From IAG Blog:

Monday, April 10, 2006
DFW & Love Field

Last week we interviewed Bernhard Weinstein, Professor of Applied Economics at North Texas University. An attempt to interview a DFW official was rebuffed because, he advised, DFW is in a "quiet phase". Prof. Weistein proved to be a good substitute.

The podcast of the interview is still being prepared and will be available on the IAGportal (see link above).

A key point made in the interview is that the Wright Amendment was poor legislation. But that does not mean its removal would help the DFW Metroplex now. The region has so much invested at DFW, anything that negatively impacts this regional asset will hurt a lot. Love Field is constrained and Southwest has limited options there anyway. No wonder there are rumblings about moving the entire Southwest HQ operation to somewhere else, like Phoenix.

So, if Southwest were to quit Love Field and move into DFW, that airport will be protected inasmuch that it needs (desperately) Southwest's traffic flow. DFW carries a lot of debt, the ratings on which can only improve with Southwest's arrival. However, with DFW apparently run as an American Airlines resource, Southwest may have to be forced to move there. The idea of a regional airport authority is a smokescreen, it appears, for the eventual closure of Love Field and forcing this move.

So it seems the real story here is not so much the protection of American Airlines, as it is the protection of DFW. Metroplex residents might lose much more if DFW cannot pay down its debt. And this is why so many people want to close Love Field. That has to leave people at Southwest wondering about going to DFW and being in an environment controlled by American's allies.

Maybe Phoenix looks better every day. We certainly don't see Southwest needing to bend to the concerns and fears of the Metroplex. Indeed, were Southwest to move its base to Arizona, the Metroplex will lose anyway. Southwest can write its own ticket. Seattle had to face that reality recently. The Wright Amendment looks more complex every day, providing little wiggle room for anyone. It may in fact be in Southwest's interests to get out of town. That would minimize its exposure to the forces at play, trying to protect DFW and the complexities of dealing with American Airlines. Of course any drawdown by Southwest in North Texas means even higher fares in the Metroplex. This whole business looks more and more like a Mexican standoff. We're betting on Southwest doing a pre-emptive strike.

posted by IAG Blog at 8:14 AM