Airlines: Dogfight In Dallas

American faces a direct threat from Southwest

American Airlines Inc. is learning that even a well-connected, politically generous company can fall victim to the fickle finger of political fate in Washington.

For 27 years, the nation's largest passenger carrier held an edge at its main Dallas/Fort Worth International Airport by preserving an obscure 1979 law that prevented upstart carrier Southwest Airlines Co. (LUV ), then a no-frills intrastate carrier, from flying nationwide from the newcomer's home base at Love Field, which is closer to downtown Dallas. But the vagaries of power in the nation's capital, combined with airline industry turmoil, has forced American to accept a painful compromise rather than face the prospect of losing a Capitol Hill showdown with a bitter rival. "We're fatalistic about it," says American lobbyist Dan Elwell. "Let's get on with making this a better airline going forward than expending a lot of effort fighting this."

The result is something that Fort Worth-based American has vigorously resisted for decades: allowing Dallas-based Southwest to fly passengers from Love Field to any U.S. airport. The changes will be phased in. First, Southwest will be permitted to sell one-stop tickets from Dallas to the rest of the country. In eight years, the high-flying discount carrier will be permitted to fly nonstop to any domestic destination. The immediate result for travelers will be lower airfares in the pricey Dallas market. A July 12 study by two aviation research consultants estimated that 2 million North Texas airline passengers will save $259 million a year because of heightened competition.


American's parent corporation, AMR, which lost $861 million in 2005 amid soaring fuel costs, could feel a short-term pinch from the coming price war in Dallas. But over the long haul, company officials say the deal will allow them to focus on their core business while saving millions on lawyers and lobbyists' fees.

The 1979 law, written by then-House Majority Leader Jim Wright (D-Tex.), restricted flights out of Love Field to cities in Texas and a few nearby states. Southwest, a short-haul carrier that first turned a profit in 1973, saw the action as a political power play by American to protect its market share. American officials insisted that the measure simply wrote into law the agreement that paved the way for the creation of DFW International airport in the first place.

For 27 years a string of powerful Texans, from Wright to former Republican House Majority Leaders Dick Armey and Tom DeLay, fended off repeated attempts to repeal the law. As the nation's preeminent carrier, and donor of about $3.7 million to federal campaign coffers since 1980, American had far more sway than its smaller competitor, whose political action committee has given less than $400,000 to members of Congress.

But scandals, retirements, and redistricting have sapped the Lone Star State's bipartisan political clout. Meanwhile, Southwest had completed its transformation from regional upstart to industry success story. And it has gone big-time in Washington by hiring 16 lobbyists, including former Representative Tom Loeffler (R-Tex.). Moreover, Southwest's "Free Love" campaign pushing for unfettered competition from its home airfield has resonated with Hill conservatives. "Its story had sex appeal to a Republican Congress," says Sam Coats, president of defunct Dallas-based Muse Air. "How can you argue against free markets?" The bill is expected to pass by the end of the year.

By Richard S. Dunham

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