Basically, we can reasonably say that the Wright Amendment is dead: put a fork in it, it's done.
We'll leave the question of how we cover the revenue shortfall created by the Wright Amendment demise for further discussion on another thread.
The problem is that we face a multi-pronged infiltration of our revenue base from the LCCs by failing to come to terms with the need to meet that portion of our domestic route network on a competitive basis. If we could just break even with the LCCs domestically on a pure cost basis, we could then leverage our service levels and international network towards the revenue premium needed for profitability and growth.
Exacerbating the infiltration by the LCCs' of our domestic network is the planned move towards rewriting the HDR, High Density Slot Rule, which has governed domestic access to some airports in the US.
According to the
AMR Annual Report 2004 page 6.
(The following is not an exact duplication of the material contained within the report referenced but retains the original discussion matter and emphasis.-Boomer)
C. Regulation
Airport Access
The FAA has designated New York JFK, LGA and Washington Reagan airports as high-density traffic airports. The high-density rule limits the number of IFR operations-take offs and landings-permitted per hour and requires that a slot support each operation. In April 2000, the Air 21 Act was enacted which called for the elimination of slot restrictions at JFK and LGA in 2007.The Company expects that the elimination of these slot restrictions could create operational challenges, but does not expect the elimination of these slot restrictions to have a material adverse impact on the Company's financial condition, results of operations or cash flows.
As a result of agreements reached with the FAA in 2004, the Company reduced operations at ORD during certain peak times to improve dependability.
Currently, the FAA permits the purchasing, selling, leasing or transferring of slots (except International operations Essential Air Service or Air 21 Act slots.) Trading of any domestic slot is permitted subject to certain parameters. Some Foreign Airports have slot allocations (LHR). Most Foreign Authorities do not officially recognize the purchasing, selling or leasing of slots.
In addition, the Wright Amendment restricts certain flight operations to LUV Field to a limited geographic area. To the extent these flight restrictions are lifted in the future, it could have adverse financial impacts on the Company.
Although the Company is constrained by slots, it has sufficient slot authorizations to operate its existing flights. However, there is no assurance that the Company will be able to obtain slots to expand its operations and change its schedules in the future because, among other factors, slot allocations are subject to changes in governmental policies.
Why does this matter? Currently, the US Government is planning for an auction of all existing slot authorities to those airports currently restricted by such authorities beginning with ORD.
(
Aviation Week and Space Technology/April 11,2005. Author: David Bond, Washington Correspondent. Page(s) 46, 47.)
Much like network spectrum was auctioned off for the telecom industry, the US Government is planning an initial auction of slot authorities at ORD. The Auction will define a successor to the HDR. The proposal, subject to NPRM, will last until 2008. If the planned auction for ORD is successful, it will create a pettern by which the other HDR airports will then have their slots auctioned.
The question: if we survive the deregulation of Love Field and the attendant loss in revenue, where are the funds supposed to come from that will allow us to continue to operate in JFK, LGA and Reagan much less bid on the route authorities we currently operate?
Given the draw on resources, how can we continue to fund a DBP that is at best 25% more expensive than a DCP without further concessions?