Wednesday, March 30, 2005

Wright Amendment follies

For those of you who might not be big followers of the aviation industry, a little background: Back in 1970s after DFW was built, a federal law was passed called the Wright Amendment that limited Dallas Love Field flights from going beyond Texas and roughly its adjacent states. This was done to force the airlines to use DFW, which is quite a bit farther out. Southwest stayed behind, and built a tidy little business shuttling people within Texas and those states. Now, DFW is the 3rd busiest airport in the country (IAH is 9th), and little Love Field is absolutely no threat to that. So Southwest would like to get these restrictions dropped, and DFW airport and American Airlines, who has a big hub there, are going ape trying to stop it. It basically gives both of them a near-monopoly on flights beyond those states, and American has a long history of expensive nonstop fares to prove it.

Here's a fun Wright Amendment visualization exercise:
  1. Go to Southwest's Interactive Route Map page
  2. Hold your mouse pointer over Dallas (Love Field)
  3. Hold your mouse pointer over Houston Hobby
Which service would you prefer?

I finally decided to post on this topic because the Dallas Morning News has a great head-to-head editorial on the pro and con arguments. It's worth reading simply to watch DFW and AA twist themselves silly trying to argue that less competition is actually good for Metroplex travelers. Sure, AA is all for low fare competition, as long as it's from DFW. It's like a crocodile that's all for duck swimming, as long as it's in their pond.

I have no idea why DFW is supporting the restrictions. I suppose on a superficial level, it looks like it gives them some sort of twisted "competitive advantage" against Love. But the reality is that more Southwest competition would drive down fares (since AA would match) and demand would skyrocket. To meet that demand, AA would add a whole slew of new flights, which means more landing and gate fees for DFW.

The Chronicle actually wrote an editorial supporting Southwest:
"The Wright Amendment now amounts to political protectionism of the most blatant kind that results in many travelers out of D-FW paying double what their counterparts in Houston pay. It is not healthy to have politicians propping up one airline at the expense of others during a time when the fallout from the 9-11 terrorist attacks has brought carriers such as Continental to the brink of bankruptcy. If Continental has to compete head-to-head with Southwest, why shouldn't American? Houston would benefit from repeal of the amendment because flights, passengers, jobs and airport fees at Hobby would increase."
Houston certainly benefits from open competition between IAH/Continental and Hobby/Southwest, with lower fares and more destinations to choose from than Dallas. But the Chronicle is actually wrong in that last sentence about the repeal benefiting Hobby. Southwest routes a lot of connecting traffic and flights through Hobby it would probably prefer to route through Love, since Dallas is more geographically central than Houston. It's actually possible Southwest would cut back flights at Hobby and route them through Love instead if the amendment were repealed. I doubt that would happen, though. More likely, Southwest would be relatively stagnant in Houston over the next several years while it grows in Dallas and elsewhere (esp. Chicago, Pittsburgh, and Philly). Either way, Hobby will lose flights or at least grow slower.

So, I end up with the economist and Texan in me supporting the repeal, but the competitive Houstonian in me says: let Dallas keep their absurd restrictions and high fares. We appreciate the favor.

1 Comments:

At 9:19 PM, April 06, 2005, Blogger Tory Gattis said...

Recent article in the Dallas Morning News that Southwest might consider moving its headquarters to another city:
http://tinyurl.com/6hdml

I think it's probably just a Wright Amendment negotiating tactic, but Las Vegas and Phoenix would be strong competitors to lure them away: they're Southwest's two largest hubs with the most nonstop destinations, and, well, they're actually in the southwestern US...

 

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