Southwest Airlines gets a boost from expiration of Wright Amendment
Just inside the front entrance of Southwest Airlines’ corporate headquarters in Dallas, a large digital clock has been blinking down the seconds to October 13, 2014. It is the Nonstop Love Countdown Clock and is dedicated “to all Southwest Warriors who fought tirelessly to Set Love Free.”
For most of America, October 13 is simply Columbus Day. Throughout the Southwestern U.S., however, October 13 marks the expiration of the Wright Amendment, an onerous modification of the 1978 Airline Deregulation Act that for the past 35 years has restricted the number and destinations of flights in and out of Dallas’ Love Field.
The main beneficiary of the Wright Amendment’s demise is Southwest Airlines (LUV). It has spent the past decade fighting for the right to fly nonstop from its home base in Dallas to major cities throughout the continental U.S. On. Oct. 13 when the clock hits zero the carrier immediately begins nonstop flights from Dallas to Baltimore, Chicago Midway, Denver, Las Vegas, Los Angeles, Orlando and Washington Reagan. On November 2, it will add eight more nonstops to Atlanta, Ft. Lauderdale, Nashville, Orange County, Calif., New York’s LaGuardia, Phoenix, San Diego and Tampa.
Southwest President and CEO Gary Kelly says the liberation of Love Field will allow more nonstop flights to 93 destinations. “Forty percent of our passengers already are flying for business,” he says. “Now that we’re a true transcon airline that base can grow rapidly. Low fares, no baggage fees and inflight WiFi are even more appealing when they are offered on nonstop, cross-country flights.” The airline’s revenue has risen for four years straight.
Consumers from all parts of the country who fly through Dallas already are benefitting from lower ticket prices. Months ago Southwest began celebrating the Wright Amendment’s demise with a limited time offer $99 fare between Dallas and 15 cities that include New York (LaGuardia), Washington (Reagan National) and Atlanta. Tickets between Denver, Seattle and Orlando to Dallas sell for $79. Virgin America, which operates two of Love Field’s 20 gates, immediately matched the offer by selling Main Cabin select and First Class seats at a 50% discount. Both companies plan to keep fares low. Virgin, for example, currently is selling nonstop tickets between Dallas and Washington Reagan for as low as $129.
American Airlines (AAL) was forced to relinquish its two Love Field gates when it merged with US Airways, but for the moment it remains competitive with lower fares on similar routes out of D/FW airport. For most of the summer American was charging more than $400 for nonstop service between D/FW and Washington Reagan. Starting October 13, it will sell the same round trip ticket for as low as $175. In the past, American flights between New York LaGuardia and D/FW were $400 or higher. Now they sell for around $250 for travel starting October 13 and beyond.
United Airlines owns the remaining two gates at Love Field but it may sublease them to another carrier since most United flights pass through Houston Intercontinental. Southwest wants one of the United gates and Delta would like the other, but the final disposition remains undecided.
Promotional fares don’t last for long but many analysts believe ticket prices will remain low for the foreseeable future. Dallas Love Field is not a tiny airport. Prior to its hobbling in 1974 it was the tenth busiest airport in the world. With only 15 miles separating the two airports, proximity alone will keep prices competitive.
Getting politics out of commercial aviation seems logical today, but back in 1964 there was no serious objection when Washington officials told Dallas and Ft. Worth to close their individual airfields and agree on a site for a regional airport. They selected 17,000 acres of vacant prairie midway between the two cities and convinced Braniff, American and Texas International to move their operations to the new Dallas/Fort Worth International Airport when it opened in 1974. Southwest, an intrastate carrier started in 1971, was not party to the original agreement, refused to leave Love Field and successfully fought eviction in court.
Southwest’s legal victory put the viability of DFW in question. Prior to the opening of DFW, Love Field served 6.6 million passengers a year. Seventy-five percent of the departing passengers were from Dallas. Why would anybody drive halfway to Ft. Worth if they could catch a flight to the same location out of Love Field?
To save their investment, Dallas, Ft. Worth and the airlines that had moved to DFW jointly petitioned Ft. Worth congressman James Wright to support a law that decreed that Love Field flights in large aircraft with more than 56 seats could fly nonstop only to cities within Texas or the four surrounding states of New Mexico, Oklahoma, Arkansas and Louisiana. Passengers bound for Los Angeles, for example, would have to change planes in El Paso or Albuquerque before traveling onward. Driving to DFW didn’t seem so bad if the alternative was purchasing two tickets and spending more than an hour changing planes.
Despite being anti-competitive, the Wright Amendment succeeded in turning DFW into a world-class airport. “DFW is the fourth busiest airport in the world with annual economic output of more than $31 billion,” says airport CEO Sean Donohue. “Our seven runways handle 62 million customers now and by 2020 we’ll be up to 70 million. Dallas/Fort Worth is the fourth largest population center in the U.S. thanks to DFW, which played a big role in Toyota’s decision to relocate from California.”