"Airlines battle over obscure amendment"

Wednesday, December 22, 2004

Airlines battle over obscure amendment 
Fliers in the Dallas area pay a premium because of the protected long-haul
market. 
 
 
DALLAS, Texas (Reuters) -- An obscure regulation that keeps Southwest
Airlines from making long-haul flights out of its Dallas airport has sparked
a controversy at one of the busiest U.S. travel markets.

The company is seeking repeal of the quarter-century-old Wright Amendment,
which it says discourages competition and drives up fares for longer trips.
But Dallas/Fort Worth International Airport has accused Southwest of taking
this position to keep out other low-cost carriers.

Because of the volume of traffic going in and out of DFW and nearby Love
Field, the situation has a profound effect on U.S. commercial aviation.

The 1979 Wright Amendment set limits on flying out of Love Field, a
medium-sized airport near downtown Dallas, to protect then-fledgling DFW,
located about 10 miles (16 km) to the northwest.

At the same time, Southwest, which was just a small and quirky carrier
shuttling passengers around Texas, was able to expand at Love Field.

DFW has now become the world's largest airport and the main hub of American
Airlines, the world's largest carrier. And both American and Southwest, the
largest domestic airline, dominate their respective home airports without
competing on the same Dallas playing field.

American and its affiliates will transport 82 percent of the passengers at
DFW when Delta Air Lines, the airport's No. 2 carrier, cuts its flights
there by 90 percent by the end of January.

Southwest, which now carries more than 95 percent of the passengers
traveling at Love Field, had long been "passionately neutral" on the Wright
amendment.

But Chief Executive Gary Kelly told local business executives in November
that the company wants to repeal the rules because they are anti-competitive
and hurt consumers.

"Circumstances have changed dramatically since 1979," he said. "DFW, one of
the world's largest and most successful airports is no longer a child."

DFW officials fired back. They said Kelly was trying to freeze out unnamed
low-fare carriers that were in talks to set up major operations at the
airport, which is trying to fill 24 gates that Delta will abandon.

The cost of curtailing love
The Wright amendment allows only intrastate flights from Love Field if the
planes have fewer than 57 seats, while larger planes can only fly as far as
the adjoining states. In 1997, Congress approved the Shelley amendment,
which allows commercial flights to Alabama, Kansas and Mississippi.

Southwest said it would be too expensive to duplicate its operations at DFW.
Nor could it operate a convenient service for long-haul passengers there,
since they would have to travel by bus to Love Field for connecting flights.

Passengers traveling through the Dallas area pay a premium because of the
protected long-haul market.

For example, a full-fare round-trip flight on American between Dallas and
Las Vegas could cost up to $1,033. The top price on Southwest between
Houston and Las Vegas is $598 round trip -- with no flights available from
Dallas because of the Wright amendment.

American has shown it can overwhelm a low-fare competitor entering DFW with
a few discounted flights by offering the same fares with a much larger
schedule of trips between the destinations.

Airline analysts said the demise of Delta at DFW shows the difficulty of
competing against American at its home, and the repeal of Wright would
encourage competition.

"People could fly all over this country much more cheaply," said Tom
Parsons, head of online travel agency Bestfares.com.

But Parsons said the time to get rid of Wright was in the mid-1990s, when
profits for major carriers were high and there was less friction between
American and Southwest. Now both American and DFW are struggling.

The airport is in the midst of a $2.7 billion development program that
includes building a new terminal, and American is fighting for financial
stability after a brush with bankruptcy last year.

"You could not find a more inappropriate time in the history of this airport
to be diverting traffic from this airport over to Love Field," said Kevin
Cox, DFW's chief operating officer.

Cox said the recent dustup arose as Southwest was discussing a move into
DFW, and it caused a chill in talks with another carrier that feared
stepped-up competition from the airline with the repeal of the Wright
amendment.

"Southwest does not have to deploy one dollar or one plane to freeze out
competition," Cox said.

Named for former U.S. Rep. Jim Wright of Texas, the Wright amendment
modified the late-1960s agreement that led to DFW airport and called for
Love Field to close.

The legislation kept Love open, and Southwest benefited from a relative lack
of competition there, while other airlines were battling at DFW.

Any change in the amendment would have to go through Congress, probably at
the behest of the Texas delegation. Most Texas lawmakers have been
noncommittal, even though the issue affects two large employers.

For its part, American wants to see things remain the same.

"The Wright Amendment made sense when it was passed," spokesman Tim Wagner
said, "and it makes sense now."


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