The (W)right to Fly

How little Legend Airlines beat mammoth American at its own game

The two bully airlines tried to destroy Southwest with underhanded--and illegal--tactics, including boycotting Southwest's vendors, blackballing it from membership in the airline credit-card system, and keeping its planes from using the fuel hydrant system at Houston Intercontinental Airport.

By the time the dust settled, Southwest, which was hemorrhaging money, had won the legal battle--thanks to its wily attorney, Herb Kelleher, now the company's CEO, who at one point deferred his legal bills and paid all the court costs. And Braniff and TI were indicted by the federal government for conspiring to put Southwest out of business. The companies pleaded no contest to violating the Sherman Anti-Trust Act.

But Southwest's battles were far from over. Based at Love Field, Southwest grew rapidly throughout the state because of its low-cost, low-frills formula. When it came time for airlines to move from Love to D/FW airport, Southwest refused. The carrier was not technically in existence when the bond covenant was drawn, and it never signed the subsequent agreement to move. Dallas and Fort Worth were furious, and both cities sued Southwest. Again Southwest emerged victorious in a federal court ruling that was ultimately upheld by the U.S. Supreme Court.

Federal Judge William Mac Taylor threatened to jail Dallas City Council and its city attorney if they didn't stop the legal harassment of Southwest, according to Bartos.

Southwest's victory and subsequent service out of Love Field did little damage to the increasing fortunes of D/FW, but probably created eternal enmity on the part of Fort Worth. In 1978, Congress deregulated the airlines, and Southwest applied for federal authorization to begin interstate travel. It launched its first route from Houston's Hobby Airport to New Orleans. It was an immediate success. When Southwest tried to inaugurate a similar route from Love Field, a furor erupted.

Former House Majority Leader Jim Wright vehemently opposed Southwest's application to fly from Dallas to New Orleans. When he lost, he marched into the House and convinced his colleagues in one day to ban all interstate service from Love Field. In the ensuing months of intense lobbying, the Senate finally talked Wright into compromising. The result was the 1979 Wright Amendment, which banned interstate travel from Love Field except to four adjacent states--Oklahoma, New Mexico, Arkansas, and Louisiana. To this day, Southwest cannot fly nonstop beyond Texas' bordering states. This leads to an absurd traveling masquerade. For example, if a Dallas passenger is flying to, say, Phoenix, and that is his Southwest flight's ultimate destination, he has to get off the plane when it lands in Albuquerque, get his baggage, wait an hour, then recheck his bags and board the next flight heading for Arizona.

At the time, Wright's rule arguably was needed to bolster Dallas and Fort Worth's investment in its new soon-to-be international airport, and it probably went a long way toward brokering a tentative peace between the two cities. In a bit of revisionist history, Jim Wright has recently said the amendment also was passed because of safety concerns at Love Field. But several air-traffic controllers at Love tower who talked on the condition of anonymity said there never was a safety issue.

By the time Leadbetter read the Wright Amendment in 1994, D/FW had become the second-busiest airport in the world and was predicted to become No. 1 by 2000.

While Leadbetter was firmly in the camp that believed the time for the Wright Amendment had come and gone, he had no intention of trying to repeal it. He was interested in the provision that allowed for long-haul service from Love in planes with 56 or fewer seats. He didn't know why that exemption was in there. At the time, the smallest plane had double the capacity, and no airline could remain profitable flying half-empty. Leadbetter figures that might, in fact, have been the point.

Over the next two years, Leadbetter researched his plan, modeling it on Midwest Express out of Milwaukee, which caters to business travelers with all first-class seating at coach prices, unlimited carry-on, good food, and expedient check-in. Spiraling airfares over the last decade made the possibility of flying a 56-plane at a profit feasible, especially if it carried cargo.

Leadbetter commissioned a survey of the 50 top businesses in Dallas, as well as travel companies catering to businesses, asking what they thought of his idea for a new airline. The results were almost 100 percent in favor of what Leadbetter wanted to do. Several respondents even offered to invest.

"I really didn't think American would object," says Leadbetter. "We were going to fly to markets that neither Southwest nor American serviced, like from here to Rochester or Birmingham. We would be giving a little bit of an alternative, but not enough to create a problem. I figured Crandall would see it as a way to relieve the pressure valve on the Wright Amendment."

And the pressure was there. In 1992, the Transportation Department released a study showing that repealing the Wright Amendment would save travelers $183 million annually, while having a negligible effect on the growth of D/FW airport, which was poised for a multi-million-dollar expansion. But it wasn't just Dallas residents who were getting fed up with the inconvenience and expense the Wright Amendment caused. Business travelers from nearby states such as Kansas and Tennessee were complaining to their members of Congress about being locked out of non-stop service to Love Field and the lack of low-cost carriers to D/FW airport.

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