GO
Loading...

How Southwest Airlines Beat the Wright Amendment

Forty years ago, Southwest Airlines made its debut as a small airline in Dallas, Texas, struggling to keep pace in the business. Today, Southwest is the top domestic carrier in the United States. But on the way to becoming the travel bellwether it is now, Southwest has been met with plenty of tension and turbulence.

The primary obstacle along Southwest’s path to success was a piece of legislation called the Wright Amendment, sponsored by former Fort Worth Congressman Jim Wright in 1979.

AP

Wright’s aim was to protect competing airport Dallas/Fort Worth International Airport from losing business when Southwest refused to stay out of Dallas Love Field airport. The law was an amendment to the International Air Transportation Act of 1979, restricting passenger flights out of Love Field to locations within Texas and to four neighboring states — Louisiana, Arkansas, Oklahoma and New Mexico.

Since long-haul flights out of Dallas were limited to 56 passengers or fewer, Southwest relied on many shorter flights to build up and bolster its Love Field operation. Some passengers even managed to “work” the system and bypass limits completely – by flying out from Dallas, changing planes and then flying to any other city that Southwest served, with two tickets in each direction.

After D/FW’s annual air traffic began to exceed capacity, the amendment was modified to add Alabama, Kansas, Mississippi and Missouri to the Wright zone.

In 2004, Southwest launched a massive public relations campaign in an effort to rally support for a full repeal of the amendment, and created a website called “Set Love Free.” D/FW and its primary tenant, American Airlines, then launched an opposing campaign and designed a website called “Keep DFW Strong” — even painting ads onto one of its water tanks.

When Southwest threatened to pull out of Dallas Love Field, the amendment was finally repealed in 2006. The repeal lifted most restrictions but left others, such as the “Wright zone,” intact until 2014. (See a complete timelineof the Wright Amendment.)

“Travelers have been burdened for nearly 30 years with the higher airfares the Wright Amendment nurtured by preventing competition,” Southwest CEO Gary Kelly said in a press release. But "the public has spoken out for change, and a plan was developed that brought together parties from both ends of the spectrum.”

Following the repeal, Love Field soon became one of Southwest Airlines’ fastest growing markets, boosting its revenue from $11 million in 2006 to $113 million in 2007. Passenger volume increased from 1 million in 2005 to 1.45 million people in the third quarter of 2007, and by 2008 the airline had raised the number of destinations it offered by 400 percent.

In an interview with the Dallas Business Journal, Southwest senior planning analyst Bob Haster said the repeal would benefit not only the airline but also its passengers.

American Airlines
AP
American Airlines

“If you get rid of the Wright Amendment and allow competition out of Love Field, traffic will increase and fares will decrease,” he said. “And passengers will be happy.”

But Tim Wagner, spokesman for Fort Worth-based American Airlines, said Dallas/Fort Worth was not as pleased.

“The lower fares generated by competition have attracted some new local passengers, though relatively few,” he said. “American Airlines being forced to move flights from Dallas/Fort Worth Airport to Love Field has resulted in decreasing connecting passengers at Dallas/Fort Worth.”

Former airline executive and industry expert Thomas Bacon predicts fares will fall to destinations beyond the current Wright zone.

American Airlines "has many monopolies from the D/FW area to the rest of the U.S. and many oligopolies with other high-cost carriers,” he said. “Southwest certainly is not always ‘low-fare’ but they do tend to price with fewer restrictions.”

Bacon also said the repeal would cause new, inexpensive capacity to increase at both Love Field and D/FW, citing a high price elasticity as the primary cause.

After the fray is finally over, despite a new maximum capacity of 20 gates, Southwest expects to launch an aggressive schedule of non-stop flights that will be coast to coast.

In addition, both American Airlines and American Eagle Airlines, which operated out of Love Field from 2006 to 2009, have vacated the airport while renovations take place but say they expect to return when a new terminal and gates are completed by 2014. Certain planned renovations to Love Field, such as baggage handling and concessions upgrades, are also on hold until then.

Wright Amendment Timeline

Timeline of the Wright Amendment

  • Early 1960s: The Federal Aviation Administration declared Love Field in Dallas and Greater Southwest International Airport in Fort Worth unsuitable for expected future air traffic demands, refusing to provide continued federal funding
  • 1964: The Civil Aeronautics Board ordered the two airports to merge in a single joint regional site, with the intent of rendering both Love Field and Greater Southwest International Airport inoperative
  • 1965: Dallas and Fort Worth established an interim joint board to determine the new airport site; eventually settling on a site located between the cities of Dallas and Fort Worth – calling it Dallas/Fort Worth International Airport
  • 1968: Ground is broken for the new D/FW site. To make the new airport viable, each city agreed to restrict its own airports from commercial passenger service use, and all airlines serving the old airports at that time signed an agreement to relocate
  • 1971: Southwest Airlines refused to stay out of Love Field as other airlines left, saying the move would affect their business model; Southwest then began service from Love Field to Houston and San Antonio
  • 1972: Dallas, Fort Worth and the Airport Board are upset by Southwest’s insistence on being stationed at Love Field, and filed suit against Southwest
  • 1973: U.S. Supreme Court rules in favor of Southwest, stating that as long as Love Field remained open as an airport, Southwest could do business there
  • 1974: D/FW officially opens for business; Love Field faces a drastic dip in number of flights and decommissions most of its concourses
  • 1978: The federal Airline Deregulation Act removed government control over fares and routes, encouraging airlines to compete freely and allowing new domestic carriers unrestricted entry into the marketplace
  • 1979: Southwest Airlines delved into the larger market and planned to offer interstate service from Love Field. This move angered Fort Worth and D/FW
  • 1979: To protect D/FW from losing business, Fort Worth Congressman Jim Wright pushed through the Wright Amendment, severely limiting Southwest’s non-stop flights within Texas and to the states of Louisiana, Arkansas, Oklahoma and New Mexico
  • 1990s: D/FW International Airport’s annual air traffic exceeded its capacity
  • 1996: A study suggested that repealing the Wright Amendment and reopening Fort Worth Alliance to passenger service would effectively provide D/FW with two reliever airports. D/FW refused
  • 1997: Alabama Senator Richard Shelby passed the Shelby Amendment, further expanding Southwest’s business by adding Alabama, Kansas and Mississippi to the Wright zone
  • 2004: Southwest CEO Gary Kelly calls the Wright Amendment “outdated and outmoded” and started attempts to repeal it, launching a massive public relations campaign. D/FW and American Airlines responded with their own campaign.
  • 2005: Southwest threatened to leave Dallas unless the Wright Amendment was repealed
  • Oct 13, 2006: President George W. Bush signs a bill into law that fully repealed the Wright Amendment. Southwest, American, D/FW and the cities of Dallas and Fort Worth all agree to the repeal, but on several conditions, including that the Wright zone restrictions stay intact until 2014, lowering Love Field's maximum gate capacity to 20 from 32 and keeping Love a domestic airport only
  • Oct. 17, 2006: Southwest announces that it will begin indirect connecting service between Love Field and destinations outside the Wright zone
  • May 2011: Southwest acquires AirTran Airways, which will give Southwest international destinations for the first time, but the Wright Amendment will bar nonstop flights to foreign destinations
  • Oct. 16, 2014: The Wright Amendment is slated to fully expire

Watch CNBC Titans, Herb Kelleher, premiering Thursday, July 13 at 9 p.m. ET, with reairs at 10 p.m., midnight and 1 a.m.

Symbol
Price
 
Change
%Change
AAL
---
LUV
---

Contact CNBC Titans

  • Showtimes

    Steve Jobs
    Sunday, May 19th, 9p ET