The Wright Amendment: time for repeal: a policy issue note

Transportation Journal, Wntr, 2006 by M. Theodore Farris, II, Stephen M. Swartz

Although transportation has been extensively deregulated since the late 1970s, some bastions of economic regulation remain. Three surviving regulations serve primarily to limit competition among carriers at key airports and increase ticket prices: the Wright Amendment, perimeter rules, and slot controls. The Wright Amendment limits carriers from serving the vast majority of the nation's airline passengers from Love Field in Dallas, Texas. Perimeter rules prohibit carriers from offering most flights that exceed 1,500 miles to or from New York's LaGuardia Airport and that exceed 1,250 miles to or from Washington's National Airport. Since 1969 there have also been limits on the number of takeoffs and landings per hour ("slots") at four major airports: LaGuardia, Kennedy, National, and Chicago's O'Hare. Slots were designed to reduce congestion, but slot controls also reduce competition (Morrison and Winston 1997).

If these three vestiges of regulation were lifted, it has been estimated that travelers would see benefits on the order of $1 billion annually (Morrison and Winston 1997). The purpose of this commentary is to present and evaluate the issues raised by recent challenges to the first form of transportation regulation, the proposal to repeal the Wright Amendment. The issues raised in this specific case may be similar to other forms of commercial regulation of transportation.

HISTORY OF THE WRIGHT AMENDMENT

The city of Dallas purchased Love Field as surplus from the Army in 1928 for $350,000. Love Field began serving as the primary airport for the city. In 1968 Dallas and Fort Worth agreed to build a regional airport to replace Love Field and adopted measures to phase out other local airports (including Love Field, Red Bird, GSIA, and Meacham Field) from servicing major airlines at those facilities in order to transfer the activity to the new regional airport, which was later named Dallas/Fort Worth International Airport (DFW). The airlines actively serving Love Field at the time pledged to move to the new airport. Southwest Airlines had only begun efforts to receive approval to start service out of the region using Love Field in 1967. Following a final decision by the Texas Supreme Court, affirmed by the U.S. Supreme Court, Southwest Airlines was able to begin service on June 18, 1971, operating flights between Dallas, Houston, and San Antonio using four planes out of Love Field as DFW was being constructed. The DFW Airport Board and the cities of Dallas and Fort Worth sued Southwest Airlines over its decision to remain at Love. By 1973 Love Field enplanements peaked at 6,668,398 and a federal court granted Southwest Airlines the limited right to remain and offer intrastate air service at Love Field. The decision was upheld after a long and expensive appellate process. One year later DFW officially opened.

The Airline Deregulation Act of 1978 (Pub. L. No. 95-504) established a national policy of favoring competition over governmental regulation as the means of determining where an airline could fly. Through this law, Congress acknowledged that open competition was the best means of determining air routes and fares. In 1979 Southwest Airlines began "interstate" service to New Orleans out of Love Field over the objections of the City of Dallas and City of Fort Worth, DFW, and other related constituent groups and competing airlines. Southwest Airlines received a ruling from the U.S. Civil Aeronautics Board decreeing that it could operate from Love Field, both for intrastate and interstate flights.

In September 1979 the U.S. House of Representatives passed additional deregulation; H.R.5481, the International Air Transportation Competition Act. Representatives H. Johnson, Fary, and Ferraro co-sponsored an amendment which would prohibit an interstate common carrier from operating regularly scheduled flights into or out of a satellite airport within twenty miles of a major regional airport whenever the major airport authority found such restrictions to be "in the best interest of the public and aviation safety." U.S. House Speaker Congressman Jim Wright (Texas), without notice, hearings, or the opportunity for public comment or informed debate, attached an amendment to the law banning any airline from engaging in interstate air commerce from Love Field. The U.S. Senate refused to go along and forced a compromise. Known as the 1980 Wright Amendment (International Air Transportation Competition Act of 1979, Pub. L. No. 96-192, [section] 29, 94 Stat. 48), the approved compromise restricted travel into and out of Love Field for commercial flights with more than fifty-six seats and made it illegal to fly from Love Field to points beyond the four states surrounding Texas (Louisiana, Arkansas, Oklahoma, and New Mexico). It also contained marketing restrictions, prohibiting airlines such as Southwest Airlines from offering or advertising the availability of any connecting flights between Love Field and any city outside the limited "service area." As a result, Southwest Airlines was free to compete head-to-head with any airline everywhere but at its home base at Love Field in Dallas. In 1997, Congress passed the Shelby Amendment (Department of Transportation and Related Appropriations Act of 1998, Pub. L. No. 105-66, [section] 337, 111 111 Stat. 1447), adding Alabama, Kansas, and Mississippi to the Wright Amendment "service area."