D/FW, American Agree on Wright, But Fight is Costly for Both

On Thursday, American will launch 16 daily flights from Love Field, its first North Texas service away from D/FW in more than four years.


Feb. 26--With a market share of nearly 85 percent, American Airlines Inc. is such a dominant force at Dallas/Fort Worth International Airport that the interests of the carrier and the sprawling facility are often inseparable.

The two are in lockstep when it comes to the issue of maintaining Wright amendment flight restrictions at Dallas Love Field, but the issue has caused some fissures in the relationship.

On Thursday, American will launch 16 daily flights from Love Field, its first North Texas service away from D/FW in more than four years, in response to a change in the Wright law last year allowing service to Missouri.

American says the move is necessary to hold on to its best customers, as Southwest Airlines Co. offers new service to St. Louis and Kansas City from Love.

The Fort Worth-based airline says it won't be profitable at Love, but it isn't just hurting its own bottom line. The move will also harm D/FW, home of 786 daily American flights. D/FW is scrambling to patch a $35 million hole in its budget created by the loss of flights to Love, as well as other flights that American is canceling because it can't support them as it shifts traffic to the city airport.

American knows the shift to Love isn't a popular move with officials at D/FW.

"Do they like what we're doing? No," said Dan Garton, American's executive vice president for marketing. "Are they surprised by it? No."

Harming D/FW will cost American financially, too. Because the airport's costs are ultimately picked up by the airlines, American will foot a bigger bill at its largest hub.

"We do our best," said Jeff Fegan, D/FW's chief executive, "but at the end of the day, if an airline decides to pull service, you have no choice but to charge the airlines more money."

American's role at D/FW has only grown since January 2005, when struggling Delta Air Lines Inc. pulled its North Texas hub in a cost-cutting move. Delta is still American's biggest rival at D/FW, but now it carries only 3 percent of the airport's passengers.

D/FW's finances are highly dependent on connecting passengers, and American fills the facility with people every day; seven out of 10 American fliers at D/FW are there just to switch planes. The airport benefits from a $4.50 passenger facility charge from each traveler, as well as revenue from concessions for the sales of sandwiches, soft drinks, T-shirts and other items.

That combination of fees and concession revenue keeps D/FW's operating costs competitive with those of other major hub airports.

American, in turn, is the primary beneficiary of a $2.7 billion capital improvement program financed by the airport, which enjoys a sterling credit rating that allowed the bonds to be sold at low interest rates.

Had American been forced to finance the project with its below-investment-grade credit rating, the cost would have been much higher. Big airlines generally lean on airport authorities to finance big projects because their better credit means lower costs.

Last year, D/FW launched its SkyLink train, which helps connecting passengers zip between five widely spaced terminals, fixing a design flaw for an airport that wasn't designed to be a hub.

The airport also opened a spacious international terminal with top-flight quarters for American's most profitable flights.

'A blessing and a curse'

Airport debt analyst Peter Stettler of Fitch Ratings Co. said that "having a hub airline is both a blessing and a curse for airports."

The blessings first: North Texas travelers get nonstop flights to 165 cities on American, most of those accessible only because of the connecting traffic through American's hub.

Top companies treasure the flexibility American provides at D/FW, and indeed some firms such as Fluor Corp. say they're relocating here primarily because of the frequent and far-reaching air service. D/FW says it supports 268,000 regional jobs.

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