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Southwest Goes to Court over Dallas Love Field

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Southwest Goes to Court over Dallas Love Field

Southwest Goes to Court over Dallas Love Field
February 18
05:39 2015

MIAMI — It appears that earlier speculation as to the end of the drama surrounding Dallas Love Field may have been premature.  Since agreeing to sublease United Airlines’ two gates at the airport, Southwest Airlines has decided that it would rather not share one of them with Delta Airlines beyond July 6, which is the duration of the agreement originally signed between Delta and United.  Although Southwest has not said anything about forcing Delta out explicitly, their February 13 filings in the US Court of Appeals in Washington, DC, clearly indicate that they wish not to comply with a letter from the US Department of Transportation insisting that Delta be accommodated indefinitely, per federal law and assurances made to Delta by the City of Dallas.

Of the numerous developments which have brought the involved parties to this point, one stands out as chiefly problematic beyond the others—the five-party agreement that led to the Wright Amendment Reform Act.  By signing on to this agreement, Southwest paved the way to the end of the Wright Amendment, allowing flights across the United States from Love Field.  But in doing so, they also consented to a permanent cap on the size of Love Field at 20 gates, of which Southwest would control 16, essentially exchanging one restriction for another.  When this agreement was signed in 2006, perhaps it seemed to be a good idea, but when the Wright Amendment Reform Act took effect in October 2014, it was already clear that it was dated and ineffective.

Into the fray, enter Delta.  Perhaps the first thing worth mentioning is that Delta has served Love Field continuously since 2008, first with five daily flights to Memphis, and later to Atlanta.  Because both of these routes extended beyond the approved zone of the Wright Amendment, they were operated using CRJ-100/200 aircraft with only 50 seats.  Upon the expiration of the Wright Amendment, Delta celebrated along with Southwest and Virgin America, albeit more quietly, as they immediately upgauged all of their flights, eventually operating all five with Boeing 717s (perhaps ironically acquired from AirTran via Southwest).  When the old Terminal 1 closed on October 13, Delta moved its flights to gate 9 in the new consolidated terminal—a gate under Southwest’s control, though this was not terribly problematic since Southwest’s schedule had not been fully expanded to its current size, and five flights were easy enough to allow, at least until January.

With the end of Delta’s temporary accommodation agreement on January 6, the airline was forced to seek help from United, which held two gates.  United had promised to increase its schedule from its original seven daily flights to Houston up to 12, but instead had cut one of its frequencies, leaving only six, all operated on 37-seat ERJ-135s.  Even with the expanded schedule, United would not have met its contractual lease obligations with the City of Dallas, and it could have been forced to share its gates.  So they reached a last minute agreement with Delta to allow them to use a United gate for their five flights to Atlanta through July 6.  However, on January 30, Southwest announced that it would be subleasing both of United’s gates, and United would be withdrawing from Love Field entirely.  Southwest agreed to take over the Delta accommodations through July 6 as part of the sublease deal.

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(Credits: Southwest Airlines)

Southwest is now poised to control 18 of the 20 gates at Love Field, though this is not the first time they have tried to add gate space.  When the American Airlines-US Airways merger yielded a series of divestures to satisfy antitrust regulations, their two gates at Love Field came up for grabs, and Southwest made every effort to gain control of them.  In fact, the City of Dallas all but signed the new lease with them before the federal government put their foot down and insisted that the gates would go to Virgin America instead.  Delta also made a bid for the gates, but was ruled out as a legacy carrier.

The way forward is now somewhat unclear.  Southwest clearly does not wish to accommodate Delta’s five daily departures, and Virgin America has already refused to do so.  But as it turns out, neither of them may have a choice.  According to the gate lease terms of all three leaseholders, they are required to fully utilize their gates, which is defined in the lease as 10 daily departures per gate.  The city is then free to reassign any unused slots to other non-lease-holding carriers.  Under these rules, no carrier at Love Field has met its contractual obligations with the city, meaning that the city is free to force any of them to accommodate Delta’s flights.  Based on the city’s prior actions regarding Delta, they clearly do not understand their own lease agreement, as they attempted to evict Delta for lack of space on October 13, despite close to 1/3 of the airport’s 200 departure slots being unused.

Southwest currently operates 153 peak daily departures from their 16 gates, meaning that they have seven unused slots.  Delta only requires five of those in order to operate its current schedule.  With the acquisition of United’s two gates, Southwest will have 180 departure slots to fill, but the announced schedule changes only bring them up to 166 peak daily departures.  This leaves 14 unused departure slots.  Virgin America, on the other hand, operates only 13 flights from its two gates, but it has allowed Seaport Airlines to use two additional slots for a total of 15 utilized slots and an unused total of five.  Based on the numbers alone, the City of Dallas is free to compel either leaseholder to accommodate Delta, though Southwest would be the most likely candidate for operational reasons—after all, they have enough unused slots to free more than an entire gate for the use of another carrier.

Although there is clearly plenty of room for Delta at Love Field in the near term, challenges remain as the airport continues to offer expanded service.  Sooner or later, it will reach capacity, and it will either be forced to stagnate or appeal the federal law restricting the airport’s size.  The challenge there is that both Southwest and the City of Dallas gave up their right to appeal that law as part of the five party agreement in 2006.  And in an interview with Airways News on the day of the Wright Amendment’s expiration, Virgin America CEO David Cush rejected the idea of Virgin attempting legal action to expand the airport.  With United gone, that leaves only Delta with the ability to fight for expansion.  Although it is not their only recourse today, it could very well become a necessary step in the next year or two.  And perhaps this could be just enough leverage for Delta to start the process.  New gates take years to plan and build, and since the old Terminal 1 has already been demolished, expansion of the new terminal would take quite a bit of time that Delta may not have.  If the Love Field master plan were to be resurrected, then the airport may eventually have 32 gates after all, and other carriers would be free to enter the market readily.  United has even been gracious enough to free up the counter space for another carrier in the ticketing hall.

 

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