18.5.05

Suspense In St. Louis

St. Louis Post-Dispatch

Airlines square off over routes to Dallas
By
Sunday, May. 15 2005

St. Louisans who fly from Lambert Field to Dallas have a big stake in a Texas-style, bare-knuckles brawl between two of the nation's largest airlines.

American Airlines flights between Lambert and Dallas/Fort Worth International Airport - one of the most frequent routes from St. Louis - can cost significantly more than trips of a similar length to cities such as Detroit, Cleveland, Oklahoma City and Columbus, Ohio. Fares for those four cities were 43 percent to 82 percent less than a Dallas trip, according to a Post-Dispatch review of prices posted on American's Web site.

Part of the reason for the higher Dallas fares is that St. Louis is on the wrong end of a federal law passed in 1979 that prevents low-cost Southwest Airlines from flying direct to most U.S. cities from its home base at Dallas Love Field. As a result, American holds a near-monopoly on the route between St. Louis and its superhub in Dallas.

The situation has caught the interest of Sen. Christopher "Kit" Bond, R-Mo., chairman of the Senate Appropriations Committee's Subcommittee on Transportation, Treasury, the Judiciary and Housing and Urban Development.

"Sen. Bond will assess all of the information as the facts are gathered from all sides. Obviously, a main concern of the senator's is how any legislative action will affect Missouri," Bond spokesman Rob Ostrander said in a statement.

Southwest says it wants to ease the pain of consumers by having the 1979 law called the Wright Amendment repealed; it prohibits the airline from offering for sale or providing transportation between Love Field and any point beyond Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Mississippi and Alabama.

Free from the shackles of Wright, Southwest said, it would be able to spur competition on direct flights between St. Louis and Dallas, and other city pairs, lowering ticket prices.

Southwest hopes to capture support from consumers with its newly launched Internet site titled "Wright is Wrong! Set Love Free" at www.setlovefree.com

American says Southwest's campaign is a red herring to deflect attention from its refusal to operate from nearby Dallas/Fort Worth. Instead, Southwest is keen to expand operations at Love, while avoiding head-to-head competition with American at Dallas/Fort Worth.

"We offered $22 million to attract Southwest, which equals one year of free rent," said Kevin E. Cox, chief operating officer at Dallas/Fort Worth. "In lieu of waging war ... Southwest has the freedom to fly out of here today. It doesn't take an act of Congress and they can make money. That's a pretty good deal."

Southwest doesn't think so. One of the reasons the carrier regularly turns a profit - an oddity in the troubled airline industry - is because it operates from secondary airports such as Love Field when it can, keeping its costs down and its flights away from cutthroat price wars.

"There's no reason to deviate from the only successful business model in the airline industry," said Ron Ricks, a senior vice president at Southwest. "Why would we junk it to go out to DFW airport? That's the antithesis of our business model."

He said if Southwest split operations between Love and Dallas/Fort Worth, it would end up competing against itself. He also conceded that American's buildup at Dallas/Fort Worth, which he says will approach 1,000 daily flights next year, would pose insurmountable competition.

"Any airline that tries to go up against American at DFW will lose," Ricks said. "American will have more flights than you have to any destination and prices will be so low you can't compete."

American flights between St. Louis and Dallas/Fort Worth - about 10 daily - didn't look competitive on Friday when the Post-Dispatch reviewed routes of similar length to other cities.

The review showed that Dallas/Fort Worth flights were much more expensive for travel over the Fourth of July weekend, for example.

The price of an American ticket between Dallas/Fort Worth and Lambert cost $210 for the 1,100-mile round-trip flight.

Flights to Cleveland, Columbus, Ohio, and Detroit ranged from $115.50 to $146.98 on American.

On a cost-per-mile basis, the price differences narrowed. The DFW-Lambert flight would cost passengers the equivalent of 19 cents per mile, compared with 13 cents or 14 cents per mile for the four other cities. The prices do not include taxes, security fees and federal airport levies.

The Wright amendment, named for former Texas Democratic congressman and House Speaker Jim Wright, intended to prevent Love Field from becoming a serious competitor to Dallas/Fort Worth.

As Cox of Dallas/Fort Worth explained, the federal government in the 1960s urged Dallas and Fort Worth to collaborate on one metropolitan airport rather than have taxpayers support four smaller regional venues.

Bond ordinances mandated that Dallas/Fort Worth be the only airport for airlines with federal certification. Bondholders didn't want revenue diverted from Dallas/Fort Worth, ensuring payment of the airport's construction debt.

Southwest, then a fledgling airline, remained at Love Field because it only flew inside Texas and didn't need a federal certificate.

In the late 1970s, Wright, who represented a district that included Fort Worth, wanted to shut Love Field down, but his amendment ultimately was a compromise that allowed Southwest to fly to four contiguous states from Love.

"Herb Kelleher, Mr. Wright will tell you, was tickled pink with the amendment," Cox said, referring to Southwest's legendary chairman. "He got more than he thought he would ever get. There was no lawsuit and he got a safe harbor that allowed him to operate out of a ... lower cost airport without competition from the big carriers."

Later, three other nearby states were added.

Kelleher apparently saw competition between Love and Dallas/Fort Worth as unhealthy, according to a study released last week by Dallas/Fort Worth. The study cites a 1990 deposition of Kelleher taken in a court case.

The study by Simat, Helliesen & Eichner Inc., an aviation consultant, concluded that repeal of the Wright Amendment would cost Dallas/Fort Worth some 204 flights a day and 21 million passengers annually and slash passenger traffic to levels seen 20 years ago.

The study predicts it would take Dallas/Fort Worth 20 years to recover.

Ricks of Southwest said an expansion by Southwest at Love would spark healthy competition, actually spurring demand for airline travel while increasing flights and passengers at Dallas/Fort Worth.

Cox and other Dallas/Fort Worth officials, however, are not ready to test that thesis.

Dallas/Fort Worth has bet a lot on maintaining the status quo. The airport holds $3.6 billion in bond debt from construction of a new international terminal, the Skylink people mover and other improvements.

"Competition between airlines is fantastic," Cox said. "But not between airports that are eight miles apart and have common ownership. When you unravel a hub, it has a negative impact on the entire community. I think the people in St. Louis know about that."

Reporter Tim McLaughlin E-mail: tmclaughlin@post-dispatch.com

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