Dallas Love Field: The Wright and Shelby Amendments

Congressional research reportNov 9, 2005

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Dallas Love Field:

The Wright and Shelby

Amendments

Updated November 9, 2005

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Legislative Attorney

American Law Division

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Specialist in Transportation

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Dallas Love Field: The Wright and Shelby Amendments

Summary

The history of the Wright Amendment dates back to the 1960s when the now

defunct Civil Aeronautics Board (CAB) proposed the creation of a single regional

airport in the Dallas-Fort Worth (DFW) area. To construct the new airport, the two

cities entered into an agreement that required the phasing out of separate existing

airports in Dallas and Ft. Worth and transferring air service to the new DFW Airport,

which opened in 1974. During this time, Southwest Airlines began operating out of

Dallas’s Love Field as a purely intrastate air carrier. As such, Southwest was not

subject to CAB regulation. Congress’s subsequent passage of the Airline

Deregulation Act of 1978, resulted in Southwest being allowed to operate interstate

flights from Love Field, and prompted concerns from many local officials about

DFW’s financial stability.

The Wright Amendment represents a compromise that was designed to protect

the interests of both DFW Airport and Southwest Airlines. The Wright Amendment

contains a general prohibition on interstate commercial aviation to or from Love

Field subject to exceptions that permits Southwest’s continued operations in a

regional four state market. In addition, the Shelby Amendment, enacted in 1997,

further expands the scope of the regional market to three additional states, but

nevertheless retains the basic compromise and structure of the original Wright

Amendment. The language of the Wright Amendment has been the focus of several

administrative interpretations by the Department of Transportation, as well as

litigation at both at the state and federal level. Each court decision to date has

affirmed the DOT’s interpretation of the Wright Amendment.

The newest iteration of this long running issue is primarily the result of events

that have occurred since the Fall of 2004. First, Delta Airlines decided in October

2004 to pull most of its service out of Dallas Ft. Worth International Airport (DFW).

Next, DFW asked Southwest Airlines to consider operating long distance flights out

of DFW. Southwest rejected the DFW offer and instead announced in November

2004 that it intended to seek legislative relief from the Wright/Shelby Amendments.

This announcement ended what was regarded as a long standing truce on this issue.

In the period since November, DFW, joined by other parties such as American

Airlines, have lobbied in favor of retaining the existing Wright/Shelby restrictions

on airline operations at Love Field. Southwest, and others, have, at the same time,

presented their own arguments as to why these restrictions should be removed.

The DFW arguments are primarily couched in the politics, legalities, and history

of the regional compact that created the airport. The rationales for retaining the

Amendments are primarily of local interest and origin, e.g. protecting investments

and markets at DFW. The rationale for removing the restrictions is the rationale for

deregulation in the first place, the unrestricted flow of air commerce. A question for

policymakers then is should the exceptions to deregulation that are the Wright/Shelby

Amendments be retained in the context of the existing national aviation system?

Legislation affecting the Wright/Shelby restrictions has been introduced in the 109th

Congress; H.R. 2932, H.R. 2646, H.R. 3058, H.R. 3383, S. 1424, and S. 1425. This

report will be updated as warranted by events.

Contents

Legislative Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Wright Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Shelby Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Litigation History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Continental Airlines v. Department of Transportation . . . . . . . . . . . . . 5

American Airlines v. Department of Transportation . . . . . . . . . . . . . . . 5

Economic Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The Dallas-Ft. Worth Aviation Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Airline Competition in the Dallas-Ft. Worth Market . . . . . . . . . . . . . . . . . . . 9

Impacts of Delta’s Decision to De-hub at DFW . . . . . . . . . . . . . . . . . . . . . 10

DFW’s Incentive Plan to Attract New Air Carrier Service . . . . . . . . . . . . . 11

Airport Competition in the Dallas - Ft. Worth Market . . . . . . . . . . . . . . . . 11

Competing Economic Impact Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

DFW Initiated Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Southwest Airlines Initiated Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

American Airlines Initiated Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Potential Impacts of Repeal on DFW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Potential Impacts of Repeal on Love Field . . . . . . . . . . . . . . . . . . . . . . . . . 15

Local Reaction to a Proposed Wright/Shelby Repeal . . . . . . . . . . . . . . . . . 16

Prospects for Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Dallas Love Field: The Wright and Shelby

Amendments

The history of the Wright Amendment dates back to the 1960s when the now

defunct Civil Aeronautics Board (CAB) proposed the creation of a single regional

airport for the Dallas-Fort Worth (DFW) region.1 As part of the airport’s funding

arrangement, the cities adopted the 1968 Regional Airport Concurrent Bond

Ordinance,2 which, among other things, created the DFW Airport Board and required

the cities to phase out existing air transportation operations at their local airport

facilities and transfer them to the new DFW Airport.3 To fulfill the requirements of

the Bond Ordinance, the DFW Board entered into contracts with the existing

federally regulated air carriers requiring them to relocate their services to the newly

constructed DFW Airport.4 After the contracts had been signed, but prior to the

completion of construction, Southwest Airlines began operating intrastate commuter

flights from Dallas’s Love Field.5 Shortly thereafter, Southwest informed the DFW

Airport Board that it intended to remain at Love Field even after DFW Airport was

completed.6 Southwest’s decision led the cities of Dallas and Fort Worth, in

conjunction with the Airport Board, to seek a declaratory judgment excluding

Southwest from operating flights from Love Field once the new airport was

operational.7 The District Court for the Northern District of Texas held that because

Southwest was flying only intrastate flights, the CAB did not have jurisdiction over

their activities.8 Thus, according to the court, Southwest, by virtue of its purely

See Eric A. Allen, The Wright Amendment: The Constitutionality and Propriety of the

Restrictions on Love Field, 55 J. AIR L. & COM. 1011, 1014 (1990) (citing City of Dallas

v. Southwest Airlines, 371 F.Supp. 1015, 1020 (N.D. Tex. 1973)).

See Dallas, Tex., Regional Airport Concurrent Bond Ordinance 12,352; see also Fort

Worth, Tex., Regional Airport Concurrent Bond Ordinance No. 602.

Id. at § 9.5(A) (stating that the cities were to “take such steps as may be necessary,

appropriate and legally permissible ... to provide for the orderly, efficient and effective

phase-out at Love Field, Redbird, GSIA and Meacham Field, of any and all Certificated Air

Carrier Services, and to transfer such activities to [DFW] effective upon the beginning of

operations at [DFW].”).

See City of Dallas v. Southwest Airlines, 371 F.Supp. 1015, 1020-21 (N.D. Tex. 1973).

Id. at 1021.

Id.

Id. at 1022

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intrastate operations, could not be excluded from utilizing Love Field as long as the

airport remained operational.9

In 1978, however, Congress passed the Airline Deregulation Act of 1978,10

which included a provision allowing automatic entry into interstate aviation markets

provided that the carrier seeking entry was fit, willing, and able to comply with all

existing rules, regulations, and requirements of the CAB.11 Southwest promptly

petitioned and was granted permission to operate interstate flights from Love Field

to New Orleans, Louisiana.12 The expansion of Southwest’s service from Love Field

to interstate markets, however, prompted concerns from local officials about DFW’s

financial stability because it appeared that the local officials were powerless to

prevent Southwest from expanding service.

Legislative Action

The Wright Amendment. The Wright Amendment represents a compromise

that was designed to protect the interests of both DFW Airport and Southwest

Airlines. Included as part of the International Air Transportation Competition Act,13

the amendment, as originally drafted, would have effectively prohibited any interstate

airline service from Love Field.14 The final legislation, however, has proven to be

a more flexible limitation on interstate commercial aviation originating from Love

Field than a strict prohibition.

The Wright Amendment contains a general prohibition on interstate commercial

aviation to or from Love Field.15 The amendment also contains four exceptions: first,

See id. at 1035.

Airline Deregulation Act of 1978, P.L. 95-504, 92 Stat. 1705 (1978).

Id. at § 12 (providing that

any intrastate air carrier which has a valid certificate or license issued by a State

regulatory authority to engage in intrastate air transportation ... may apply to the

Board for a certificate under this subparagraph to engage in nonstop service

between any one pair of points in interstate or overseas air transportation ... the

Board shall issue a certificate to such applicant for the nonstop service specified

in such application, unless within such sixty-day period the Board determines

that the applicant is not fit, willing, and able to provide such nonstop service and

to conform to the provisions of this Act and the rules, regulations, and

requirements of the Board issued under this Act.)

See Southwest Airlines, Automatic Market Entry, CAB Order No. 79-9-192 (Sept. 28,

1979). The CAB stated that they were “persuaded by the clear language ... and the

legislative history of the automatic market entry section of the Act that our authority to deny

a [sic] application is highly circumscribed unless the carrier is unfit and that, on the facts

before us, we have no discretion to deny the application.” See id. at 2-3.

International Air Transportation Competition Act of 1979, P.L. 96-192 § 29, 94 Stat. 35,

48-49 (1980).

See Conference report (H.Rept. 96-716, 24) 96th Cong., 2d Sess. (1980).

Id. at § 29(a) (stating that “neither the Secretary of Transportation, the Civil Aeronautics

(continued...)

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the amendment permits ten interstate charter flights each month to and from Love

Field;16 second, it allows flights by “commuter airlines operating aircraft with a

passenger capacity of 56 passengers or less;”17 third, the amendment specifically

grandfathers in the existing interstate service that Southwest was providing between

Love Field and New Orleans,18 and; finally, what is referred to as “turnaround

service” from Love Field to one or more points within the states of Louisiana,

Arkansas, Oklahoma, New Mexico, and Texas are permitted, provided that the

carrier does not “offer for sale” through or connecting service with any other air

carrier outside the listed states.19

The legislative history provided by the conference committee indicates that the

language was intended to provide “a fair and equitable settlement” to the dispute and

was agreed to by representatives of “Southwest Airlines, the City of Dallas, the City

of Fort Worth, DFW Airport authority, and related constituent groups.”20 The

conferrees also attempted to make clear that the Wright Amendment was to

supercede any Federal Aviation Act provision that might have, or could in the future,

be construed to permit interstate commercial service from Love Field.21 In addition,

the conferees indicated that the Love Field situation was unique and that the

compromise offered by the Wright Amendment was not to be construed “as a

harbinger of any similar proposals for any other airport or area.”22

(...continued)

Board, nor any other office or employee of the United States shall issue, reissue, amend,

revise, or otherwise modify (either by action or inaction) any certificate or other authority

to permit or otherwise authorize any person to provide the transportation of individuals, by

air, as a common carrier for compensation or hire between Love Field, Texas, and one or

more points outside the State of Texas ...”).

Id. (stating that “charter air transportation not to exceed ten flights per month”).

Id.

Id. at § 29(b) (stating that “no person shall provide or offer to provide the transportation

of individuals, by air, for compensation or hire as a common carrier between Love Field,

Texas, and one or more points outside the State of Texas, except that a person providing

service to a point outside of Texas from Love Field on November 1, 1979, may continue to

provide service to such point.”).

Id. at § 29(c) (providing that “Subsections (a) and (b) shall not apply with respect to, ...

transportation of individuals, by air, on a flight between Love Field, Texas, and one or more

points within the States of Louisiana, Arkansas, Oklahoma, New Mexico, and Texas by an

air carrier, if (1) such air carrier does not offer or provide any through service or ticketing

with another air carrier or foreign air carrier, and (2) such air carrier does not offer for sale

transportation to or from, and the flight or aircraft does not serve, any point which is outside

any such State.”).

Conference report (H.Rept. 96-716, 24) 96th Cong., 2d Sess. (1980).

Id. at 25 (stating that “this provision supercedes any provision of the Federal Aviation Act

that may otherwise be construed to authorize interstate service to Love Field.”).

Id.

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The Shelby Amendment. The Wright Amendment remained in place,

unamended, until 1996, when Legend Airlines sought to begin interstate service from

Love Field. Legend filed a petition to operate pursuant to the exception in the Wright

Amendment that appeared to permit unrestricted interstate service by airlines

operating aircraft with a seating capacity of less than 56 passengers.23 In response,

however, the DOT’s Office of General Counsel issued an opinion stating that the

Wright Amendment’s exception only applied to aircraft that were originally

configured to hold fewer than 56 passengers.24 The following year, Congress adopted

the Shelby Amendment as part of the Department of Transportation and Related

Agencies Appropriations Act of 1998.25 The Shelby Amendment specified that the

Wright Amendment’s 56 passenger exception includes “any aircraft, except aircraft

exceeding gross aircraft weight of 300,000 pounds, reconfigured to accommodate 56

or fewer passengers if the total number of passenger seats installed on the aircraft

does not exceed 56.”26 In addition, the Shelby Amendment added Kansas, Alabama,

and Mississippi to the list of States previously included by the Wright Amendment.27

The legislative history that was included in the act’s conference report does not

articulate a rationale for the clarifying language, nor does it offer an explanation for

the additional three States.28 Instead, the report language focuses on Congress’s

concern with respect to the safety of flight operations in the Dallas- Fort Worth area

and the requirement that the Federal Aviation Administration take the necessary steps

to alleviate the problems and report back to the appropriate congressional

committees.29

Litigation History

Since its original adoption in 1980, the Wright Amendment’s provisions have

been challenged in court on two separate occasions. Interestingly, both litigations

have attempted to prevent the expansion of airline services operating from Love

Field. Both lawsuits were instigated after interpretive rulings by the DOT, and in

See Robert B. Gilbreath & Paul C. Walter, Perimeter Rules, Proprietary Powers, and the

Airline Deregulation Act: A Tale of Two Cities ... And Two Airports, 66 J. AIR L. & COM.

223, 227-28 (2000) (citing American Airlines v. Dep’t of Transp., 202 F.3d 788, 794 (5th

Cir. 2000)) [hereinafter Gilbreath & Walter].

See American Airlines v. Dep’t of Transp., 202 F.3d 788, 794 (5th Cir. 2000).

Department of Transportation and Related Agencies Appropriations Act of 1998, Pub. L.

No. 105-66 § 327(a), 111 Stat. 1425 (1998)(October 27, 1997).

Id.

Id. at § 327(b).

Conference report (H.Rept. 105-313, 45) 105th Cong., 2d Sess. (1998).

Id. (stating that “[u]pon a 50 percent increase in total flight operations from the levels

existing on the date of enactment of this Act at either of the airports mentioned in this

section, the Administrator shall report to the House and Senate Committees on

Appropriations and the Senate Committee on Commerce, Science, and Transportation within

30 days describing what actions, if any, are recommended to ensure the efficient and safe

operation of Dallas-Fort Worth metroplex airspace.”).

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each case the DOT’s ruling was upheld by a federal court and local authorities were

ordered to permit the expanded services.

Continental Airlines v. Department of Transportation. In 1985,

Continental Airlines sought to establish passenger service between Love Field and

Houston, Texas. The DFW Board, joined by the cities of Dallas and Forth Worth and

Southwest Airlines, sought to prevent Continental’s action by initially requesting that

the Department of Transportation interpret subsection (c) of the Wright Amendment

as imposing a “class restriction” and preventing air carriers who operate through

service or ticketing with another carrier from operating at Love Field.30 The DOT,

however, disagreed, holding that the subsection did not prevent a carrier from

operating at Love Field simply because they provided through service elsewhere on

its system.31 In addition, the DOT held that while the Wright Amendment does not

preclude airlines from “double ticketing,”32 air carriers are prohibited from

advertising, promoting, or otherwise affirmatively soliciting double ticket services.33

The basis for this ruling by the DOT appeared to be the prohibition on “offering for

sale” transportation outside the proscribed service area.34 In Continental Airlines v.

Department of Transportation, the United States Court of Appeals for the District of

Columbia reviewed and affirmed the DOT’s decision in its entirety.35 Since

Continental Airlines, there appears to have been no other substantive challenges to

the provisions of the original Wright Amendment. At least one law review author,

however, has suggested that there may be grounds for a constitutional challenge to

the Wright Amendment.36

American Airlines v. Department of Transportation. As a result of the

Shelby Amendment, Southwest Airlines began offering flights to Alabama and

Mississippi, while Legend, Continental, and other air carriers began to explore

See Continental Air Lines v. Dep’t of Transp., 843 F.2d 1444, 1447 (D.C. Cir. 1988).

See Love Field Amendment Proceeding, Order No. 85-12-81 (Dep’t of Transp. Dec. 31,

1985); see also Continental Air Lines, 843 F.2d at 1447.

According to the DOT, double ticketing is “the purchase by a passenger of two separate

tickets: one for service from Love Field to a point within Texas or the four adjacent states,

and a separate, second ticket for service from that destination to a point beyond the

authorized Love Field Service Area.” See Continental Airlines, 843 F.2d at 1455 (citing

DOT’s Brief at 48, n. 34).

See Love Field Amendment Proceeding, Order No. 85-12-81, 10-11 (Dep’t of Transp.

Dec. 31, 1985)

Id.

Id. at 1453-54.

See Eric A. Allen, The Wright Amendment: The Constitutionality and Propriety of the

Restrictions on Love Field, 55 J. AIR L. & COM. 1011, 1032-1074 (1990) (arguing that

passengers may have a claim against the Wright Amendment for violating their

constitutional right to travel. In addition, the article suggests that States located outside the

proscribed service area may challenge the Amendment on the grounds that it violates the

port preference clause of the Constitution (Art. I, § 9, cl. 6)).

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providing both interstate and intrastate service from Love Field.37 Litigation ensued

at both the federal and state level. Initially, the City of Forth Worth brought a suit

in the Texas State court against the City of Dallas, the DFW Board, Legend,

Continental, and Continental Express, attempting to block the proposed additional

service from Love Field. Fort Worth argued that the Bond Ordinance, which was

part of the original DFW construction agreement, required the cities to phase out

service at their local airports and shift them to DFW.38 According to Fort Worth, the

terms of the Bond Ordinance were not preempted by either the Airline Deregulation

Act, or the Wright and Shelby Amendments; therefore, Dallas was obligated to

utilize its proprietary powers to restrict service at Love Field.39 The state court

agreed, holding that “Dallas was obligated ... to preclude airlines from flying between

Love Field and areas outside Texas and the four-state service area authorized by the

Wright Amendment.”40

While an appeal of the state court’s decision was pending, the DOT initiated an

interpretive proceeding that resulted in a Declaratory Order rejecting the claims of

the City of Fort Worth. Specifically, the DOT held that:

(i) the City of Fort Worth may not enforce any commitment by the City of Dallas

... to limit operations at Love Field authorized by federal law, and the proprietary

powers of the City of Dallas do not allow it to restrict services at Love Field

authorized by federal law; (ii) the ability of the City of Dallas to limit the type

of airline service operated at Love Field is preempted by the Wright and Shelby

Amendments; (iii) any airline operating aircraft with a passenger capacity of no

more than 56 passengers and a gross aircraft weight of no more than 300,000

pounds may operate service with any type of equipment and flights of any length

from or to Love Field, notwithstanding any claim that such service violates any

agreement between the Cities of Dallas and Fort Worth; (iv) the Dallas-Fort

Worth International Airport Board may not enforce any contract provision that

allegedly bars an airline from operating interstate airline service at another

airport in the Dallas-Fort Worth metropolitan area; and (v) any airline may offer

through service between Love Field and any other point to passengers using a

flight between Love Field and another point within Texas operated under

subsection (a) of the Wright Amendment, as amended by the Shelby Amendment

.... 41

Given the conflicting rulings by the Texas state court and the DOT, the parties

appealed both judgments. The Texas court of appeals, however, issued a stay

pending the resolution of the DOT appeal, which was before the Fifth Circuit Court

See American Airlines, 202 F.3d at 795.

See supra notes 2-3.

See Gilbreath & Walter, supra note 30 at 229 (citing City of Fort Worth's Motion for

Summary Judgment or Alternatively Motion for Partial Summary Judgment, City of Fort

Worth, Texas, No. 48-171109-97(48th Dist. Ct., Tarrant County, Tex., filed August 21,

1998)).

See American Airlines, 202 F.3d at 795.

See id. (citing Love Field Service Interpretation Proceeding, Order No. 98-12-27, 58

(Dep’t of Transp., Dec 23, 1998)).

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of Appeals in Texas. While the Fifth Circuit ultimately affirmed the DOT’s

Declaratory Order, one of the major issues addressed by the court was the scope of

an airport owner’s proprietary powers.42

According to the court, federal courts have generally held that “an airport

proprietor can issue only ‘reasonable, nonarbitrary, and nondiscriminatory rules that

advance the local interest.’”43 While under this standard courts have upheld

regulations aimed at addressing environmental concerns,44 and managing

congestion,45 the court was able to find no justification for a broad grant of

proprietary power that would permit an airport owner to “allocate traffic between two

airports so as to preserve the short-haul nature of one facility.”46 Although the court

did note a willingness to review the exercise of proprietary powers with respect to

advancing previously unrecognized local interests, the city of Fort Worth failed to

present a sufficiently viable justification in this instance.47

As a result of the Fifth Circuit’s decision, it appears that local governments are

likely to have regulations enacted that are designed to protect the economic interests

of airports preempted by federal law to the extent that such regulations conflict with

federal requirements. Notwithstanding the Fifth Circuit’s willingness to consider

previously unrecognized local interests, it would appear that a locality’s proprietary

powers are limited, and any future judicial interpretations of such interests will likely

be narrowly tailored to address a specific local issue. Thus, it would appear that the

local governments and DFW Board are substantially limited in their ability to remedy

any economic distortions that are the result of either the Airline Deregulation Act or

the implementation and enforcement of the Wright and Shelby Amendments.

Economic Issues

The current dispute, as discussed above, has its origins in the 1960s. The new

chapter of this long running discussion is primarily the result of events that have

occurred since the Fall of 2004. First, Delta Airlines decided in October 2004 to pull

most of its service out of Dallas- Ft. Worth International Airport (DFW). Next, DFW

asked Southwest Airlines to consider operating long distance flights out of DFW.

Southwest rejected the DFW offer and instead announced in November 2004 that it

intended to seek legislative relief from the Wright/Shelby Amendments. This

announcement ended what was regarded as a long standing truce on this issue

between Southwest and DFW. Since November, DFW, joined by other parties such

as American Airlines (American), have lobbied extensively in favor of retaining the

American Airlines, 202 F.3d at 806-808.

Id. at 806.

See National Helicopter Corp. of America, 137 F.3d 81, 88-89 (2d Cir. 1998).

See Western Air Lines v. Port Authority of New York and New Jersey, 658 F. Supp. 925,

958 (S.D.N.Y. 1986).

American Airlines, 202 F.3d at 807.

Id. at 808.

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existing Wright/Shelby restrictions on airline operations at Love Field. Southwest,

and others, have, at the same time, presented their own arguments as to why these

restrictions should be removed.

This section of the report will discuss the major claims and counterclaims made

by each side in this discussion. The subjects chosen for examination are those most

frequently discussed in public forums on this subject.48 Additional background

information will also be detailed to provide a context for these discussions.

Until very recently there has been a minimal level of public interest in this issue

outside of the Dallas-Ft. Worth area. A few articles about the Wright/Shelby

Amendments have appeared in the national press since last November, but they have

been few and far between. The aviation trade press has taken a slightly greater

interest, but here too the treatment of the issue dwells primarily on the local aspects

of the issue.

The Dallas-Ft. Worth Aviation Market

The Dallas-Ft. Worth region is served by one large hub airport, DFW, and one

medium hub airport, Love Field.49 Respectively they rank 4th and 55th nationally in

terms of total passenger enplanements. In FY2003, DFW enplaned 24.6 million

passengers while enplanements at Love Field stood at around 2.8 million.

Commercial aircraft operations totaled 751,546 versus 126,313 respectively during

the same period.50

Both airports are important components of the regional economy. Each airport

can claim to be the home of one of the nation’s 10 largest airlines, with American

based at DFW and Southwest based at Love Field. American is the nation’s largest

airline having an almost 18% share of the U.S. market in February 2005.51

Southwest, which controls about 7.5% of the U.S. market, is the nation’s most

profitable airline, being one of a very small number of airlines that has remained

profitable throughout the post-September 11th period. Southwest had revenues of

$6.5 billion in 2004 and a net profit of $313 million. For the same period American

had revenues of $18.6 billion and a net loss of $761 million.52

Much of the material discussed in this section is taken from DFW Airport and related

materials found at, [http://www.keepdfwstrong.com/]; and Southwest and related materials

found at, [http://www.setlovefree.com/]

The Federal Aviation Administration (FAA) classifies U.S. airports on the basis of

passenger enplanements and ranks them accordingly.

U.S. Department of Transportation. Federal Aviation Administration. Terminal Area

Forecast Summary: Fiscal Years 2004 - 2020. March 2005. p. 14 - 15.

Aviation Daily. U.S. Industry Traffic Market Share, February 2005. March 21, 2005. p.

7. Market share is based on revenue passenger miles flown during the period.

All financial information from Hoover’s Company Information. Hoover’s Inc. Austin,

TX.

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American is clearly the dominant air carrier at DFW. In 2003, just over 71% of

all passengers at DFW boarded American and American regional air carrier flights

(17,990,193 enplanements).53 Delta, and Delta regional carriers, accounted for about

a 17% share of DFW traffic (4,314,445 enplanements). The next largest major air

carrier share was United Airline’s 2%. At Love Field, Southwest had a market share

of almost 97% in 2004 (2,945,588 enplanements).54 Continental Express accounted

for most of the remaining 3% of passengers. There are no other significant air carrier

competitors at the airport at this time.

Airline Competition in the Dallas-Ft. Worth Market

As can be seen from the above, most of the airline traffic in the regional market

is controlled by a small number of air carriers. There are some major differences

affecting how these air carriers operate in the current marketplace, however.

Southwest is the most successful air carrier in the era since deregulation of the

industry in 1978. It has been corporately based in Dallas for its entire existence. It

has also been profitable for most of its existence, which is a rather unique situation

in the U.S. airline industry. It has done this by offering low, or lower, fares, while

at the same time maintaining relatively low operating costs. Southwest is the

prototypical low cost carrier (LCC) and its operating structure has been imitated at

least to some degree by many new air carriers formed since deregulation (imitating

Southwest has not guaranteed success, however). For much of the 1980s, Southwest

was primarily viewed as a niche carrier with an uncontested regional market based

out of Love Field. During the later 1980s and especially in the 1990s, Southwest has

expanded dramatically with a route system that became national in scope. Southwest

does not operate hub-and-spoke service, hence Love Field is not referred to as a hub.

Rather, Southwest operates primarily as a point-to-point air carrier. Because the

Wright/Shelby Amendments limit direct service from Love Field to 7 states, it has

not been possible for Southwest to compete directly with DFW-based air carriers in

many major national airline markets. This does not mean that Southwest travelers

originating in Dallas have been unable to reach other Southwest cities such as

Baltimore. A passenger can reach these destinations, but cannot be through ticketed

and must change planes at some other destination such as New Orleans.

Over time, Southwest has faced very limited competition at Love Field. At the

present time the only other airline providing service from the airport is Express Jet,

which is a Continental Airline’s affiliate. All of this service is between Love Field

and Houston Bush International. Because of the regional air carrier exemption to the

Wright/Shelby Amendments, any service beyond the 7 state restriction must be

performed by an aircraft with 56 seats or less. The now defunct Legend Airlines

unsuccessfully tried to provide service to multiple national destinations in the late

1990s. No airline provides such service at present.

Aviation Daily. Airport Market Share at Leading U.S. Airports. August 25, 2004. p. 9.

[http://www.dallas-lovefield.com/lovenotes/lovenotes.html]. Traffic Statistics.

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American Airlines is one of the nation’s oldest air carriers. It is one of the air

carriers known in industry parlance as a legacy carrier. It operates international

service from DFW and other locations, and operates multiple hubs - Chicago, Miami,

and to a lesser extent New York. From DFW, American can take a passenger almost

anywhere in the world on a single ticket. It provides service to most major U.S. cities

either on American aircraft or on affiliated American regional air carriers. American

was not originally headquartered at DFW, having moved there from New York after

the airport was completed in the mid-1970s. Like most other legacy air carriers,

American has lost money consistently since September 11th. At some points in the

1990s and 1980s, however, it was one of the most financially successful of U.S. air

carriers.

Delta has a history similar in many respects to that of American. Its corporate

base is Atlanta. Its now reduced foray into DFW met with limited success initially,

but, especially since September 11th, it has consistently lost money at the airport,

according to industry analysts. Other air carriers at DFW serve the airport primarily

as a feeder to their own hub-and-spoke systems, e.g. United service to Chicago or

Denver, Continental service to Houston. DFW has sought to encourage service to the

airport by other LCC air carriers such as Airtran and Jet Blue. Airtran has a growing

presence at the airport, but is not yet viewed as a replacement air carrier for Delta’s

lost service.

Impacts of Delta’s Decision to De-hub at DFW

Delta Airlines maintained a hub at DFW airport for some years, but as can be

seen from the market share figures discussed above, it was dramatically smaller than

its American counterpart. In October 2004, Delta announced that it was restructuring

system-wide in order to stave off a bankruptcy filing. Delta announced its intention

to cut up to 7,000 jobs, reduce wages, close its DFW hub, and make major operating

changes throughout the remainder of its system. Its DFW hub, now closed, ended

operation earlier this year. Delta continues to provide service at the airport, though

at a much more modest level: 21 departures per day versus the 258 departures per day

in October 2004. In its new configuration, Delta now uses 4 gates at the airport

versus the 28 it previously occupied.

Since deregulation began in 1978 there have been several instances in which

more than one airline tried to operate a hub at the same airport. In most instances

these multiple airline hubs, for example, Miami and St. Louis, have either become

single airline hubs (Miami) or stopped being hubs altogether (St. Louis). A very few

multiple airline hubs still exist, e.g. Chicago O’Hare and Atlanta Hartsfield Jackson.

Many airline industry observers believed from the establishment of its hub at DFW

that Delta would be unable to compete with American on its home turf. They

expected, correctly, that Delta would eventually scale down or abandon its hub at

DFW.

Delta’s withdrawal comes at what the airport views as an inopportune time.

DFW is currently constructing/completing several major capital projects, including

a new international terminal ($1.09 billion) and a new internal people mover system

($885 million). In total, its ongoing capital improvement program will cost $2.7

billion and raise airport debt levels to $3.8 billion. Delta’s presence had been an

CRS-11

important part of DFW’s decision to initiate its capital improvement program and

Delta’s landing fees and other related revenues were expected to make a major

contribution to paying off the bond issues floated to pay for the improvements. DFW

now expects that the withdrawal of Delta will decrease its revenue stream by $50

million annually and that it will need to find new revenues to compensate for this loss

in order to avoid problems paying off its debts.

DFW’s Incentive Plan to Attract New Air Carrier Service

In January 2005, DFW announced that it would provide significant financial

incentives for an air carrier willing to initiate new service at the airport and take over

at least 10 of the gates made available by Delta’s departure. These incentives

included a year’s free rent on airport facilities and up to $22 million in other aid. To

date there have been no takers. DFW contends that Southwest’s move to eliminate

the Wright/Shelby Amendments is a major reason for this situation. DFW contends

that no carrier is currently willing to take a gamble until there is some certainty about

the future of the Wright/Shelby Amendments.

DFW’s argument could explain some of the reluctance of new carriers to locate

at the airport, but does not take into consideration other factors that might be more

important in the market at the moment. The current financial state of the airline

industry makes it almost impossible for all but a few LCCs to significantly expand

service to new airports. At the moment, no legacy airline is known to be

contemplating the creation of a new hub. LCCs, as mentioned earlier, do not

normally create hubs. The DFW argument also fails to fully acknowledge

American’s competitive position at the airport. American has always been a fierce

competitor and is likely to remain one, its financial problems notwithstanding. There

are not many airlines who are willing to compete head-to-head with American’s well

established hub at the airport, especially when they have other options.

Airport Competition in the Dallas - Ft. Worth Market

There are a number of major cities that have more than one major airport

successfully operating in relative proximity to each other. Examples include

Chicago, New York, Los Angeles, San Francisco/Oakland/San Jose,

Washington/Baltimore, and Houston. Southwest contends that this national

experience could easily be replicated in the Dallas Ft.Worth region and that any

negative effects on DFW of increasing flights out of Love Field would be of

relatively short duration as regional growth continued to create new opportunities for

both airports.

DFW goes to some length in its briefing materials to argue that the Houston

model in particular would be a bad model for the Dallas-Ft. Worth region. DFW

argues that it already provides more service out of DFW alone than Houston does out

of two airports. It also argues that its fares are as low, and in some cases are lower,

than those prevalent in the Houston region. Again, DFW repeats the argument that

it would be inefficient for the region’s resources to be split between two airports.

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Competing Economic Impact Studies

DFW Initiated Work. As part of its presentation on why the Wright/Shelby

amendments need to be retained, DFW hired economists at the University of North

Texas to perform an economic analysis of what the Delta hub closure means to the

airport and the local economy.55 The specific findings of this analysis are that the

Delta pullout will result in a $782 million per year decrease in regional economic

activity, the loss of more than 7,000 jobs, a decrease in wages and salaries of $344

million per year, an annual loss of tax and other revenues collected by state and local

governments of $58 million, and, in 2005, a $35 million loss to the airport as a result

of diminished landing fees, concession fees, etc. The authors conclude their

assessment by stating that:

...the airport will be severely pressed to fill the 24 gates left vacant by Delta.

Given Southwest Airlines’ decision not to move flights to DFW, and the

reluctance of other discount carriers to serve DFW with Southwest making

noises about expanding service from Love Field, it may be many years before

DFW’s gates and terminals are fully utilized.56

The type of economic analysis utilized by the authors, input-output analysis, is

a standard tool employed to show the benefit or loss that might accrue to a

community as a result of some sort of action. For example, new stadium and other

large public works project proposals are frequently accompanied by economic

analyses of this type. It is not uncommon for opponents of stadiums, etc. to hire their

own economists to provide an alternative view using the same basic methodology,

which, as will be seen in the next section, is the situation here.

As is sometimes the case, the assumptions that go into the input-output process

are often questioned. For example, some of the observations in the report, while

sounding quite dramatic, are much less so when put in the perspective of the greater

regional economy. The Dallas-Ft. Worth region had total wage and salary

disbursements in 2003 of $116.4 billion.57 This represents a year over year increase

of $524 million, or roughly a 0.5% increase over the previous year’s level. The $344

million in wages and salaries associated with Delta’s pullback equates to less then

3/10ths of one percent of total local salaries and wages. Less than eight months’

growth in the regional economy at current growth rates would, therefore, overshadow

the regional effects of Delta’s departure (individuals and businesses, however, may

continue to suffer from the pullout for a much longer period).

DFW commissioned a second study by aviation consulting firm SH&E that

focuses on how aviation activity in the region might change as a result of repeal of

Weinstein, Bernard L. and Clower, Terry L. Economic and Fiscal Consequences of

Dallas-Fort Worth International Airport and the North Texas Region From the Shutdown

of Delta Airlines’ Hub Operations. University of North Texas. Denton, Texas. November

23, 2004. 9 p.

Ibid. p. 9.

U.S. Department of Commerce. Bureau of Economic Analysis. Regional Economic

Accounts. Found at [http://www.bea.doc.gov/bea/regional/bearfacts/action.cfm]

CRS-13

the Wright/Shelby amendments. The study does not express its findings in dollar

terms, but rather tries to demonstrate that repeal would redistribute air service in a

manner that would be bad for DFW and for the regional economy. This second study

works from the premise that Southwest would greatly expand its activity at Love

Field to major destinations outside of the seven states to which service is currently

restricted under two growth scenarios.58 The study, assuming a worst case outcome

from the perspective of DFW, presents several major findings, among these are: that

air traffic at Love Field could triple,59 that international traffic at DFW would be

reduced, that the number of domestic destinations served from DFW would also be

reduced, and that DFW would lose up to 35% of its annual passengers. Against this

backdrop SH&E comes to the conclusion that the best option for the region would

be the retention of the Wright/Shelby amendments because it would concentrate

future aviation growth at DFW where infrastructure is readily available. Otherwise

SH&E predicts DFW would be underutilized with significant financial implications

for the region, which at the same time might need to pay for expensive new public

infrastructure at Love Field.

There are many assumptions in the SH&E study that can be questioned, which

is the normal situation for a study of this type. One assumption open to question is

the prediction that American and other DFW-based airlines can only compete with

Southwest successfully by moving and/or creating new service at Love Field.

Although certainly possible, this would seem to be in conflict with the experience in

other multi-airport metropolitan areas where airlines successfully compete using

different airports.

Southwest Airlines Initiated Work. Southwest has contracted for its own

study of the effects of repealing the Wright/Shelby amendments. The study by the

Campbell-Hill Aviation Group takes a very different approach from the DFW

initiated studies.60

Campbell-Hill contends that the Wright/Shelby amendments impose an economic

penalty on North Texas of $2.4 billion and on the nation as a whole of $4.2 billion.

This penalty, in the view of the study’s authors, is the result of limited competition

at DFW that results in above market fares to many destinations. The figures in the

study are derived from a detailed regression analysis that assumes that Southwest

would be able to compete in 15 city-pair markets from which it is currently excluded.

A Southwest able to compete in the regional market, it is assumed, will offer lower

fares in these city-pairs then those currently available at DFW from American or

other airlines. The study also assumes that lower fares will attract considerable new

airline traffic to North Texas and that each visitor will have a positive economic for

the region as a whole.

SH&E. Dallas/Fort Worth International Airport: Potential Impacts - Repeal of Wright

Amendment. May 2005. Found at [http://www.keepdfwstrong.com/pdf/results.pdf]

The study assumes that much of the new traffic is from American and other airlines that

would move service from DFW to Love Field as a competitive counter to Southwest’s

expanded service.

Campbell-Hill Aviation Group, Inc. The Wright Amendment Consumer Penalty. June 7,

2005. Found at [http://www.setlovefree.com/pdf/Campbell_Hill_Study.pdf]

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There are of course several issues that a study of this type cannot and is not

designed to answer. For example, the study does not discuss the issue of offsetting

investments in new infrastructure that might accrue to facilitate this increased traffic,

especially at Love Field.

American Airlines Initiated Work. American Airlines’ has also

commissioned a study supporting the DFW position.61 The study, done by Eclat

Consulting, suggests that the Southwest supported Campbell-Hill study is flawed and

considerably overstates the regional benefits of increased Southwest service at Love

Field. Eliminating the Wright/Shelby restrictions would, also in this view, cause

significant changes in American’s DFW hub system and lead to reduced/eliminated

service to numerous small cities and some international destinations. As with the

other studies mentioned above, the authors of this report made a number of

assumptions as a basis for analysis. Primary among them in this case is that

American would move a significant amount of service from DFW to Love Field.

All of the above mentioned studies provide insights into the relative merits and

demerits of repealing the Wright/Shelby amendments. None, however, give a

complete picture and each is built on assumptions that can and will be called into

question.

Potential Impacts of Repeal on DFW

DFW is legitimately concerned that it will have a tough time paying off its

bonded indebtedness if it loses airline service as a result of a Wright/Shelby

restriction repeal. It is, as discussed earlier, a principal argument made by the airport

for retention of the restrictions. Whether these effects would be short-term or longterm in nature, however, is debatable. Also debatable is whether DFW’s potential

financial plight vis-a-vis Love Field should be a matter of congressional concern.

In the last two decades numerous airports have seen large reductions in air

service. In some instances the reductions were far greater then what appears to be the

case at DFW. Several airports, for example, have lost a hub carrier. Atlanta and

Miami both went through some rough times after the collapse of Eastern Airlines.

Indianapolis is currently dealing with the loss of ATA as a major presence at the

airport. Many other examples could be detailed. The experience in each case has

been similar. There have been no major bond failures at any of these airports. In

most major markets, replacement air carriers, or growth by the incumbent air carrier,

has over time, restored the airport to economic health. In light of the experience of

other cities, DFW would not be expected to experience serious long-term economic

repercussions as a result of the dynamic nature of the Dallas-Ft. Worth regional

marketplace. In the short-term, however, DFW may go through some hard times.

The biggest threat to the financial health of DFW is the long-term financial

health of American Airlines. American is not just the largest air carrier at the airport,

Torbenson, Eric. American report says repeal risks D/FW hub; Southwest disagrees. The

Dallas Morning News. [http://www.dallasnews.com/cgi-bin/bi/gold_print.cgi] October 11,

2005.

CRS-15

its route system and its future aspirations are largely the rationale for much of the

infrastructure at the airport. As suggested above, the move of a significant number

of American flights to Love Field would hurt DFW financially. An American

business failure would have much more serious repercussions. It could be argued,

therefore, that DFW’s campaign to save the Wright/Shelby Amendments is as much

concerned with protecting American’s market position as it is with trying to retain

its overall preeminent position in the North Texas aviation market. And from the

airport’s perspective this is a common sense position.

Potential Impacts of Repeal on Love Field

A 2001 Master Plan adopted by Love Field limits service to 34 gates, and makes

no plans for runway or other airside expansion. Love Field is physically constrained

by surrounding development that includes several residential neighborhoods. Noise

issues are important to the local community and noise concerns played an important

role in the adoption of the Master Plan.

Southwest contends that its potential expansion of service at Love Field can be

easily handled within the context of the Master Plan. Further, they contend that their

fleet of relatively quiet Boeing 737-700 aircraft ensures that increased noise will not

be a factor in any ramp-up of service. Southwest has consistently stated that it

welcomes new competitors at the airport, so long as everyone has to abide by the

same rules.

Unclear, however, is how a relaxation of the Wright/Shelby Amendments might

play out amongst Southwest’s competitors. American has suggested that termination

of the existing restrictions would force them to open a hub at Love Field as a

competitive response.62 American perceives, possibly correctly, that it could lose

significant amounts of Dallas originating traffic if Southwest were able to provide

national service from the downtown airport without direct competition. American

currently owns three gates at Love Field although it does not use them. At this point

it is far from clear whether American could in fact create a parallel, but smaller hub

operation at Love Field. By their own admission, serving two airports in close

proximity would be inefficient. Such a move could certainly have at least short-term

negative financial implications for DFW.

So far, no other major air carrier has publicly stated an intention to serve Love

Field if restrictions are withdrawn. Many industry observers would question the idea

that some carrier would want to go head-to-head with Southwest on its home turf.

More likely is that additional airlines might wish to add regional or even large jet

service at the airport to serve their own hub-and-spoke or point-to-point route

systems.

American contends in its statements that it views the Love Field Master Plan as

moot in the event of a Wright/Shelby repeal. This is not a view shared by either

Southwest or the City of Dallas. It is likely that this issue would become very

Associated Press. USA Today. American threatens to build hub at Love Field. March 22,

2005.

CRS-16

important locally in the event that the Amendments were repealed. As mentioned

above, there is considerable sensitivity in the surrounding communities to increased

noise and other activities at and around the airport. As a result, there might be

considerable local opposition to the increase in airport activity that might accompany

Amendment repeal.

Local Reaction to a Proposed Wright/Shelby Repeal

The large populations of American and Southwest employees in the region, by

itself, almost guarantees that this subject will generate considerable local debate. It

is not surprising, therefore, that regional opinions appear to be mixed. A perusal of

the websites created by DFW and Southwest to promote their respective positions

details local support for both protagonist’s positions.63 Local newspapers have also

weighed in on the subject, providing extensive coverage of the debate over

Wright/Shelby.64 Again, coverage would seem to indicate that broad consensus on

the question of repeal is absent.

Local politicians are also weighing in on the subject. Notably, the Mayor of

Dallas now seems to be seeking an as of yet undefined compromise on the issue.65

In addition, Members of the region’s congressional delegation are weighing in on the

subject, with two Members supporting repeal and several others opposing the idea.

Prospects for Congressional Action

In the 108th Congress, several members of the Tennessee congressional

delegation introduced legislation that would have allowed direct air service between

Love Field and airports in Tennessee (H.R. 5187). The bill received no further

congressional consideration. Comparable legislation has now been introduced in the

109th Congress (H.R. 2932, Representative Marsha Blackburn, June 16, 2005). The

bill has been referred to the House Committee on Transportation and Infrastructure,

Subcommittee on Aviation. At this point no further action on the legislation has been

taken.

Legislation that would repeal the Wright/Shelby Amendments has been

introduced in the 109th Congress (H.R. 2646, Representative Jeb Hensarling, May 26,

2005). This legislation has also been referred to the Subcommittee on Aviation. No

further action on the legislation has been taken.

As of this writing, three pieces of legislation have been introduced in the Senate

that would impact the Wright/Shelby Amendments. The first of these would have

the practical effect of eliminating the existing restrictions, but does so, not by

repealing the Wright/Shelby Amendments, but by amending the existing provisions

www.keepdfwstrong.com and [http://www.setlovefree.com]

e.g. the Dallas Morning News at [http://www.dallasnews.com/business/wright/index.html]

tracks the debate.

Marta, Suzanne and Gillman, Todd J. Mayor wants role in Wright’s future. June 28,

2005. [http://www.dallasnews.com/s/dws/bus/stories/062905dnbuswright.556daad9.html]

CRS-17

to include the 43 states not currently named in the Amendments as allowable service

points (Puerto Rico is also added)(S. 1424, Senator John Ensign, July 19, 2005). A

second bill, opposed to lifting the Wright/Shelby restrictions, would require the

closure of Love Field three years after the date of enactment (S. 1425, Senator James

Inhofe, July 19, 2005)66. A final piece of legislation is a provision in the Senatepassed version of the Transportation, Treasury, the Judiciary, Housing and Urban

Development, and Related Agencies Appropriations Bill, 2006 (H.R. 3058 as

amended, October 20, 2005). This provision would appear to permanently add

Missouri to the existing list of states eligible for direct service to Love Field.

The Senate Committee on Commerce, Science and Transportation has scheduled

a November 10, 2005 Hearing on the Love Field dispute. It is unclear whether action,

other then on the appropriations bill, will be take on any of these bills during the

remainder of the 1st Session of the 109th Congress. It is unknown whether the Senate

appropriation’s provision concerning Love Field will survive, or be modified by, the

Conference Committee considering the legislation.

In its November 2005 announcement, Southwest contended that H.R. 5187 in

the 108th Congress clearly showed a desire on the part of Congress to expand direct

service to Love Field beyond the 7 states allowed service by the Wright/Shelby

Amendments. Southwest believes that the legislation introduced in the 109th

Congress, excluding S. 1425, bolsters this position. Southwest also contends that the

departure of Delta from the regional market provided a need for additional service

in the market, especially low fare service, and that with relief from the

Wright/Shelby restrictions, Southwest is in the best position to provide it.

DFW, obviously, takes a very different view. From their perspective, Southwest

should either offer long distance service from DFW, or live with the Wright/Shelby

Amendment restrictions. Giving Southwest authority to fly beyond the seven states

it can now serve would, in their opinion, have a chilling effect on DFW’s ability to

attract new air carriers to replace Delta. By extension, such a move could also

diminish the economic vibrancy of the airport and the region (Love Field, in this

view, is not seen as a regional asset, but rather as a Dallas City asset).

The DFW arguments are primarily couched in the politics, legalities, and history

of the regional compact that created the airport that are discussed more fully earlier

in this report. The rationales for retaining the Amendments are primarily of local

interest and origin, e.g. protecting investments and markets at DFW. Many industry

observers, including some outside the Dallas/Ft. Worth region, believe that

Wright/Shelby repeal or modification is a local issue, and should be decided in the

context of local aviation needs.

Since its 1978 deregulation, the airline industry has become very competitive.

Airlines move service in and out of airports as their marketing strategies change.

This is mostly done irrespective of the financial and other needs of the airports they

Legislation introduced subsequent to S. 1425 would require that airports in Tulsa,

Oklahoma and Des Moines, Iowa be closed if Love Field were to be closed (H.R. 3383,

Representative Hensarling, July 21, 2005).

CRS-18

serve. There are still a few other airports with operating restrictions; Reagan

Washington National and New York La Guardia are the two most commonly

mentioned. But the restrictions in each instance are far less constraining than they

are at Love Field, and the reasons for these restrictions are completely unrelated to

those at issue here. The rationale for removing Wright/Shelby restrictions, therefore,

is the rationale for deregulation in the first place: the unrestricted flow of air

commerce. A question for policymakers, then, is should the exceptions to

deregulation that are the Wright/Shelby Amendments be retained in the context of

the existing national aviation system or should local concerns be the primary

determinant as to the desirability of repeal and/or modification?

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