|Quoting commavia (Reply 96):|
And no matter what the DOT thinks it can and cannot tell others to do, a judge will likely get the final say in this case. Southwest contends that the DOT's letter constituted essentially a non-binding suggestion, and not a legally-binding directive order, and has asked a federal court for an interpretation as such.
F. Use/lose or use/share policies for gates and other facilities
As noted above, the Main Terminal leases include gate-sharing provisions (“use it or share it” language referred to herein as the “Scarce Resource” provisions (see Exhibit C)) requiring accommodation of other airlines within the leased premises of the incumbent airlines.
The process for accommodating an airline needing space (“requesting airline”) has three stages. First, if the City were to have space available to lease directly, it would do so.
Second, in the absence of space available for direct lease, the City will refer the requesting airline to parties who are known to have gates or gate capacity available.
Finally, if neither of these approaches proves fruitful and if necessary to force accommodation by an incumbent carrier at one or more of the operational Main Terminal gates, the Scarce Resource provisions of the leases permits the City to
unilaterally require an airline to accommodate a requesting airline in its premises.
In case of a conflict between schedules of Lessee and the requesting airline, the Lessee shall have preferential use of its personnel and its Terminal Lease Area.
|Quoting justplanenutz (Reply 2):|
Didn't TTA/Treetops start out intra-state same as WN?
|Quoting LoneStarMike (Reply 3):|
It wasn't until 1961 that the TAC was given authority to cooperate in activities of federal and state agencies, such as certifying air carriers operating within the state.
In 1997, after waiting for a final interpretation by the courts over the Shelby Amendment and assessing the implications it would have on service levels at DFW Airport, the Airport embarked upon an extensive capital development plan designed to improve and expand Dallas/Fort Worth International Airport. This $2.7 billion Capital Development Plan was supported and authorized by the airlines, the DFW Airport Board, the City of Dallas, and the City of Fort Worth. After a series of unprecedented and unpredictable challenges including the terrorist attacks of September 11th, SARS, and the overall financial instability of the airline industry, this eight-year Capital Development Program came to a successful conclusion.
The program culminated with the opening of the new Skylink airport train, which opened to the public on May 21, 2005, and now connects all of the airport’s terminals by rail. Shortly thereafter, International Terminal D was opened to the fanfare of the traveling public on July 23, 2005. These two projects, combined with other airfield and roadway improvements, increased the Dallas/Fort Worth International Airport Board’s debt from $676 million to $3.8 billion, nearly a six-fold increase.
The airport judiciously pursued this long-term investment, completing the project on time and under budget in the face of these unprecedented challenges. Fortunately, DFW Airport was able to maintain a competitive cost structure well in line with other peer airports across the country. Although this increase in the airport’s debt load was anticipated, no one expected nor could have predicted that on the heels of this investment, Delta Air Lines would abandon its hub at DFW, jet fuel prices would hit an all time high, and Southwest Airlines would call for repeal of the Wright Amendment.
In 2004, Delta Air Lines began eliminating its hub at Dallas/Fort Worth International Airport as part of a larger restructuring of the airline. At the time, Delta Air Lines was DFW Airport’s second largest carrier, with 566 flights to and from 72 non-stop destinations. By the end of February 2005, Delta Air Lines had eliminated 522 of these flights and reduced its service to just three destinations–Salt Lake City, Cincinnati, and Atlanta. With the elimination of its hub, Delta Air Lines’ gate requirement fell from 28 gates it used to operate in Terminal E to just four. Some of these 28 gates have subsequently been released; unfortunately, as of today, DFW Airport still has 15 gates that remain vacant and many other gates that are underutilized. In addition to these gates, DFW has a satellite facility in Terminal A that is unoccupied and capable of handling 7 narrow body aircraft or up to 13 regional jet aircraft. Obviously, DFW continues to have excess gate capacity.
From DFW’s perspective, an immediate and outright repeal was and is a direct threat to its financial stability having just completed a $2.7 billion capital development plan and having just lost Delta Air Lines’ hub. To determine the potential operational and financial impact of such a repeal, DFW International Airport commissioned a formal study.
Given the projected growth at Love Field with the repeal of the Wright Amendment, SH&E concluded that DFW would lose a substantial amount of traffic under either of these two scenarios. In fact, SH&E predicted that DFW could lose as many as 408 daily flights, or 20 percent of DFW’s current operations, and as many as 21 million passengers annually, representing a 35 percent decline from current levels. With this substantial loss, DFW Airport passenger levels would decrease to levels seen 20 years ago, and it would take another 19 years for traffic just to recover to current levels.
In short, repealing the Wright Amendment, without a revision to Love Field’s gate limit, would amount to a 39 year penalty for DFW International Airport. Obviously, the traveling community and businesses that have come to rely on DFW’s economic vitality, and the airlines that moved to DFW in reliance upon the closure of Love Field would be adversely impacted. Equally traumatic would be the untold impact on the lives of the 268,500 men and women who have their jobs tied to DFW Airport.
Having recently added $2.7 billion in new infrastructure, while facing the prospect of losing 21 million passengers, 408 daily flights, and a significant number of domestic and international destinations, DFW Airport would obviously be under severe financial stress at a time when it is least equipped to handle it.
Repealing the Wright Amendment, without a reduction in gates, would also have a dramatic impact upon DFW’s cost structure. DFW’s net cost per enplaned passenger in Fiscal Year 2006 is budgeted at $8.32. If the Wright Amendment were to be repealed and Love Field was permitted to operate at its 32-gate capacity, DFW Airport’s cost would be projected to increase 54 percent to $12.81. If the Wright Amendment were to be repealed and Love Field traffic could grow uninhibited, it is estimated that DFW’s net cost per enplaned passenger would increase 98 percent to $16.47. Without question, this would have a dramatic impact upon DFW Airport’s cost structure and its ability to attract new air service, creating a potentially irreversible downward spiral.
The Dallas Love Field Impact Analysis Update became the catalyst for the parties to work towards the solution which is being offered for this Committee’s consideration today. Applying this information, the Mayor of Dallas and the Mayor of Fort Worth were able to fashion a local solution which ultimately was agreeable to all parties. The fundamental elements of the solution which require Congressional action
involve the following:
• to immediately permit airlines serving Love Field to offer through ticketing between Love Field
and any destinations through any point in Texas, New Mexico, Oklahoma, Kansas, Arkansas,
Louisiana, Mississippi, Missouri, and Alabama, and to market through services;
• to continue to limit charter flights as originally contemplated under the Wright Amendment
• to continue to restrict Love Field to domestic operations;
• to codify the locally sanctioned and established gate limit of 20 gates at Love Field; and
• to eliminate all remaining restrictions on air service from Love Field after eight years from
enactment of legislation.
Each element of this proposal is essential and interdependent. As an example, with a 20-gate limit at Love Field, the impacts from repealing the Wright Amendment are mitigated for those residents who live in and around Love Field. Similarly, the impacts on DFW International Airport are reduced with this 20-gate limit. Additionally, the consumer will immediately benefit from more flight options and more competition with through ticketing from Love Field to any destination. Finally, with 8 years to work on filling its unused gate capacity and to adjust to its new cost structure given the $2.7 billion in new investment, DFW Airport and its tenant airlines can better prepare for the ultimate repeal of the Wright Amendment.
Recently, a few parties have raised concerns that this local proposal limits access into Love Field and/or the marketplace. At the outset, it is important to note that Love Field has had excess gate capacity for several years. It is slightly ironic that only after press reports surfaced that a potential solution was in the works did any carrier express any public interest in gates at Love Field. Regardless of the timing, the fact is that carriers have access into Love Field today and will tomorrow if this solution is ultimately enacted.
As articulated in the Airline Competition Plan submitted by the City of Dallas for Love Field on July 31, 2001, “the operational Main Terminal gates at Love Field are all subject to scarce resource provisions that, when invoked, render those gates preferential use gates.” Thus, the scarce resource provision in the lease allows the city of Dallas to require airlines to share gates that are not fully used.
In fact, the City of Dallas even offers its support to the requesting carrier to assist in the negotiation of reasonable sublease terms. To date, this process has been an unmitigated success as outlined in Love Field’s Competition Plan, in that “there have been no cases in which an air carrier that was ready and willing to begin or expand service to Love Field has been unable to do so due to inability to secure reasonable access to needed facilities.” Despite rhetoric to the contrary, there is no viable reason to believe that this approach will not have similar success in the future.
It is also critically important to understand that every carrier today has unimpeded access into Dallas/Fort Worth marketplace. The fact is that even if carriers could not access Love Field through the accommodation provisions, which to date, none of the objecting carriers have even applied; carriers can still access the marketplace by flying directly into DFW International Airport. As discussed earlier, Love Field and DFW Airport are a mere 8 miles apart. There is no question that these two airports serve the same marketplace.
Table 1a provides information for airport pair markets rather than city pair markets. This table only lists airport markets where the origin or destination airport is an airport that has other commercial airports in the same city. Midway Airport (MDW) and O’Hare (ORD) are examples of this.
As referenced earlier, DFW Airport has 15 gates that are currently available to be leased and many other gates that are currently underutilized. Moreover, DFW International Airport has one of the most aggressive Air Service Incentive Programs in the country. As an example, a carrier that is willing to offer new domestic air service to one of DFW’s top 50 domestic markets is eligible to receive up to 6 months free landing fees, up to $100,000 in marketing support, and an additional $50,000 in marketing support if the carrier is new to DFW. To put that in perspective, if JetBlue Airways were to initiate service from John F. Kennedy Airport to DFW with just three daily flights, then the carrier would be eligible to
receive $479,000 in financial incentives. If JetBlue Airways were to fly 20 flights a day to five destinations as recently suggested in a local newspaper, then JetBlue would be eligible to receive $2.9 million in financial incentives from DFW Airport.
DFW Airport has diligently sought to bring JetBlue Airways to the marketplace and will continue to do so. Officials from DFW Airport have met with officials from JetBlue Airways 22 times since the airline’s inaugural flight back on February 11, 2000. We have provided them with detailed presentations and numerous financial incentives all designed to convince them to enter DFW marketplace. In fact, a DFW official was on JetBlue’s inaugural flight from JFK to Fort Lauderdale for the sole purpose of trying to convince JetBlue Airways officials to consider serving DFW International Airport.
In doing so, the carrier will avail itself to one of the most aggressive air service incentive programs in the country. If JetBlue or any other carrier chooses not to, then that is their choice. However, that choice should not serve as a legitimate basis to object to the local solution that is being offered here today.
The number of passengers flying to St. Louis or Kansas City from either Dallas/Fort Worth Airport or Love Field rose 43 percent in January and February, the most recent data available, compared with the same period in
2005, according to the government.
That's the day Southwest will begin seven non-stop routes from Love to Baltimore, Chicago, Denver, Las Vegas, Orlando, Washington D.C. and Los Angeles. Then on November 2, the airline will add eight more to Atlanta, Fort Lauderdale, New York, Phoenix, San Diego, Nashville, Tampa, and Orange County, California. Those will be the routes to watch.
"On those routes you're seeing some big drops. Anywhere from 20 to 45 percent at least in the short term period while American and Southwest beat each other over the head on those non-stop routes," said [Rick] Seaney. [CEO and Founder of FareCompare.] Seaney said the reason for the big price drop can be summed up in one word: Competition.
American Airlines chief financial officer Derek Kerr indicated Thursday that American won’t be backing off in the current fare cutting in the Dallas/Fort Worth market.
Since the Wright amendment expired Oct. 13, Southwest Airlines has boosted its flights and destinations significantly out of Dallas Love Field, and Virgin America has started service from Love Field to five cities – all with introductory fares that haven’t returned to pre-Oct. 13 levels.
American has had to match, as has ultra-low-fare carrier Spirit Airlines and other airlines flying out of Dallas/Fort Worth International Airport.
“Yeah, we’ve been aggressive on it. We plan on matching. We have matched on prices. There’s some view that, you know, Spirit’s customers aren’t the same customers as we want to have, but we disagree with that. We think we’re their competitor just like anyone else and we need to match.
“So we have in Dallas – it’s very competitive with Love Field opening up. Southwest has always been a rational competitor and we’ve always done very well competing against them in Phoenix in our past US Airways life, so we know how to compete with them. So we’re going to compete hard for everything in Dallas as we move forward.”
|Quoting justplanenutz (Reply 9):|
note that 8.2 million pax is what the City says is max capacity
Mr. Oberstar. Now, in the attachment the accommodation provisions, "Lessee does hereby agree to accommodate other airline. Lessee says...terminal lease area at such times that will not unduly interfere with airlines operating schedule." What does "unduly interfere with" mean? Who defines that? Is that a term of art? A term of legislative art? A term of judicial art?
Ms. Miller. Well it was crafted by the Dallas City Attorney's Office and we understand, since it has never been tested, we have never had a conflict; that we should, if we are responsible, create a very clear policy using this as the template for how we are in real terms going to be executing this. This gives us the authority to tell an American or a Southwest, you have to make room. But I think that like other airports like you cited that have this issue of capacity, we need to have a very specific policy in place so that the tenants have a clear expectation for how it is going to work when the director says we shall make room for Jet Blue and this is how we are going to do it.
Mr. Oberstar. Now, I listened carefully earlier when discussion was made of Jet Blue, and Mr. Costello raised the issue, and I think Dallas/Fort Worth says we have plenty of room for Jet Blue, they can come here. But they may not want to come, just as Southwest had no intention of getting into DFW and paying those larger landing fees. They are quite happy with 55 cents a thousand pounds. Right, Mr. Kelleher?
Mr. Kelleher. Well, Mr. Oberstar, our headquarters is at Love Field. We have invested $200 million in Love Field and this agreement calls for us to invest another $200 million. So it is a little different from the situation that any other carrier is in, and we have been the ones that have been restricted at Love Field since 1979 by the Wright amendment.
Mr. Oberstar. I know you have been restricted at Love Field, but you have been laughing all the way to the bank as well.
Mr. Kelleher. Well, great service at low fares.
Mr. Oberstar. That is for sure, and a monopolistic position. And in case of a conflict, lessee shall have preferential use of its terminal lease area. If you combine rather vague language about "unduly interfere with" and section 4(a), "in case of a conflict, lessee shall have preferential use of both," now American and Southwest are in the catbird seat. You keep anybody out.
Mr. Cox. Can I respond to that?
Mr. Oberstar. Anyone can respond to that.
Mr. Cox. Congressman Oberstar, first, the way the language is drafted I believe provides the city of Dallas greater flexibility than the standard language that is drafted. Typically you find in those leases that if you are turning your gates at six times a day, then it is considered fully utilized and nobody else can get in. The way it is drafted, I believe, provides the city of Dallas a greater hammer to force an accommodation than most other places that would allow that.
The other thing is, I would argue the difference is that Southwest has been there for a long time and has an asset of which they lease. Jet Blue does not. Nobody has ever guaranteed access into an airport, as evidenced by all the other airports that I talked about, but they are guaranteed access into the marketplace. And 8 miles down the road, Jet Blue can fly basically for free for 6 months, and we believe that is a good deal. And we believe nobody is guaranteed access to any particular airport but should have access to the marketplace. And with great capacity and an extremely generous air service incentive plan, after multiple meetings with Jet Blue we think they can make the right business decision. If they really want to enter the marketplace, they can.
Mr. Oberstar. Well, Southwest was presented with a good business decision in 1991 when we had the hearing and Kevin Fahey said we can have 18 gates in 3 weeks for Southwest and we can have a temporary basis and we can have permanent gates in 18 months. And Mr. Kelleher thought that was not as good of a deal as he was ready to take.
Mr. Kelleher. No, again because we do not want to split our operations in our home city, and there are very few airlines, including American Airlines in Chicago, if I may say that, Gerard, that want to split their operations between two airports in the same city. That is the reason why American does not serve Midway Airport, Southwest Airlines does not serve O'Hare Airport, and that is why the other spoke carriers do not want Peotone Airport because it would be a horrible situation from Southwest Airlines' standpoint to have its headquarters, all of its investment at Love Field take half of that service, send it to DFW Airport and suddenly have the two airports competing against one another in the hands of the same carrier. That is not true of Jet Blue or anyone else that wants to come in.
Mr. Oberstar. Let's understand something a little further. At O'Hare when an international agreement is reached between the United States and another country in a memorandum of understanding or an aviation trade open skies agreement, and it calls for service into O'Hare for whatever, five, six or seven slots, American and United both are told you will provide slots. I do not know if you still have sales of slots, but you have to sell them, and then you have to go and find other opportunities to replace your lost slots. But this is the U.S. DOT telling you and United you give up space so an international competitor can come in.
Now, supposing JetBlue makes the decision and we want to come in and we want to get in the Love Field game, too. Who is going to tell you, Mr. Kelleher, you have got to give up space to accommodate them?
Mr. Kelleher. Well, first of all, there is no international treaty that pertains to Love Field that sets aside the local situation with respect to the proprietorship of the City of Dallas and how many gates it wants to have.
Now, let me say this to you, Mr. Oberstar, if I might, the biggest impediment and hindrance to Southwest Airlines' expansion after deregulation in 1978 was not being able to get gates at other airports, whether you are talking about San Diego or Los Angeles, or whatever might be the case. And that was because they had exclusive use leases where one carrier had 14 gates with five departures a day and said, well, if we do all your ground handling charging you three times as much as the city charges us, you can get in.
What is my point? Everybody suffers from trying to get into an airport where there are not a lot of available gates. But the situation has improved today because airports haven't gotten rid of their exclusive use leases, which is the ones that we ran into and now have these preferential use leases where there is room for another carrier. And it is very simple. There is no mystery to the way it operates, and that is, I can show you Southwest Airlines schedule, gates schedule, we have got hours on our gates where another carrier could operate there, and that doesn't have anything to do with American or Continental Airlines either. And we would simply be told by the City of Dallas, you have got these vacant spaces in your gate utilization and by golly you are going to put another carrier in there.
Mr. Oberstar. They would be able to tell you that?
Mr. Kelleher. That is the way it works, oh, yes absolutely.
Mr. Oberstar. Well, the problem you defined just a moment ago in your remarks is why I included in the 2001 reauthorization of FAA a requirement that every airport have a master plan included showing their competition the plan.
Would the parties agree to a legislative provision that would give FAA authority to take all necessary actions to ensure that carriers seeking to initiate or expand service at Love Field have access to necessary facilities on reasonable terms? Provision could apply if FAA determined that new entrants are unable, as you have described moments ago, Mr. Kelleher, to obtain access under the procedures of this agreement?
Mr. Kelleher. I will respond to that, if I might lead off, I am sure the mayors have some comment about it, but, if that were the case, then this agreement is a nullity because it is absolutely essential to the cities of Dallas and Fort Worth for a variety of reasons that the airport be limited to 20 gates, of which we gave up 5.
And if that went down the tube, then I am afraid there wouldn't be any agreement at all because certainly, American Airlines and DFW, one of their interests, Mr. Oberstar, is not jeopardizing the status of DFW. So having a total of 20 gates is what assures that? Because the gates limit the operations that you can have from Love Field.
Mr. Oberstar. The language I am talking about would not--well, we can make it clear that the FAA could not require an increase in gates.
Mr. Kelleher. You are saying the FAA could take gate leases away?
Mr. Oberstar. To take necessary action to ensure that carriers have access to necessary facilities.
Mr. Kelleher. Well, would you apply that to Long Beach, California where JetBlue has 27 out of 35 available slots?
Would you apply it to Washington National? Would you apply it to all airports across the Nation? And the reason I ask is that is that that could be very helpful to Southwest airlines.
Mr. Oberstar. But there are other ways in which access can be obtained at Washington National.
And, I don't know about Long Beach. That might be an interesting--but they don't have the two airport scenario that we are dealing with here.
Mr. Kelleher. No they have the 41-slot scenario.
Mr. Oberstar. They do. Mr. Arpey.
Mr. Arpey. Mr. Oberstar, I think that perhaps we haven't explained it as artfully as we should have, or carefully as we
should have, but I think in the agreement that we have created, we are doing precisely what you are asking for, and that is, that if any airline wants to come in and operate at Love Field on the same terms and conditions that American, Southwest and Continental operate today, this agreement says that the City of Dallas is going to make that happen as part of this agreement.
So I think we have recognized your concern as we negotiated our way through this, and so I think the current agreement does what you are suggesting.
Mr. Oberstar. The language of the current agreement is to the extent a new entrant carrier seeks to enter Love Field, the
City of Dallas will seek voluntary accommodations from its existing carriers to accommodate the new entrant's service.
There is no enforcing mechanism.
Mr. Moncrief. But that is the first thing they do, Mr. Oberstar, they seek voluntary response from the other carriers. If they don't do that, then the City of Dallas has the authority to come in and say you will.
Mr. Oberstar. It goes on to say if its carriers are not able or not willing, the City of Dallas agrees to require the sharing of preferential leased gates.
But what is the--but it says this, agrees to require the sharing of preferential leased gates, but then you go back to
the attachment to the accommodation, it says in the case of a conflict between schedules of lessee and the requesting
airline, the lessee shall have preferential use. So you require on the one hand, but you vitiate it on the other.
Mr. Cox. Mr. Chairman, that, I mean, ranking member, that is not different than virtually every other accommodation lease that exists out there in the country.
Mr. Oberstar. We will take a look at that and see if that is the case.
Mr. Cox. You have the ability to accommodate, but you don't take rights away from somebody that had already contractually obtained those rights, but you have the ability to try to, to the extent possible, to fit those people in.
Mr. Oberstar. That is true in a majority of interest clauses.
Mr. Arpey. I would like to add, though, on the JetBlue issue, and we can start with the first provision and American will volunteer today to open up gate space for JetBlue at Love Field.
Mr. Kelleher. Tell them to come on down. We welcome them too.
|Quoting cjpark (Reply 15):|
"And any carrier that is desirous now of serving Love Field can easily be accommodated even after those gates come down."
|Quoting cjpark (Reply 15):|
The gates are gone, Delta wants to fly from DAL.
Nobody has ever guaranteed access into an airport.
And we believe nobody is guaranteed access to any particular airport but should have access to the marketplace.
That is not different than virtually every other accommodation lease that exists out there in the country.
But you don't take rights away from somebody that had already contractually obtained those rights, but you have the ability to try to, to the extent possible, to fit those people in.
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