The (W)right to Fly

How little Legend Airlines beat mammoth American at its own game

When discount airlines did try to make inroads at D/FW, American squashed them like bugs. For example, in 1996 Vanguard Airlines started flying from Kansas City to D/FW. In response, American added several routes, slashed airfares, and offered special frequent-flyer miles. When Vanguard retreated, American discontinued the routes and raised their prices.

Several Kansas lawmakers tried numerous times over the years to introduce legislation to kill the Wright rule--to no avail. A frustrated Bob Dole, the former senator from Kansas, wrote a scathing letter to Crandall in the 1990s that stopped short of calling him an out-and-out hypocrite. In his droll way, Dole pointed out that the American CEO, who had recently argued for removing airline restrictions in European markets and loosening certain anti-competitive practices at some lucrative U.S. hubs, was being two-faced.

"The bottom line is that if you are truly for real competition, in favor of the flying public and against contradictory involvement by the government, you will support a repeal of the absurd restriction imposed on Dallas Love Field," Dole wrote. "No rational argument can be made to justify the exorbitant fare differences between destinations in Kansas and Dallas as opposed to those within Texas and contiguous states and Dallas..."

In light of this mounting opposition to the Wright Amendment, Leadbetter thought his airline concept would offer a compromise that might appeal to American and its head honcho.

"Bartos was right," Leadbetter says. "I was very naive."

Leadbetter began lining up potential investors, who would eventually need to kick in $32 million if Legend took off. He began looking for a possible CEO and found a good candidate in McArtor, who had spent most of his career at Federal Express.

Before McArtor committed, Leadbetter took the first important step toward making his idea a reality. He needed a clarification from the Department of Transportation that reconfigured planes with 56 seats were in compliance with the Wright Amendment. Based on both the FAA's and DOT's previously stated definition that maximum passenger capacity meant the number of passenger seats for which a plane is configured, not the number for which it was designed, Leadbetter didn't expect any problems. He asked DOT to interpret the amendment in its least restrictive manner, since the purpose for the amendment--providing economic safeguards for D/FW airport--had ceased to exist.

He wrote to the Transportation Department in May 1996 and did not hear anything back for almost two months, despite repeated phone calls to DOT's chief counsel, Nancy McFadden. Finally, transportation officials agreed to meet him in August. He had his first inkling his request was doomed when he learned that DOT was meeting with American Airlines officials that afternoon. He would later learn from DOT officials that American Airlines had submitted a briefing paper on Leadbetter's proposal and that the Transportation Department also sent some information to the White House concerning Legend's issue.

In mid-September, DOT dealt Legend a setback. Using the Webster's Dictionary definition of capacity, McFadden ruled that Legend's reconfigured planes did not meet the definition. Further, she said DOT believed that Congress' intent when passing the Wright Amendment was to limit long-distance service. As for whether the amendment was no longer necessary, McFadden told Leadbetter that was best left to Congress to decide.

Rather than kill Legend Airlines, the DOT order strengthened its resolve. By now, McArtor was on board, and he had his work cut out for him.

"I fell in love with the idea of Legend," he says. "It had great potential. I wanted to take my 30 years of aviation experience and build an airline at Love Field the way I think an airline should be built. As a former FAA administrator, I think it is a crime to have a billion-dollar asset like Love Field all paid for and sitting there underutilized."

The DOT ruling, he decided, was just a minor setback. He and Leadbetter devised a strategy to get their airline off the ground. Technically, the DOT decision did not keep them from flying. They could use new regional jets built with 50 seats, which is what Continental is soon going to be flying out of Love Field. But for Legend, regional jets were too costly. Besides, there was a waiting list for them, which would push back the airline's starting date by more than a year. And the jetliners--which are manufactured in Canada and Latin America--wouldn't require heavy maintenance for a while, which would mean no new jobs created for Dalfort.

Legend was going to stick with its original plan. The first thing its leaders decided to do was appeal the DOT decision to the 5th U.S. Circuit Court of Appeals. They knew that was going to be a lengthy and expensive proposition, and their chance for success was uncertain.

Curious about just how much input American Airlines had in the DOT decision, Leadbetter instructed his lawyers to investigate. They also wanted to know whether there had been any contact between DOT and the White House or any Democratic Party fundraising committees regarding Legend Airlines.

Leadbetter had reason to be suspicious. According to the public citizens' lobby Common Cause, American Airlines--which donated more money during the last presidential election than all the other major airlines combined--gave almost $250,000 to the Democrats within days of DOT's final ruling on Legend.

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