends, and other sources will decrease by $143 million each year. State and local governments will also experience an estimated loss in yearly tax revenues of about $58 million.

The results of the comprehensive economic impact study were announced today in DFW's Terminal E, which will be left largely vacant by Delta as it decreases its daily flights from 254 to 21 by January 31, 2005.

"Since 1990, Dallas/Fort Worth has been the fastest-growing major metropolitan area in the nation in terms of people and jobs," concludes Dr. Weinstein in his report, co-authored by Dr. Terry Clower. "Without question, DFW International Airport is one of the economic engines that has helped sustain that growth. Ongoing and planned expansion projects will ensure the airport remains competitive in the decades ahead. But for the near-term, the airport faces some serious challenges as a result of Delta's decision to "de- hub" at DFW. And when Delta withdraws 90 percent of its operations at DFW International Airport, many local businesses will lose a valuable, long-term customer."

Delta Air Lines announced in early September it would drop DFW as one of its major hubs and drastically reduce flight operations. Delta has been a tenant at DFW since the Airport opened in 1974 and had grown into its number two carrier, behind American Airlines.

The Weinstein report offered this prognosis for new air service and revenues at DFW: "New flights planned by American Airlines next year will generate some additional landing fees, but the airport will be severely pressed to fill the 24 gates left vacant by Delta. Given Southwest Airlines' decision not to move any flights to DFW, and the reluctance of other discount carriers to serve DFW with Southwest making noises about expanding service from Love Field, it may be many years before DFW's gates and terminals are fully utilized."

"The terminal area where we are standing today will be empty by late January and that is unacceptable for DFW and our region," says Joe Lopano, DFW's executive vice president of marketing and terminal management. "The impact of Delta's decision is already hurting local businesses. One of our concessionaires in Terminal E reported a total income of $46 on Saturday of last weekend, during one of the busiest travel weekends in history. Rest assured DFW will continue to aggressively reach out to low-fare carriers to fill the void left by Delta and provide low fares for our loyal passengers who are now benefiting from the incredible competition between American and our five low-fare carriers who already do business here every day."

Drs. Weinstein and Clower used the respected IMPLAN economic impact model to accurately measure the impact of the Delta move, reviewing all aspects of the North Texas economy from tax rolls and pay rolls to losses in employment and spending. The huge losses extend well past the runways and concourses of DFW.

"This is certainly a major blow to the regional economy, affecting everyone from flight attendants and pilots to travel agents and fuel providers," says Dr. Weinstein. "This multiplier effect occurs not only when a new company comes to the region or an existing firm expands, but also when an ongoing business like Delta Air Lines leaves the local economy. Aviation plays a major role in the overall health of the North Texas business climate and the numbers clearly tell us that our region and DFW are not out of the woods yet."

The University of North Texas report specifically detailed annual projected losses to DFW Airport, Dallas and Tarrant Counties, North Texas, and the State of Texas as a result of Delta's decision to reduce its flight schedule.

DFW International Airport:

The Airport estimates that lost landing fees from Delta's reduced schedule will total about $18 million per year while lost gate rent and increased operations and maintenance expenses will be about $13 million annually. In addition, DFW Airport will lose $3.6 million in concessions fee revenues due to lower passenger volumes in Terminal E.

The loss of landing fees, gate rentals, and concession income of approximately $35 million is equal to about seven percent of DFW's $494 million operating budget.

DFW International Airport concessionaires and state/local tax revenues:

The loss of $29 million of taxable sales from terminal concessions will reduce the state's collections by about $1.8 million and the City of Grapevine's revenues by $290,000.

Dallas and Tarrant Counties:

According to the Dallas and Tarrant County Appraisal Districts, Delta's taxable business property is currently on the rolls at $222 million. About 90 percent of this property likely will be relocated to other taxing jurisdictions after January, with attendant revenue losses not only for the counties but also for the cities and school districts whose boundaries overlap the airport's footprint.

The report also contains this table that aggregates the total impact of the Delta loss:

Economic and Fiscal Impacts of Delta Reducing Operations at DFW (Assuming 50% of re-assigned flight crews continue to live in DFW area) Description Impact Total Economic Activity $ -782,311,000 Total Wages, Salaries, Benefits $ -344,207,000 Total Property Income* $ -143,278,000 State and Local Taxes+ $ -57,951,000 Total Employment -7,056 jobs * Includes royalties, rents, dividends, and corporate profits. + Includes sales, excise, property taxes, fees, and licenses.