Wright pact a matter of facing reality: American was losing support; Southwest bowed to Love limits

Jun. 18--The compromise on the Wright amendment appears to be a combination of a changing of the minds, a changing of the times and a changing of the guard.

What was unthinkable 10 years ago -- an American Airlines Inc. willing to back off its unyielding opposition, a Southwest Airlines Co. fighting aggressively to overturn the Dallas Love Field limits -- became a fact as the two carriers' leaders grappled with a changed world.

Southwest, pressured by a shrinking short-haul market at Love Field, was no longer content to abide by the law that went into effect in 1980. American saw shrinking support in Congress, evidenced by last year's addition of Missouri to the states reachable nonstop from Love Field.

The result was that the airlines accepted a deal that neither entirely liked but was good enough compared to what they might have had to swallow.

The law says that airlines can have scheduled nonstop service between Love Field and airports in Texas and eight other states: originally Oklahoma, New Mexico, Arkansas and Louisiana, with four more states added in recent years. The limits apply to airplanes with more than 56 seats.

The bigger change of position had to come from American, which supported the original law and has consistently fought any changes to the Wright amendment, no matter how small. Until 1997, it was always successful in squelching any changes.

But the first crack appeared that year when Congress added Alabama, Kansas and Mississippi to the Wright perimeter. In a far bigger blow to American, lawmakers in 2005 added Missouri and its two large cities, Kansas City and St. Louis, to the Wright area.

Southwest in November 2004 launched a nationwide campaign to persuade Congress to repeal the amendment and its limits on nonstop flights entirely. The addition of Missouri showed that lawmakers were willing to listen.

American could ignore the small markets opened up by the 1997 change. But opening up the Missouri markets gave notice to American that it faced the likelihood that the limits would disappear, either state by state or all at once.

Through the years, Fort Worth had steadfastly opposed any changes as well, even suing Dallas, Southwest, Dallas/Fort Worth International Airport and new entrant Legend Airlines Inc. in 1997 to try to keep Legend or Southwest from adding service to the three states that Congress had added.

But as support for changes to the Wright amendment grew in Congress, U.S. Sen. Kay Bailey Hutchison urged the warring parties to come up with a local solution, rather than have it settled in Washington. That brought Fort Worth, Dallas and D/FW Airport to the table.

That left American in much the same place that Southwest had been in 1979. It could accept a compromise it didn't want or face a far worse outcome.

Southwest chairman Herbert D. Kelleher recalled that Southwest didn't have popular support in 1979 as then U.S. Rep. Jim Wright of Fort Worth was working to restrict Southwest's ability to fly out of Love Field. Mr. Wright was pushing for proposals that would prevent Southwest from using Love Field or restrict its flights only to other airports inside Texas.

"We weren't serving the rest of the United States, so there weren't any constituent interest in support of our cause in the cities that we weren't serving in the other 49 states," he said. "It was basically us against Jim Wright."

That's not the case today. Southwest operates throughout much of the United States and gets credit for leading the spread of low-price fares. American's message -- that changing the law would hurt D/FW Airport and the regional economy -- didn't have much appeal outside North Texas.

Dan Garton, American's executive vice president who represented American when negotiators worked out the compromise Wednesday, said American knew it had to be in the negotiations if it wanted to affect the outcome.

"As the months went on, it was clear that there were a lot of parties that would be pursuing some kind of compromise," Mr. Garton said. "Our choice was to sit on the sidelines or participate. We determined that by participating, we could guide it in a manner that would be more favorable to us, and that's what happened."

Although American had to concede the elimination of the Wright amendment's boundaries, Southwest had to accept handcuffs on the amount of service possible at the Dallas airport.

The proposal allows only 20 gates, including 16 for Southwest. That's two more gates than Southwest uses today, but it allows only a modest expansion of flights beyond the 121 daily flights it currently operates.

But Southwest was willing to concede the restrictions on gates and to wait eight years for the longer nonstop flights so that it could fly anywhere in the U.S. from Love Field, where its traffic had been declining.

Demand for short-haul flights had taken a real hit after the 9/11 terrorist attacks. Faced with long waits for security screening, many potential passengers stayed home or chose other ways to travel.

In 2000, the last full year before the terrorist attacks, Southwest carried 6.6 million passengers at Love Field. In 2002, the first full year afterward, traffic dropped nearly 19 percent below the 2000 levels, to 5.4 million passengers. Last year, traffic remained down 15 percent to 5.6 million.

Mr. Kelleher said Southwest could add more long-haul flights in Houston, Phoenix and elsewhere in its system to make up for the lower demand on shorter flights. But it couldn't do so at Love Field -- not without changing the Wright amendment.

"This time around, there was a real economic necessity," Mr. Kelleher said.

From the Southwest side, Mr. Kelleher has been a constant as one of its founders, its main lawyer in its early days and an executive for most of its history.

From the American side, the fight to uphold the Wright amendment for years was led by Robert L. Crandall, chairman and chief executive who vehemently opposed any modification. But Mr. Crandall retired from the airline in 1998, and his successor resigned three years ago.

One can only speculate about whether an American Airlines run by Mr. Crandall would have agreed to compromise. Mr. Crandall, who was tough but also pragmatic as the airline's top executive, has continued in retirement to oppose any changes.

Gerard Arpey, American's current chairman and CEO, has spoken out just as vehemently against changing the Love Field limits. But in the end, Mr. Arpey and other American executives accepted the compromise pushed on them.

"It's true that the expenditure of resources and management time had become very burdensome," Mr. Garton said. "It's no secret that American has its share of challenges. Diverting so much of our time to this issue was a big issue for us."

And American was willing to accept what it got, with limits on growth at Love Field or area airports other than D/FW Airport, he said.

"We felt we could hold out, but in the world of agreements, this one was good for us," he said.

Staff writer Suzanne Marta contributed to this story.

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