Wright Amendment

[funguy2]

jimntx:

Would an increased level of competition between AMR and LUV be bad? It seems to have worked well for other communities thus far, having legacies and low-fare carriers compete. Traffic is up in ATL, Chicago, and DEN, for example. I guess if you work for AA/AMR (and IIRC, I think you do), then it could be bad. But for Joe-Average Ticket Buyer, Dallas area businesses, and tourism-related industries, the competition would be welcomed.

I am opposed to foreign nationals working for USA airlines and foreign ownership of USA airlines on the basis of national security.

1. The domestic airlines are required via CRAF to provide aircraft and employees to the federal government in time of war.
2. Relative importance of transportation system in time of war.
3. Our national economy is somewhat dependent on the effiecient transportation systems we have developed

For those two reasons, I do not think its prudent to allow foreign ownership of our transportation system. But that is a whole different ball of wax than the domestic liberties these corporations are supposed to enjoy.

As I said in an earlier post, I believe that currently, Southwest understands that the WA amendment protects them. However, when they feel that they will be able to gain financially from lifting the restrictions at DAL, you will see LUV begin to lobby for such a change. And quite frankly, once they do, I am sure they have made plenty of congress friends in CA, AZ, NV, TX, LA, FL, MD, RI, NH, NY, OH, IL, MO over the years to get some things passed. I would bet that lobbying from Southwest on the subject would definitely hold greater "emphasis" on Capital Hill today than it did 10 years ago, given the amount of power LUV currently has in the industry (perceived and actual).

And, quite frankly, I think the perimeter rules at LGA and DCA are a joke too. Those rules were also created to protect JFK and IAD. Fine, the time for that has passed too. I think those rules should be eliminated and replaced with a system more like SNA and LGB have. Continue to limit departures (i.e. keep the slots), but let the market determine the maximum benefit of where those departures go. Does BTV really need 6 flights a day to LGA? Maybe one of those could be a flight to LAX? Maybe BTV would have as good or better access to LGA on 3 CRJ-700s than 6 Dash-8's. But I think the set-up of the "Perimeter rules" make a lot more sense that the Wright Amendment. Particularly onerous is the no-thru ticketing provision of the WA. That is a protectionists' dream.

Let's look at this another way...

Should we be considering adding restrictions at ORD and MDW to push Chicago area traffic to GYY and the new Peotone airport?

Should we implement restrictions at STL to help out Mid-America?

Should we restict MCO to support Sanford?

My answer in all three cases is no. So why do we do it at LGA, DCA, and DAL?

 

[sfb]

The issue of gates at DAL is a red herring, though. At present, Southwest only uses the 14 gates in the West Concourse for scheduled passenger operations. Continental Express has two gates in the East Concourse, and American still has its three gates of "office space" in the East Concourse (unless they managed to get out of the leases). Southwest's lease of the North Concourse, currently used for office space, gives them first right-of-refusal to operate those gates for scheduled service, but does not allow them to hold the gates without using them should another airline require their use. And in any case, Southwest's leases at DAL expire in 2006. Six gates at Legend's terminal remain available for anyone choosing to lease them.

When AA attempted to use its "office space" for passenger service in violation of the terms of its lease, Southwest offered to vacate some of its gates (used as ofice/training sapce) on the North Concourse; AA refused this offer claiming that the facilities were substandard.

The long and the short of it is that DAL has plenty of gates available today for anyone choosing to operate scheduled service, and the master plan envisions 32 total gates (twice the number currently in use) should additional airlines want to serve DAL. I'm not even sure AA would want to move much of its service from DFW to DAL, given the way WN trounced them when American decided to match WN flight-for-flight between DAL and AUS.

My thoughts are that Southwest is (in Herb's words) "passionately neutral" regarding the Wright Amendment because (1) they have plenty of expansion opportunities elsewhere and (2) opening up DAL would probably lead to some vicious fare wars on long-haul flying. Right now, the DAL/DFW market is in a state of detente; WN dominates virtually all markets they serve inside the Wright/Shelby perimeter, while AA takes the rest. Besides, US Airways' airfares in its captive markets are an easier target for WN than AA's DFW fares.

As for Stapleton vs. DIA -- yes, it probably was necessary to bulldoze Stapleton given what a hugely inconvenient and grossly overbudget boondoggle DIA turned out to be. Sure, Stapleton could have long taxi times, but you can say the exact same thing about DIA. And the cost per passenger at DIA is nearly 5 times what it was at Stapleton.

But an end to the Wright Amendment clearly would not bring about DFW Airport's demise. After all, HOU and IAH have coexisted nicely for over three decades with no restrictions on HOU aside from it having shorter runways. And just as the Houston metro area has grown to make IAH more convenient for much of the population, the same can be said for the Metroplex and DFW.

 

[jimntx]

jimntx:

Would an increased level of competition between AMR and LUV be bad? It seems to have worked well for other communities thus far, having legacies and low-fare carriers compete. Traffic is up in ATL, Chicago, and DEN, for example. I guess if you work for AA/AMR (and IIRC, I think you do), then it could be bad. But for Joe-Average Ticket Buyer, Dallas area businesses, and tourism-related industries, the competition would be welcomed.?

At what point did I say I objected to competition between AA and WN? Are you reading the white part of the page again? Yes, I worked (note verb tense) for AA. I never wrote a word in defense of AMR other than to say that they aren't the only entity who likes the WA.

Let's try this one last time. I have not said a word about AA/LUV competition. I don't care whether the WA is repealed or added to the U.S. Constitution with a no repeal clause. I was disagreeing with people who think that ATA, JB, or ACA are going to jump at the chance to compete against WN and who implied that AA should stand by and let them take business. If DAL opens up for long distance flying; so be it. But I think that AA may be the ONLY airline that competes with WN for new "long-haul" business from DAL.

I am opposed to foreign nationals working for USA airlines and foreign ownership of USA airlines on the basis of national security.

Ever heard of sarcasm or facetiousness? That whole paragraph was about the hypocrisy of those who cry free enterprise as long as their industry is protected. You are preaching to the choir about foreign nationals. And the national security argument is pretty weak if you are talking about British Airways or Lufthansa. Now the French, that's another thing.

As I said in an earlier post, I believe that currently, Southwest understands that the WA amendment protects them. However, when they feel that they will be able to gain financially from lifting the restrictions at DAL, you will see LUV begin to lobby for such a change.

Well, it's been 25 years now. When do you think that opportunity to gain financially is going to appear? That's exactly what is so silly about this whole topic anyway. If Southwest thought that they could gain financially from repeal of the WA, it would have been gone years ago. It would have saved them having to create the large hub at HOU and maybe even PHX.


This whole thread started over a newpaper article that tried to lay the whole DFW area economic problem at the feet of the WA. Tain't so, McGee. It would be like AMR, UAL, and U saying that 9/11 was the sole source of their current problems.

 

[funguy2]

At what point did I say I objected to competition between AA and WN? Are you reading the white part of the page again? Yes, I worked (note verb tense) for AA. I never wrote a word in defense of AMR other than to say that they aren't the only entity who likes the WA.

Let's try this one last time. I have not said a word about AA/LUV competition. I don't care whether the WA is repealed or added to the U.S. Constitution with a no repeal clause. I was disagreeing with people who think that ATA, JB, or ACA are going to jump at the chance to compete against WN and who implied that AA should stand by and let them take business. If DAL opens up for long distance flying; so be it. But I think that AA may be the ONLY airline that competes with WN for new "long-haul" business from DAL.

jimntx:

I don't think we are that far off on our views... I agree the competition would be between AA and LUV, with LUV being the primary benefactor of opening DAL outside the WA. My point was that the "Southwest" effect seems to be a net positive on most local economies, such that airport directors and Chambers of Commerce clammour to be a "chosen" city. I don't think repealing the WA would solve all of the MetroPlex's ills (there is never a Silver Bullet like that), but I think it could help.

Well, it's been 25 years now. When do you think that opportunity to gain financially is going to appear? That's exactly what is so silly about this whole topic anyway. If Southwest thought that they could gain financially from repeal of the WA, it would have been gone years ago. It would have saved them having to create the large hub at HOU and maybe even PHX.

I think there are two points of significance here:

1. Southwest has lots of other growth opportunities, but they are not endless. How many more "big fish" like PHL are out there... Not many. As those opportunities dry up, LUV will be pressed to find profitable growth. As other opportunities are exhausted, I think DAL will become a front burner.

2. LUV started service to BWI in 1993. Prior to that, LUV, dispite their years of profitability and 'legendary' service, they were largely unknown on a national level and did not carry the 'heavyweight' status they carry now. Now, since LCC's are all the rage, and LUV is, by far, the king of LCC's, I think they have more power now to get things done in DC that benefit themselves, more than ever. Certainly more than 5 years ago.

This whole thread started over a newpaper article that tried to lay the whole DFW area economic problem at the feet of the WA. Tain't so, McGee. It would be like AMR, UAL, and U saying that 9/11 was the sole source of their current problems.

Like I said above... repeal the WA is not a Silver Bullet for economic issues facing DFW area... but the last time I checked, low-fare availability and economic growth seem to go hand-in-hand.

 

[mga707]

The easiest short term answer is to force LUV out of gates, but at DAL, I understand they have some gate areas converted to office space. So, I suspect DAL could come up with the space...

Correct. The office space is in the old Yellow (north) concourse, the former home of DL at Love.
There is also unused space in Braniff's old East (red) concourse, where only CO Ex is now.

Plus, there's a really nice, nearly-new terminal over on the NE (Lemon Ave.) side of the field--the ex-Legend terminal.

Sure wish they'd get that long-abandoned moving sidewalk up and running again--Love was the first airport in the world to have them, I think--and stop partially covering up that neato late-50s tile mosaic air age map of the world on the floor of the main lobby area! B)

 

[AAmech]

That is until these routes began to be cherry-picked by AA's loss-leader fares on the Fokkers. I guess what interests me the most is that AA claimed at the time that their move wasn't in response to Legend but rather b/c they saw the customer demand/need out of DAL. And then the tore down the service almost immediately after Legend's demise.

Its important to remember the fares we set by Legend. AA matched them. If they were "Loss Leader Fares" why did they set them so low? Probably to stimulate some demand. AA's service continued long after the demise of Legend. It was only pulled down after 9/11.

 

[AAmech]

When AA attempted to use its "office space" for passenger service in violation of the terms of its lease,

Please explain in more detail how AA was attempting to use a contruction site for passenger service? Hardhats for the passengers? These gates were not even ready for passenger service on 9-10-2001, AA's last day at DAL. They used CO's gates.

 

[KCFlyer]

Please explain in more detail how AA was attempting to use a contruction site for passenger service? Hardhats for the passengers? These gates were not even ready for passenger service on 9-10-2001, AA's last day at DAL. They used CO's gates.

I believe he is referring to the fact that AA was "remodeling" the office space with jetways, and I don't believe their intent was to conduct gate agent training. IIRC, this also went against an order from the city of Dallas to cease construction immediately.

 

[Ch. 12]

Please explain in more detail how AA was attempting to use a contruction site for passenger service? Hardhats for the passengers? These gates were not even ready for passenger service on 9-10-2001, AA's last day at DAL. They used CO's gates.

AA Mech-

You apparently don't know your recent history about your own company. They were ordered to cease construction of these gates as it was clear violation of their administrative lease on the space. This happened in the short time between when Legend inaugurated service and subsequently failed. That is why these gates weren't completed by 2001...they weren't allowed to be.

And in reference to the fares...Legend actually started much higher as it was a premium service. AA came in with retrofitted a/c and charged near-DFW prices which were far below Legend's. Because this happened in the beginning, Legend's higher fares weren't around for long.

Look at battles between AA and Vanguard in the DFW-MCI routes to see the same story all over again. It's called predatory pricing.


jimntx-

AS Funguy mentioned...the times are different for WN now and that is why the value of repealling the WA may soon be enough for them to lobby in that direction. Underutilized aiports were the winner a decade ago and WN has done well with those. Now, however, so have all of the other LCCs. Transcon used to be the ticket a few years ago, and WN was at the forefront of that. Again..the LCCs have jumped onto that wagon and that has rapidly dried up. WN picked PHL which never would have been a logical choice for them in the past. The current market and WN's constant expansion has made PHL necessary. Longhauls from DAL may not be far off...if only it weren't for that illogical WA.

Oh...and you cry hypocrisy for different views on "free enterprise". Well there should be different views from different levels. You are stuck in the micro level by feeling that free enterprise should not exist b/c that would inhibit AMR's profitability out of Dallas (a pretty good assessment, I feel, based on your comments). I am referring to the national level and from the perspective of both the consumer and the industry. No industry benefits from allowing predatory practices in which new competition is kept out of monopolithic or oligopolithic markets. That causes rates to become exorbanent, demand to shrivel, and industry profits to drop in the long run. And you mentioned foreign employment...that is a different story b/c of security and our national well-being. If we have economic and unemployment issues, we shouldn't exacerbate them by not hiring our own citizens. Though I do not feel this is a major issue right now...you brought this into the arena.

 

[AAmech]

AA Mech-

You apparently don't know your recent history about your own company. They were ordered to cease construction of these gates as it was clear violation of their administrative lease on the space. This happened in the short time between when Legend inaugurated service and subsequently failed. That is why these gates weren't completed by 2001...they weren't allowed to be.

And in reference to the fares...Legend actually started much higher as it was a premium service. AA came in with retrofitted a/c and charged near-DFW prices which were far below Legend's. Because this happened in the beginning, Legend's higher fares weren't around for long.

Look at battles between AA and Vanguard in the DFW-MCI routes to see the same story all over again. It's called predatory pricing.

Actually they never did cease construction. To appease the city fathers they they cancelled plans to install the footings for the jetbridge but they continued the interior remodeling. The lease only forbade scheduled operations of which there never were.
If you went to Legends website before they started operations they were offering fares of around $2500.00 RT. These fares came down rapidly and I doubt its was because of AA. AA only competed on two of Legends 4 or 5 routes. And there was NO WAY that AA would have offered a lower fare with the DOJ/DOT watching their evey move. AA has NEVER undercut a new entrant carrier prices. It merely matches the price the competitor sets. Must I remind you the DOJ's Predatory behavior lawsuit was SUMMARILY tossed out of a KANSAS court as it was completley without merit?
BTW. If AA's matching of Vanguards prices from DFW to MCI was "Predatory Pricing" what would we call WN's actual undercuting of Vanguards price on the MCI-LAX route?

 

[KCFlyer]

Actually they never did cease construction. To appease the city fathers they they cancelled plans to install the footings for the jetbridge but they continued the interior remodeling. The lease only forbade scheduled operations of which there never were.
If you went to Legends website before they started operations they were offering fares of around $2500.00 RT. These fares came down rapidly and I doubt its was because of AA. AA only competed on two of Legends 4 or 5 routes. And there was NO WAY that AA would have offered a lower fare with the DOJ/DOT watching their evey move. AA has NEVER undercut a new entrant carrier prices. It merely matches the price the competitor sets. Must I remind you the DOJ's Predatory behavior lawsuit was SUMMARILY tossed out of a KANSAS court as it was completley without merit?
BTW. If AA's matching of Vanguards prices from DFW to MCI was "Predatory Pricing" what would we call WN's actual undercuting of Vanguards price on the MCI-LAX route?

It's not just the fares that constitute what many would call predtory pricing. Let's use VAnguard and AA again at MCI. AA not only priced lower than Vnguard...they also added about 6 daily flights between DFW and MCI. When Vangaurd cut back, one would think that the excess demand from Vanguard's departure would have filled those 6 extra flights from AA. But...AA raised the fares and then cut back those extra flights. I think Vanguard offered something like 4 daily flights between MCI and DFW. In the battle, AA offered something like 16 daily flights. So the combination of adding flights and lowering fares, then, when the threat had passed, raising fares and cutting back flights, then the "predatory" flags went up.

There's a big differnce between Vanguard and Southwest on the MCI - LAX route...Southwest didn't lower their fares from what they were charging, and they didn't add any flights between the two cities. When Vanguard folded, one could still get a low fare from MCI-LAX and still pick from one of their 8 daily flights (5 of them nonstops). In fact, I think after Vanguard folded, Southwest actually ADDED another nonstop to their schedule. FWIW, here's another bit of the "predatory puzzle" When Vanguard went under, a last minute round trip flight on AA from MCI-DFW (460 miles) is $872. Today (long after Vanguard left, and with no low fare competiton on the MCI LAX route), a last minute round trip flight halfway across the country and back is $608.

 

[jimntx]

You are stuck in the micro level by feeling that free enterprise should not exist b/c that would inhibit AMR's profitability out of Dallas (a pretty good assessment, I feel, based on your comments).

I am? Where did I say that AMR's profits at DFW should be protected. You and funguy are both apparently reading the white parts of the page again. I only objected to you and funguy implying that AMR was the sole protector of the WA. AMR may very well be in favor of the WA, but so is WN; so is the DFW AOA, and I would be willing to bet you both the cities of Ft. Worth and Dallas. Because if income at DFW drops below the debt service, both cities are on the hook for the difference.

Let me try this one more time. Now this time just read the words. I DON'T CARE whether the WA is repealed or not. Let competitions reign! Yeah, competition. But, if you think that ATA, JB, Frontier, and ACA are dumb enough to compete against WN at DAL, then you need a keeper. They know that WN can do predatory pricing just as well (if not better) as AMR ever thought, and WN has enough cash to keep it up a LOT longer than AMR could in this day and age.

Unless the overall condition of the airline industry improves greatly, the repeal of the WA is not going to benefit anyone except WN. And, if they end up with exclusive use of the much vaunted DAL-MDW and DAL-IAD routes, we'll see if they fares come down.

And, we haven't even considered the fact that greatly increased traffic in and out of DAL might very well result in a citizen outcry about the noise levels. Some of the neighborhoods under the flight path have gotten rather pricey in the years since DFW opened. Those people do not take kindly to having their property values lowered, and they have the most effective political leverage of all. It's called MONEY.

 

[Borescope]

WN can do predatory pricing just as well (if not better) as AMR ever thought, and WN has enough cash to keep it up a LOT longer than AMR could in this day and age.

They did it to us at UAL. I remember Herb replying to a comment by UAL management one day. It was when we were starting the Shuttle out of SFO. He said (in reference to the Shuttle competing against WN at OAK) "bring it on we'll nuke 'um". Our shuttle (UAL) got "nuked" fairly rapidly.

 

[KCFlyer]

They did it to us at UAL. I remember Herb replying to a comment by UAL management one day. It was when we were starting the Shuttle out of SFO. He said (in reference to the Shuttle competing against WN at OAK) "bring it on we'll nuke 'um". Our shuttle (UAL) got "nuked" fairly rapidly.

With all due respect, I doubt that SWA conducted any predatory practices, either in pricing or scheduling. UAL just lost on the battlefield that was already in place. Right now...after they "won" the "predatory" battle against UAL shuttle, they still offer 22 daily flights between OAK and LAX. They are hourly flights, but 10 of those flights are within a half hour of the previous flight. And after they "won" the "predatory" battle against UAL, their fully refundable round trip price is $216. Now, either SWA started offering flights every 15 minutes and lowered their fully refundable fare to $100, or they didn't really do anything predatory. Considering this period when SWA was "nuking" the shuttle, they also made a profit - operating a systemwide flight schedule that charged no more than $300 for a one way trip. So my guess is - they were still making a profit on the OAK-LAX runs. If that's the case, what SWA did was not at all predatory.

When I look at the UAL website, a flight from ORD-CVG (no low fare competition), a fully refundable round trip flight is $1,278.20. A non-refundable and penalty laden "last minute" fare on that route can be had "only" $552. IIRC, when Vanguard started CVG-MDW service, UAL suddenly found it in their hearts to offer significantly lower priced refundable fares. I don't have access to what they might have done with scheduling, but I gotta wonder if they decided that they needed a more "convenient" schedule into CVG.

Look at AA and Vanguard out of MCI or ICT to DFW...AA slashed the fares and bumped up the schedules. When Vanguard pulled out, you would think that the added "demand" from the discontinued Vanguard flights would easily be accomodated on the increased AA flights. Instead, the airfares went up (as of last month, a last minute round trip from MCI-DFW on AA or DAL was $872..."two stepping" to DAL via TUL on a fully refundable SWA fare was $400) and schedules were reduced. That is "predatory".

Perhaps Herb's comments about "nuking" the shuttle had more to do with his knowledge of UAL's cost structure and how he (but not UAL management) could see that they couldn't operate profitably against SWA - even at "regular" SWA fares. FWIW - I have seen Herb's office a couple of years ago. While he does have some Wild Turkey and Harley furnishing in his office, the wall he viewed from his desk was covered with photos of WWII generals and memorabilia. And I think he ran his business like a general runs a war, and not like a lush would run a distillery. And I gather from past history that he doesn't much like to be in a "reactionary" mode - which is what predatory practices are.

 

[Ch. 12]

They did it to us at UAL. I remember Herb replying to a comment by UAL management one day. It was when we were starting the Shuttle out of SFO. He said (in reference to the Shuttle competing against WN at OAK) "bring it on we'll nuke 'um". Our shuttle (UAL) got "nuked" fairly rapidly.

Unfortunately, my attempt to post earlier was "nuked" by my connection so I will try again with a more watered-down version.

Southwest is strategic in its operations. It has a maximum fare of $299 and consumers know this. They operate based on their business plan as they know that a simple business plan such as theirs will defeat the scattered tactics of the legacies.

A major difference, as KCFlyer and others keep posting here, between WN's "predatory" practices and AMR/UALs predatory practices is how they behave before, during, and after competition is in a market. You will find that even in monopoly markets, WN offers reasonable fares and frequency to meet demand. They react to the market...not the competition.

AMR/UAL treat monopoly markets as placeholders. They will keep a meager schedule (not meant to be based on the best interests of the consumer) and offer sky high fares. When competition enters, they increase frequency and lower fares. This is obviously not their business plan, b/c IMO, a business plan is best reflected in markets with no competition. AMR/UAL are tactical and respond to the competition, not the consumer. LUV responds to the consumer.

Not having enough time to sufficiently research all potential LUV monopolies, I chose three. These are RDU-TPA, BHM-STL, and BNA-MCI. RDU-TPA has 2 flights (actually more than the one flight they had when Midway was in that n/s market a few years ago) and the fares range from 49-114 one-way. Hardly price-gauging. BHM-STL frequency is one. This is the same as the TWA days. Fares are 88-139 one way. BNA-MCI (old US) has 4 N/S which has actually increased IIRC since they have become the sole server of this market and the fares are 60-95 one way.

Imagine that...WN actually INCREASES supply when they are the only carrier in the market and they MAINTAIN the same fare levels. interesting.

You do realize that the sole difference between WN and the legacies that continues to guarantee WN's success is that they arrange their plan according to the consumer market (hence, they often actually reduce a schedule when competition enters a market...why fly excess capacity that you know will create a loss when you can fly enough to meet demand and win on your customer service, timeliness, and consistent low fares alone?). The legacies arrange their plan according to the competition. They create losses for the sole purpose of hoping to gain 90+% market share after the competition is gone (in which case they drop supply below what is demanded and charge exorbanant fees). But coming from AMR/UAL, it can be difficult to see these differences. "Predatory" is quite different at WN.