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Dallas Drama

Dallas Drama

2014.03.11 – No, not the show; the airports. DFW and DAL serve as an excellent case study in prospective competition, given the jostling underway for two measly gates; but when those gates are at Southwest-dominated Dallas Love Field, restricted to 20 gates by 2006’s Wright Amendment Reform Act (“WARA”), and with nearby, American-dominated DFW booming, the issue takes on increased importance and intrigue. Today’s Ft.Worth Star-Telegram article does a good job of summarizing the state of play.

[Disclosure – we’re a former Southwest Employee, having left the company in December, 2011. In our last two positions we were directly involved in implementing the terms of the Wright Amendment Reform Act of 2006 at DAL, and then in reviewing, debating, adopting and executing Southwest’s commercial and marketing strategy across the network and in many of its larger cities. However, nothing herein is based on inside knowledge of Southwest’s strategy or plans, or on our personal preferences for how to resolve this issue]

Most of the discussion of the two DAL gates has centered on competition among carriers, and obviously this is important. What gets less attention, it seems, is the question of what competition between airports looks like, and how the DAL gate allocation decisions will affect airline competition in the DFW/DAL catchment. That’s the topic on which we focus here today, and it really boils down to one decision that someone, somewhere (presumably, at DOJ or the City of Dallas) has to make – is competition better served by ensuring competitiveness at (a) one airport in a catchment, or (b) in the catchment as a whole?

(a) If you think DFW and DAL do not compete with each other for customers, and that therefore the primary competitive concern is DAL unto itself, then it’s a no brainer – someone other than Southwest should get the gates, whether under lease or, as legislated in the WARA, on a common use basis with the City of Dallas controlling the gates (Delta got that much right, at least, in its rebuttal to DOJ).

(b) If you think DAL and DFW do compete with each other for customers, then what matters is what carrier, or combination of carriers, provides the best competitive balance to AA’s massive DFW hub? From our perspective, the answer to that question is obvious: Southwest (as evidenced in yesterday’s announcement) would provide far more access to and over DAL from more cities than would any combination of Southwest and another carrier. And contrary to Virgin America’s claim, the WARA does not prohibit Southwest from operating at more than 16 DAL gates; it merely prohibits them from preferentially leasing more than 16 DAL gates; no minor distinction, that.

However shocked, shocked we all might be, there’s a political angle to this, so logic alone may not predict the eventual decision.  If pressed, we think (b) is the more compelling argument on the merits and the facts. Airports in a catchment do, to various degrees, compete with each other, even if only through their dominant carriers:

  • Look at post-2007 trends at secondary airports close to major international gateways. Airports such as Manchester, Oakland and Burbank have declined while airlines focused on and grew a nearby international airport, respectively Boston, San Francisco and LAX.
  • If DAL and DFW don’t compete with each other, what exactly was all the Wright Amendment fuss about anyway?
  • Doesn’t Virgin America’s determination to abandon DFW in favor of DAL underscore that?

But we’ve been wrong before. What do you think? Let us hear from you…

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