Southwest says federal law hampers Valley growth - East Valley Tribune: Business

Southwest says federal law hampers Valley growth

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Posted: Tuesday, March 29, 2005 5:19 am | Updated: 8:42 am, Fri Oct 7, 2011.

A federal law that restricts Southwest Airlines from flying between Love Field in Dallas and Phoenix Sky Harbor International Airport should be repealed or changed because it will open up the markets to better fares and allow the airline to continue growing in the Valley, Southwest co-founder Herb Kelleher said Monday.

In a meeting with Tribune editors, Kelleher said the Wright Amendment is anticompetitive, anticonsumer and could hurt Southwest’s ability to fill the gates in its new concourse in Sky Harbor’s Terminal 4.

"We’re looking to the future," he said. "We’re looking at profitability on an ongoing basis. It’s important to Phoenix, because we’re your other hometown airline. Southwest Airlines has a ton of people in Phoenix that are job secure, very wellcompensated and with a tremendous benefits program. The restrictions on Love Field have become a severe retardant with respect to our probability and growth potentially as our fuel hedges go down."

Southwest, the longtime darling of the industry, lost money in its core business in 2004, Kelleher said, and was only profitable because of fuel hedging, the practice of using investments in the commodities futures markets to "lock in" or "cap" the price that eventually will be paid for future jet fuel purchases.

"If you look at our 2004 annual report, you’ll see that," he said. "We need to correct this situation in Dallas as quickly as we can."

Kelleher said the Wright Amendment, established 26 years ago to protect Dallas/ Fort Worth International Airport and the airlines that serve it, allows airlines at Love to only fly to other Texas destinations and seven neighboring states.

The Dallas/Fort Worth airport is dominated by American Airlines, the world’s largest carrier and a huge employer in north Texas.

Should the law be repealed, Kelleher said the result would create more traffic at Dallas/Fort Worth and Love and lower fares.

"It’s sort of accident of history," Kelleher said of the amendment. "It wasn’t much of a burden to tell you the truth when short-haul traffic was plentiful and people were getting out of their automobiles to get on airplanes. Now, under the new security regime, they’re getting off airplanes to get back in their automobiles. We can adjust our business model everyplace but in Dallas."

Dallas/Fort Worth airport officials, backed by a group of heavy-hitting Texas politicians, say repealing the law comes at a time when the airport faces an estimated $50 million in lost annual revenue as a result of Delta Air Lines’ decision to eliminate its hubs.

"Any changes to the legislative compromise, which could siphon traffic from DFW Airport to Love Field, would have a detrimental effect upon DFW at a critical time for the airport and the industry," an airport report says.

The airport has been unsuccessful at enticing any airline, including Tempe-based America West Airlines, to fill the void left by Delta.

Airport authorities say Southwest could immediately serve the area by accepting its offer of free rent and other financial incentives equating up to $22 million.

But Kelleher said the airline does not want to split its Dallas operations between two airports.

Michael Boyd of the Boyd Group, a Colorado-based airline consulting group, called the Wright Amendment a hangover from the 1970s.

"These arguments the Wright Amendment protects DFW are like posting a Cub Scout with a popgun in front of a battleship and saying he’s protecting it," Boyd said, adding if the amendment were removed the only consequence would be Southwest beginning long-haul flights out of Love Field. "This argument that airlines will rush over to Love Field, there’s no place to park for crying out loud."

Kelleher said abolishing the law or amending it would have little impact on America West, Southwest’s biggest competitor in the Valley and Las Vegas. America West flies between Dallas/Fort Worth and Las Vegas and Sky Harbor.

"I think that probably affects . . . maybe 14 America West departures a day," Kelleher said. "As far as I can see, that’s the only effect it would have on America West is those two routes where, of course, you would get lower fares into and out of Dallas and a lot more passengers flying between Dallas and Phoenix as a consequence of that."

An America West spokesman said the company is neutral on the law.

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