Wright Amendment

[AAmech]

I would like to add that I use the word "predatory" loosly. Actually I'm using the Governments/DOJ's definition. I really don't think what WN does is predatory and I especially don't think AA's matching fares is predatory.

 

[KCFlyer]

I especially don't think AA's matching fares is predatory.

I agree with that statement, taken on it's own. There's nothing to stop "competition". But living in KC, I am well aware of what happened with AA and Vanguard. AA wants to match prices - great...matter of fact, I flew AA a few times because their prices were the same as Vanguard. Usually I'd "dance with the one that brung me", but Vanguard only had 4 daily flights to DFW. None of which were within the hours I needed to fly. And AA had the flight at the right time. But what AA also did, beside match the fare, was to increase the flights. My actions showed that I appreciated the increased scheduling flexability that that move gave me. But when Vanguard went belly up, the increased DFW flights went away (although to be perfectly honest, AA still has the most convenient nonstop schedules between MCI and DFW), and the airfare, especially on last minute travel, skyrocketed. So it wasn't so much the action of matching the fare. It was the other things that made their actions "predatory"...especially cutting flights and raising fares once the competition was eliminated. FWIW, I don't blame AA for Vanguards demise...the poor management they had ("hubs" at MCI, MDW and PIT with a fleet of 13 planes was their top mistake, IMHO) saw to it that their days were numbered, even without any help from AA.

 

[funguy2]

One of the conditions of predatory pricing per the DOJ, IIRC, is pricing your product below cost in a particular market. Since you can argue different ways to assess costs (CASM, Stage-Adjusted CASM, etc), on top of the fact that CASM will vary by market, stage length, equipment, time of day (maybe?), etc, it is really hard to prove that predatory pricing has been engaged in the airline business. I believe this is why AA won the predatory pricing suit with Vanguard, even though the actions taken stink of predatory pricing.

I think its a case of it looks like a duck, smells like a duck, and acts like a duck, but I cannot prove whether or not its a duck.

 

[Ch. 12]

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.

You completely inferred this by citing the "hypocrisy" of those that want free enterprise yet to protect the nation's jobs. That was your argument against Funguy and myself b/c we have said that the WA limits competition illegitimately. If we weren't supposed to infer that, then maybe you should change your argument. I don't get what else your argument that "free enterprise" isn't always the ticket could mean. If you apply that to repealing the WA, then yes...you have to read the white space since that is the only correlation. The only thing to read from your argument is that the WA is worth it b/c profits are being protected. Please tell us how else your argument could apply b/c it just doesn't make sense.

 

[whlinder]

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.

KC, do you remember what the approximate dates were that NJ flew MDW-CVG?

 

[KCFlyer]

KC, do you remember what the approximate dates were that NJ flew MDW-CVG?

I believe it was around July of 1999.

 

[LoneStarMike]

From the Fort Worth Star Telegram, here s the other side's point of view.

"Don't Ground Wright Amendment
By Dee Kelly
Special to the Star-Telegram
Friday, June 11, 2004

http://www.dfw.com/mld/dfw/news/opinion/8897877.htm

Most people in the Metroplex thought that the long debate over Dallas Love Field and the Wright Amendment had ended. However, a Star-Telegram columnist recently opined that Fort Worth might be better off if Love Field were opened to unrestricted long-haul jet service in direct competition with Dallas/Fort Worth Airport.

The Wright Amendment generally restricts Love Field to short-haul jet service, whereas long-haul jet service traffic flies out of D/FW. According to the columnist's argument, the people of Fort Worth would save money by traveling to Dallas and riding the discount airlines.

The overriding question, of course, is what would that do to D/FW, the engine that has driven Fort Worth's economic growth for more than 25 years.

True, the Wright Amendment is old -- but people forget (or never knew) the great struggle that Fort Worth and Dallas leaders faced in trying to build D/FW. Only after much controversy did the two cities agree to end decades of rivalry and pool their resources to build the airport.

To that end, both cities agreed by ordinance to transfer to the new regional airport all air service with certification from the Civil Aeronautics Board -- now the U.S. Department of Transportation -- at Love Field and Red Bird airports in Dallas and Greater Southwest and Meacham Field in north Fort Worth. Both cities also agreed to use every legal and reasonable means to promote the development of D/FW.

When the ordinance was adopted, Southwest Airlines operated only two aircraft and lacked CAB certification. It was licensed under the authority of the now-defunct Texas Aeronautical Commission.

Southwest refused to move to D/FW, and the cities lost a 1973 lawsuit, which sought to force the airline to move, because Southwest was then an intrastate carrier not regulated by the CAB.

After the 1978 deregulation of the airline industry, the CAB authorized Southwest to implement interstate service from Love Field to New Orleans. Based on this decision, Fort Worth and Dallas tried valiantly to close Love Field to all service or to limit its service to intrastate traffic .

Thanks primarily to the efforts of U.S. Rep. Jim Wright and the dynamic new president of Southwest Airlines, Herb Kelleher, the Wright Amendment was enacted as a congressional compromise to prevent carriers from offering interstate service on large aircraft from Love Field to points beyond Texas, New Mexico, Oklahoma, Arkansas and Louisiana.

In 1989, groups then associated with the North Dallas Chamber of Commerce pressed for a repeal of the Wright Amendment. In 1990, the D/FW Airport board released a study by KPMG Peat Marwick warning that lifting and diluting flight restrictions at Love Field not only would slow development at D/FW but would lead to more congested skies at both airports.

The Dallas City Council reaffirmed its support of the Wright Amendment, but two years later the mayor of Dallas offered a resolution to repeal the Wright Amendment. This action precipitated a lawsuit between Fort Worth and Dallas, which resulted in Dallas' dropping its efforts to have the amendment repealed.

The tranquility was short-lived, however. In 1997, Sen. Richard Shelby of Alabama introduced a bill in Congress to amend the Wright Amendment to add three states (Alabama, Mississippi and Kansas) and to exempt 56-seat jets from the restrictions of the Wright Amendment.

This triggered a second lawsuit by Fort Worth, which the city eventually lost when the Department of Transportation sided with Dallas and other parties that supported the Shelby Amendment. The successful legislation was primarily designed to help new start-up Legend Airlines, which failed after a few months of operation.

Today, Southwest Airlines continues to fly out of Love Field as it has in the past, with little competition. Southwest has flourished at Love Field despite the Wright Amendment, and there has been no recent great effort, by Southwest or anyone, to repeal the amendment.

If Southwest wanted to offer unrestricted jet service, it could do so today at D/FW, just like other discount carriers, including Air Tran, Frontier and America West. Southwest simply has chosen not to do so.

From Fort Worth's perspective, there is little to be gained and much to be lost by loosening the restrictions at Love Field. Fort Worth has always been concerned that North Texas would be less attractive to business, old and new, if service at Love Field were to be increased at the expense of D/FW Airport, which still ranks among the top airports in the world based on passengers served.

Making matters worse, Dallas and Fort Worth could lose millions of dollars of their investments in building and improving D/FW. Indeed, the D/FW Airport board, with members from Dallas and Fort Worth, is in the midst of a five-year capital development project that will pump another $2.6 billion into the airport's infrastructure. D/FW needs more passengers, not fewer, to make these investments pay off.

The great leaders of the Metroplex joined together in building a magnificent regional airport to serve not only the Metroplex but the entire nation. It has been a huge success for Fort Worth and Dallas. No one can predict how badly D/FW would be affected by the repeal of the Wright Amendment. Neither city, especially Fort Worth, can afford to take that risk.
-----------------------------------------------
Dee Kelly is a Fort Worth attorney who represented Fort Worth in litigation to limit flights out of Love Field."

LoneStarMike

 

[Ch. 12]

Thanks primarily to the efforts of U.S. Rep. Jim Wright and the dynamic new president of Southwest Airlines, Herb Kelleher, the Wright Amendment was enacted as a congressional compromise to prevent carriers from offering interstate service on large aircraft from Love Field to points beyond Texas, New Mexico, Oklahoma, Arkansas and Louisiana.

This is a gross misinterpretation of the inception of the WA. Kelleher, faced with having no interstate markets available to WN (no ABQ, MSY, etc) grudgingly signed on the line of the WA but he in no way exerted "effort" with Jim Wright to get it passed. He was told that it was the only way to serve the Dallas interstate markets at all.

Kelleher complained about the WA during his entire tenure. Why would he have made the push to get it enacted? He didn't...that was a blatant stretch of the story by this reporter.

 

[orwell]

Probably not if AMR is still flooding them with their lobbyists.

Yeah - what partypoopers! The idea that a commitment would be kept is like SO last century!

 

[Ch. 12]

Yeah - what partypoopers! The idea that a commitment would be kept is like SO last century!

Actually, the idea that a commitment be kept that was initially designed to keep an advantage over all others is so last century. The Wright Amendment is blatantly anti-competitive and benefits one carrier unfairly.

Tell me...what is their angle? (and don't tell me "to keep a commitment" b/c as we all know, this country has signed some pretty dumb laws into existance that have since been repealed.) Why should AMR be the main contender to keep the WA? I'm curious to see what you come up with.

 

[orwell]

Actually, the idea that a commitment be kept that was initially designed to keep an advantage over all others is so last century. The Wright Amendment is blatantly anti-competitive and benefits one carrier unfairly.

Tell me...what is their angle? (and don't tell me "to keep a commitment" b/c as we all know, this country has signed some pretty dumb laws into existance that have since been repealed.) Why should AMR be the main contender to keep the WA? I'm curious to see what you come up with.

Considering that WN was the one that successfully petitioned the courts to nullify the agreement to decommission each city's passenger-service airports, it seems particularly convenient to lambaste AA as being the "rent seeker" today.

I was always under the impression that the amendment protected DFW from DAL, not AA from WN. Clearly, AA benefits from the amendment, as AA, not WN, has invested billions over the years in DFW - something WN was free to do or not do.

To ignore the fact that AA invested billions at DFW under the honest understanding that the amendment would continue to prevail going forward and to bellow about AMR's reluctance (not to mention DFW and Ft. Worth's) to see the amendment go bye-bye seems intellectually dishonest at best and, at worst, to expose an unbridled hope that AMR will just cooperate and go bye bye along with the amendment - like all legacy carriers are supposed to do in the "new world order" in which the industry now operates.

Cheers.

 

[KCFlyer]

Orwell...hindsight being 20/20, and Herb being a shrewd lawyer - I find it a bit ironic that had Braniff and Texas International not tied SWA up in court before they ever got started, they would have been operating at Love Field, and most likely would have been forced to sign the same agreement that the other airlines signed intrastate airline or not - and they'd be over at DFW. But....they weren't operating at the time the agreement was signed, and the rest is history.

 

[Oneflyer]

Had Braniff not tied them up in court SWA would not be around today. Herb's orginal idea was to use old 4 engine props purchased from AA to start the airline with, not till much later did Lamar Muse make the decision to use 737-200s.

 

[mga707]

Had Braniff not tied them up in court SWA would not be around today. Herb's orginal idea was to use old 4 engine props purchased from AA to start the airline with, not till much later did Lamar Muse make the decision to use 737-200s.

The "old, four-engined props" in question were actually Lockheed Electra TURBOprops that AA was retiring in 1968-69. All were only a decade old or less, having been delivered new to AA in 1958-60. Had Herb started operations with the Electras in 1968, they could have still upgraded to 737s a few years later.
Air California and PSA (with similar intrastate operations) both transitioned from Electras to jets, and both succeeded until they were bought out in the late '80s.

 

[Oneflyer]

I'm quite certain that SWA could not have flow DAL-HOU every hour with 3 props like they did with 737s. Muse explains it quite well in his book.

They also couldn't have transitioned to 737s because they wouldn't have made it more than about 6 months.