The Wrongs of the Wright Rule
DALLAS -- Some things, said Marx, appear in history twice, first as tragedy, then as farce. The airport here named Love Field entered America's consciousness through the tragedy of assassination: Lyndon Johnson took the presidential oath aboard Air Force One on Love Field's tarmac. Today Love Field is again in the news, this time illustrating the farcical consequences of the government's 10-thumbed attempt to manage an industry.
In 1971, after years of harassing litigation by two airlines averse to competition, Southwest Airlines was born. It had just three aircraft and flew only intrastate, between Dallas, Houston and San Antonio. This first of the no-frills, low-cost airlines, under the leadership of its ebullient founder Herb Kelleher, was to democratize air travel and revolutionize the airline industry.
The cities of Dallas and Fort Worth, and the Dallas/Fort Worth airport, which opened in 1974, tried unsuccessfully to force Southwest to move its operations from close-in Love Field out to DFW, arguing that the new airport depended on this. Today Kelleher laughingly recalls telling a judge: "If a three-aircraft airline can bankrupt an 18,000-acre, nine-miles-long airport, then that airport probably should not have been built in the first place."
But in Washington, reasonableness is no match for the routine and lucrative corruption known as rent-seeking -- economic interests getting government to impose handicaps on competitors. House Majority Leader Jim Wright, from Fort Worth, rode to the rescue of the strong -- DFW and Fort Worth-based American Airlines. In 1979 he muscled through Congress a measure designed to stifle the growth of Southwest and punish it for not moving out to DFW -- an expensive move that would have made it sensible for many Southwest customers to drive rather than fly to their destinations.
The Wright Amendment restricted interstate service from Love Field to cities in just four states -- Louisiana, Arkansas, Oklahoma and New Mexico. In 1997 senators wanting to bring Southwest's low fares to their constituents amended the Wright Amendment to allow flights to Alabama, Kansas and Mississippi. Today, if you want to fly Southwest from Love Field to Los Angeles, you must buy a ticket to Albuquerque, collect your baggage there, buy another ticket, go through security again and board another plane.
Today DFW is the world's sixth-busiest airport, and American Airlines is the world's largest carrier. American is, like all the older airlines, losing money. But is that a reason to punish Southwest? Unlike other airlines, Southwest is not asking Washington to take on its pension burdens or to give it other subsidies. It is asking only for liberation.
Southwest, which is now using only 14 gates for 117 flights a day at Love Field, says it could use only 21 gates if the Wright restrictions were repealed. This would put some downward pressure on the fares of American, which by the end of the year may have almost 1,000 flights a day out of DFW.
That pressure would be good for travelers -- and probably for American, too. When Southwest entered the Fort Lauderdale market, forcing American to cut fares to and from Miami, American's passengers and revenue increased. The Philadelphia Inquirer reports that since Southwest entered the Philadelphia market just last May, driving down the fares of previously unchallenged US Airways, travelers through that airport have saved $1.2 billion.
The Wright Amendment is now functioning in the context of an airline industry crisis aggravated by government policies. The government is subsidizing airlines that have unsustainable business models. By allowing them to use bankruptcy as a strategy for enhancing competitiveness against other high-cost airlines, it creates an incentive -- even a necessity -- for those rivals to enter bankruptcy and dump pension burdens on Washington.
Government is preserving precisely what ails the industry -- excess capacity. Suppose a major carrier were to go out of business. A salient fact about the airline industry is, Kelleher says, that "its principal capital asset travels at over 500 miles per hour." Which means: If one airline fails, unserved markets will be served swiftly. He notes that on the afternoon of May 12, 1982, Dallas-based Braniff Airlines -- one of those that had urged government to strangle Southwest in its cradle -- went out of business. The next morning at least five airlines started up on some Braniff routes.
Ronald Reagan said that Washington's approach to intervening in industries is: If it moves, tax it; if it keeps moving, regulate it; if it stops moving, subsidize it. Regarding airlines, the policy is: If they are failing, keep them flying; if they are prospering, burden them. But surely Washington, although difficult to embarrass, is embarrassed enough to repeal the Wright Amendment.