Wednesday, March 27, 2013

Southwest Airlines looks forward to end of Wright Amendment

The final curtain doesn’t drop on the Wright amendment for another 19 months. But already, Southwest Airlines Co. is thinking about what the change will mean for service at Dallas Love Field — and the prospect has airline officials excited.

“The repeal of the Wright amendment is a fabulous opportunity for Southwest,” said Bob Jordan, the airline’s executive vice president and chief commercial officer.

As of 12:01 a.m. on Oct. 14, 2014, Southwest and other carriers at the Dallas airport will be allowed to fly nonstop to any other U.S. city, the first time they’ve had that right since the federal law limiting flights at Love Field went into effect on Feb. 15, 1980.

The likely result — a substantial increase in Southwest’s flights out of the Dallas airport and nonstop flights to its biggest cities, which it now reaches with at least one stop in between.

Most North Texan old-timers know the history of the Wright amendment and the Love Field restrictions by heart.

The limits, signed into law by President Jimmy Carter in February 1980, were part of a compromise between Southwest, which wanted to fly beyond Texas, and Dallas, Fort Worth and Dallas/Fort Worth International Airport.

In September 1979, Southwest launched its first flights from Dallas to a non-Texas city, New Orleans. It had also proposed Dallas-Chicago Midway Airport flights.

Officials of Dallas and Fort Worth, co-owners of D/FW Airport, then asked House Majority Leader Jim Wright, D-Fort Worth, to try to stop the expansion.

Wright originally proposed that Congress prohibit any flights out of Love Field beyond the Texas state line. When that idea met resistance, a revised proposal stated that Love Field flights could go only to Texas and four adjoining states — Oklahoma, Arkansas, Louisiana and New Mexico.

The law remained substantially intact for the next 26 years, although Alabama, Mississippi and Kansas were tucked into the Wright amendment boundaries in 1997, and Missouri was added in 2005.

A new compromise
 
But Southwest, which tolerated the limits for nearly a quarter-century, rebelled in 2004, with chief executive Gary Kelly announcing that the airline was abandoning its stance of “passionate neutrality.” He called for the law’s repeal.

Southwest’s effort touched off a tremendous political battle that ended in a June 2006 compromise among the two cities, Southwest, D/FW Airport and its primary tenant, American Airlines Inc.
The compromise had three major parts:

The limits would expire in eight years, after which airlines would be able to fly nonstop to any destination in the United States. However, commercial carriers could not fly to any international destinations from the Dallas airport.

In the interim, from 2006 to 2014, airlines would be able to sell tickets to anywhere in the United States, although passengers would have to make at least one stop inside the Wright amendment area. For example, a ticket from Dallas to Chicago would require at least one stop along the way, in places like Little Rock, Oklahoma City or Kansas City.

Love Field’s facilities would be remodeled or replaced, with an all-new 20-gate concourse to replace all existing gates at the 1958-era airport. Southwest would control 16 gates, with Continental Airlines Inc. and American Airlines each controlling two.

In an interview last week, Jordan called the end of the Wright restrictions “a huge opportunity” for Dallas-based Southwest.

“Just at the highest level, it gives us the opportunity to add more than 65 new nonstop destinations out of Dallas,” Jordan said. “That doesn’t mean we will add those all, of course. But it gives us a huge number of new markets.”

He expects Southwest to serve its major cities — like Chicago, Las Vegas and Phoenix — with nonstop service.

“We know that customers prefer nonstop service to both connecting and one-stop service,” he said.

In addition, “we also have a large number of markets that we don’t serve today that make sense now because we can serve them nonstop,” he said. “I can’t give you exact numbers, but I would expect we will see a substantial number of not just new destinations but also new flights out of Love Field.”

In January, Southwest offered as few as 125 daily departures, but it typically goes up to 130 to 135 flights during peak months. “Could Dallas see 30 or 40 new daily flights? Absolutely, from Southwest Airlines,” Jordan said.

In 2012, Southwest carried about 7.9 million passengers in and out of Love Field. Does that suggest that Southwest, with the added flights, could be carrying 10 million a year at Love Field? “Easily,” Jordan said.

Financial outlook
 
Southwest hasn’t made a firm estimate on what the end of the flight restrictions will mean for its finances. But it has been quite enthusiastic about what the loosening of the rules in 2006 has meant for its bottom line.

Before the 2006 change, Southwest could not sell a ticket for travel beyond the Wright amendment boundaries. A person wanting to go farther would have to buy two tickets and, at the intermediate airport, get off the flight from Love, pick up their bags, recheck the bags and get another boarding pass — even if it was to get on the same airplane they had just exited.

Since 2006, Southwest can sell tickets to anywhere as long as there’s that one stop in a Wright amendment state. Its customers can stay on the same airplane and have one-stop service to Southwest’s major airports in Las Vegas, Chicago, Phoenix, Los Angeles and Orlando, among others.

The carrier’s Love Field traffic increased immediately and noticeably after the change. In 2005, it carried about 5.6 million passengers. Two years later, that number had jumped to 7.4 million, up 31 percent.

In 2012, its 7.9 million passengers represented a 40 percent increase in just seven years — despite a significant drop in its traditional short-haul markets like Houston and Austin.

“Since 2006, the incremental revenue just from flying passengers on through and connecting basis out of Dallas Love Field is $1.1 billion,” Southwest executive vice president Ron Ricks told analysts and investors at a December meeting. “And today the annual run rate on that incremental revenue is $250 million.”

The Wright amendment’s justification in 1979 and 1980 — and the core of its defense in the years since then — was that more service out of Love Field would hurt the area’s main airport, D/FW.

American Airlines told elected officials that it would have to split its operations between Dallas and D/FW because expanded service at Love Field would siphon away traffic from its D/FW hub.

Even today, there are worries that a busier Love Field will mean a less busy D/FW. The bigger airport is rebuilding its four oldest terminals that date from the 1970s, with part of the justification being the need to get ready for the increased competition from Love Field and low-fare carrier Southwest.

Aviation consultant Mike Boyd, a longtime observer of North Texas aviation who has consulted for a number of parties including American in the past, says pish-posh.

“Long term, is this good for the metroplex? Absolutely. Near term and long term, is this going to be good for Southwest? Stand by for news, it’s going to be great for Southwest. They’re going to do whatever they have to do,” said Boyd, chairman of the Boyd Group of Evergreen, Colo.

“But is this going to take a lot of traffic from D/FW? The answer is no. Is it going to slash fares? Our friends at Spirit Airlines have already done that and will continue to do that.”
Impact on D/FW?
 
He sharply disagrees with those who say that Love Field’s location in the heart of Dallas gives it an advantage over D/FW, built between Dallas and Fort Worth. New airlines arriving in North Texas will probably go to D/FW, not Love Field, he said.

“Here’s the deal. Let’s say you’re Virgin America or someone like that, a new carrier. Why would you go to an airport that only accesses a third of the metroplex demand when you can go to D/FW and access 100 percent of the metroplex demand? There’s no competitive advantage of going to Love Field over D/FW,” Boyd said.

“Love Field is not in the middle of the metroplex. It’s isolated. You have parking issues. It’s crowded. It’s hard to get in and out of. Our friends at Southwest will do just fine. But this argument that they’re going to hammer D/FW is hokey. There’s no factual evidence to show it.”

One question that won’t be answered until Southwest adjusts its schedules in late 2014 is the impact on its existing markets out of Love Field.

The 2006 change gave Southwest a reason to keep up its Love Field flights inside the Wright amendment states as a way to provide one-stop service to its big markets beyond the boundaries.

For example, two of its Dallas-Amarillo flights go on to Denver, its fifth-busiest city. Similarly, the Dallas-Albuquerque schedule has five flights that provide one-stop service to other major Southwest destinations — Oakland, Phoenix and Los Angeles.

Jordan said Southwest, like other carriers, continues to see erosion in its short-haul markets, but he doesn’t see a big shift in Southwest’s short-haul demand out of Dallas. Still, he acknowledges that some shorter flights are doing well enough now because there may be 30 to 40 passengers going on to Las Vegas, for example.

“You’ll see some modest reduction in some of those short-haul markets because that long-haul traveler was helping prop up the demand, Dallas-Amarillo, for example,” he said. “So I think you’ll see a little bit of shifting of short haul in some markets, but I think it’ll be very modest.”

And those losses will be offset by the passengers flying nonstop from Dallas to Las Vegas, he said.
“The sum total of all this will be more flights, more passengers out of Love Field.”

Background
 
The limits on flights at Dallas Love Field go away in October 2014, nearly 35 years after Congress put handcuffs on airlines operating out of that airport. Here’s a chronology of events:

June 18, 1971: Southwest begins operations with flights between Dallas Love Field, Houston and San Antonio

June 7, 1979: Sen. Howard Cannon, D-Nev., introduces the International Air Transportation Competition Act of 1979.

Sept. 28, 1979: Southwest begins flying from Dallas to New Orleans, its first Love Field flights outside Texas.

Oct. 18, 1979: A proposal pushed by House Majority Leader Jim Wright, D-Fort Worth, to prohibit interstate flights out of Love Field is added as an amendment to a House bill. The Wright amendment is later added to Cannon’s bill.

Dec. 12, 1979: Congress and local leaders announce a compromise that would restrict nonstop, direct or connecting flights from Dallas Love Field to airports in Texas, Oklahoma, Louisiana and New Mexico only.

Feb. 1, 1980: Congress passes the International Air Transportation Competition Act of 1979 with the Wright amendment included.

Feb. 15, 1980: President Jimmy Carter signs the bill into law.

Oct. 9, 1997: Mississippi, Alabama and Kansas are added to the states that may have service from Love Field. The change, proposed by Sen. Richard Shelby, R-Ala., becomes known as the Shelby amendment.

Nov. 12, 2004: Southwest CEO Gary Kelly officially abandons Southwest’s longtime “passionate neutrality” on the Wright amendment and calls for its repeal.

Nov. 18, 2005: Congress adds Missouri to the states included inside the Wright amendment boundaries.

June 15, 2006: Dallas, Fort Worth, Dallas/Fort Worth International Airport, American Airlines and Southwest Airlines announce a compromise that would allow airlines to have one-stop or connecting service from Dallas to anywhere in the U.S. and allow nonstop service to any domestic city in eight years. As part of that, Love Field’s existing gates would be replaced with 20 gates in a new concourse.

Late 2009: Construction begins on a five-year program to rebuild or replace Love Field’s gates, central terminal, roadways and other facilities.

April 15, 2013: Southwest is scheduled to occupy the first 10 of its new gates at Love Field.

Oct. 14, 2014: The Love Field restrictions are scheduled to end.

(Terry Maxon - Dallas Morning News)

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