Southwest Airlines started as an underdog, but has turned into a government crony trying to squash competitors the way competitors once tried to use the government to smother them when they were small.
Herb Kelleher and Rollin King apocryphally sketched out the idea for Southwest Airlines on a napkin, flying between Dallas, Houston and San Antonio – all within Texas – and therefore avoiding Civil Aeronautics Board regulation over whether and where they could fly and how much they could charge.
Put another way, by operating entirely within one state they’d exploit a loophole in airline regulation that exempted them from the rules that major carriers had to follow. They’d replicate what PSA Airlines was doing in California, based at convenient Love Field in Dallas, just as other airlines were moving out to Dallas – Fort Worth.
- The major airlines sued to stop them, arguing that they couldn’t fly out of Love Field, but they weren’t party to the agreement not to do so and ultimately won the right to operate.
- Just as the carrier was gaining traction, the Civil Aeronautics Board began allowing ‘experiments in price competition’ ahead of deregulation. This let major airlines match and even undercut their pricing. Southwest had to innovate, and in 1977 became the largest liquor distributor in the state of Texas, rewarding customers on expense accounts who paid higher fares.
- Airline deregulation allowed Southwest Airlines to fly outside of Texas. Almost immediately competitors got the federal government to limit Southwest Airlines flying to contiguous states via the Wright Amendment. That boxed them in at Dallas Love Field and limited how much they could compete against the majors. House Speaker Jim Wright represented Tarrant County and parts of the DFW metroplex where Braniff operated its hub. American Airlines moved its headquarters to Dallas the same year the Wright Amendment was passed.
Southwest was a David versus Goliath story, succeeding in the face of competitors who tried to use the government to keep out competition at Dallas Love Field. But as Southwest grew, instead of staying true to their roots, they adopted the tactics of their competitors.
In mid-2006 American Airlines, Southwest Airlines, DFW Airport and the cities of Dallas and Fort Worth came to a five-party compromise to cartelize the Dallas market and jointly seek repeal of the Wright Amendment. This was passed into law, with connecting flights beyond the existing allowable states permitted right away and limitations on non-stop service lifted in October 2014.
- This gave Southwest a near-monopoly at Love Field, with 16 of 20 gates
- And it limited competition American Airlines faced at DFW, reducing the number of gates at Love Field by 37.5% from 32 to 20 and limiting future competition by new entrants into the market.
The lack of competition at Dallas Love Field was created by the federal government taking 12 gates off the table. Southwest lobbied to have the federal government shut out competition there at the same time restrictions on it were lifted. (The airport and city government didn’t even own all of the gates they decided to eliminate – instead of taking Southwest gates, they used eminent domain to take and destroy the Legend Airlines terminal, and a Court of Appeals ruled they didn’t even need to pay for it because the change in law to reduce gates at Love Field meant that the gates they were taken became worthless.)
Now Southwest Airlines has waded into the fight to have the FAA ban JSX which offers a premium product based at an FBO at Dallas Love Field rather than using main terminal gates. Southwest reportedly wants them kicked out of Love Field entirely, too.
Southwest has joined the opposition to FAA approval for SkyWest Charter, which would operate under the same regulator model as JSX (Part 380 company selling scheduled part 135 charter flights). Opposition to SkyWest, which doesn’t meaningfully compete with Southwest and does provide a pipeline of pilots, is a stalking horse for seeking a government ban on JSX. Enilria writes,
They are part of the anti-competition cabal. amazing how they went from a scrappy start up using legal loopholes to being part of the establishment trying to use the same government they fought to shut down a rival. Sad.
In their opposition to SkyWest Charter, which would operate on small city Essential Air Service routes, Southwest makes clear their support for government route subsidies too.
No matter what you think of JSX even (and they are fully legal, achieve high safety standards, and deliver a quality product), it’s embarrassing to see one-time maverick Southwest Airlines having turned into a creature of cronyism. They’re using the government to shut down competition at Dallas Love Field the way that major airlines in the 1970s tried to use government to shut down competition from them.
Protecting one’s brand by utilizing existing laws is just smart business. Your article is just a hit piece – you are turning your site into another asinine rumor mill and bastardizing YOUR site – is this smart business on your part, open to negative discussions?
Hi Gary, do you agree or disagree it is an issue that JSX can fly a regularly scheduled and marketed international route to Cabo from Dallas Love Field, when it is literally illegal for any “real” scheduled service carrier to fly international from Love? I would hope you would agree that is an issue and is a loophole to being the only provider of of international service, and is a significant advantage for JSX that should not be allowed.
If you agree, which I fully expect you to, then it becomes a discussion between which laws and rules is JSX allowed to circumvent, and which must they abide by.
Also, While DAL provides benefits closer to Dallas proper, I don’t think anyone in the industry would look at DAL capacity and call it a monopoly in the metroplex with DFW so close and able to serve the same population.
How sad…
I flew SW, had some hurried transfer through LAX. That was probably twenty years ago, but I’ve still got my loyalty ID and emails from SW. Never flew JSX. I prefer more competition, and more diversity in airline options.
More competition means a better chance that I get an airline that evenly matches my personality and keep the odd characters away from me on their odd airlines. Not a fan of one-size-fits-most socialist regulatory environment.
A sidebar comment regarding the “Five-Party Agreement” for Love Field – Once that agreement became official, one of the first actions to occur was the demolition of the old Braniff terminal. Though disused at the time, that was an additional 15 gates that could’ve been reactivated.
Enilria is using a bit of creative license in suggesting that WN is seeking to kick-out JSX from Love Field. Direct airline intervention in the lessor/lessee business affairs of other airlines at federally obligated airports (those receiving federal dollars for development) is prohibited by DoT. That said, don’t be surprised by “back-door” efforts to influence airport authorities or other airport lessees.
Example: As an indirect result of Orange County’s (SNA) implementation of a General Aviation Masterplan, JSX will have to vacate its leased FBO space by 12/31/23. The FBO from where JSX operates, was granted permission to remodel/expand, but has to comply with the airport administration (via the county board of commissioners) licensing rules. A portion of those rules were crafted to target Part 135/380 operators.
Edit – Just checked the Enilria site….apparently TSA has joined the anti-135/380 chorus. That’s such hypocrisy considering TSA approves the security screening component of all the 135/380 operators.
If there were ever a potential death knell for that portion of the industry, losing security certification would be it.
This whole article/situation accurately sums up the downfall of the USA. From being the place for the small man to be innovative and rule-breaking to becoming the place where only the biggest of gov’t folks and the rich can build anything
Why innovate here when you’ll inevitably be ruined or bought-out by government interests?
@Tony – what is the concern or problem that you’re expressing? Is JSX somehow unfairly advantaged over Southwest Airlines at Love Field?
Carving up the metroplex was a cartel arrangement involving Southwest AND American.
– Reduced flying out of Love Field (32 gates to 20)
– That’s less competition for American at DFW for close-in Dallas passengers
– While also less competition for Southwest at Love, which was left controlling the vast majority of gates
Gary, you act like the congressional act of lifting the Wright Amendment was some mafia-like behind the scenes action. It was a bill passed by congress and signed by the President. There are many many things AA and WN lobby for that they never get but it’s not like they were actively colluding to create a cartel and I’d seriously doubt any lawmaker at the time regarded it as such either. The Metroplex has quite a lawmakers but it’s never had 217 to pass a bill in Congress by itself. The Wright Amendment was lifted after WN had lobbied for it to be lifted for quite some time. It’s not as though AA was fully utilizing all DFW gates at the time and AA wouldn’t expand at DFW (post Delta leaving their hub) to their current size for years after. AA didn’t want the Wright Amendment lifted but WN lobbied to get it open and succeeded. It’s a bit disingenuous to think AA was trying some form of cartel arrangement when they didn’t want the Wright Amendment lifted in the first place. All AA did was make sure that WN couldn’t keep Love Field to themselves on the one hand (the only even possible way to think about a cartel instance in the DFW area) while simultaneously growing at DFW at the same time.
As you know, my issue with JSX has never been the product. Everyone knows it’s an amazing product but it’s built off lower pilot costs of a loophole in the law. JSX is circumventing the rules of scheduled service with a certain number of passengers. It’s an obvious loophole they’ve found and good for them but that doesn’t mean it should stay open when it renders the FAA and Congressional laws/regulations on the topic toothless if they can be circumvented this easily by having two shell companies: one selling the tickets while the other has the charters in JSX livery and LOPA (it’s not like those planes are flying for anyone else…).
I am sympathetic to Tony’s point though. If Southwest can’t sell nonstop tickets to Cabo from DAL by following the laws of scheduled service then why should JSX be allowed to sell scheduled international service from Love Field? Should Southwest just go create a shell company like JSX has done to sell scheduled tickets then “charter” their entire fleet of 737s that’s in Southwest livery and LOPA to fly that scheduled service?
If the JSX business model doesn’t work hiring pilots with the appropriate qualifications, then it shouldn’t be legal. I don’t think the current pilot quals are correct but that isn’t an excuse to find loopholes in the law and expect to build a business off it. If JSX can make their model work under the same pilot cost burdens of anyone from GoJet to Endeavor to Envoy, great.
If Southwest wants to go buy a bunch of smaller jets and reconfigure them to qualify, so be it. But their business model isn’t set up for it. JSX have to pay for the FBOs and provide staffing for only a few flights a day. It’s been great at DAL for those of us who live in Highland Park to fly with JSX. If SW wants to put up a better product and not force us to fly with cattle class, then go for it.
But this competition is a huge win for consumers and that’s what SW and AA don’t want.
Dirty pool.
This is a good article that exposes the evils of government regulation. Capitalism is an economic system in which individuals freely decide what they will produce and who they will serve. When the government steps in to protect a business, that is corruption, not capitalism. It is the aristocracy of pull and who is the most “connected” and is skillful at obtaining favors from the Legislature rather than the business supplying what the customer wants.
Hal, the issue has nothing to do with the size of planes JSX is flying. The law and FAA regulations governing Southwest based on number of seats and scheduled air service are the same ones that would govern the size plane JSX is flying if JSX hadn’t found a loophole by having one shell company sell scheduled air service but a separate company “chartering” aircraft in the JSX logo and configuration… but only for JSX. JSX operates under charter FAA regulations when they’re clearly selling scheduled service which is a different part of the law/regulations.
Under this arrangement, in an extreme example, JSX could just as easily extrapolate this business model to sell scheduled international service to just about anywhere, regardless of number of seats so long as the separate “Charter” company stayed separate. Again, an extreme example, but what JSX is doing means they could “charter” 777s in their own JSX livery and configuration and fly to… wherever. Hawaii… London, wherever. but they still would fall outside the law since the company selling tickets is “chartering” their scheduled air service utilizing lower pilot costs from less training and pilots over the age of 65.
That’s the issue. It’s a loophole to operate under lower pilot costs to get away from the FAA regulations on pilot training and age.
Again, I don’t think the FAA rules on pilot minimum qualifications are based on much more than lobbying from APA and ALPA (vs safety), but I don’t think the basis for a business model should be rendering congress and the FAA toothless when it comes to safety regulations. Fix the FAA and the law but don’t penalize carriers with unfair competition based on loopholes in the law.
I guess the consensus is that only dirt-bags, miscreants and bloggers dare to threaten the bizarre sainted reputation of WN as some sort of “White Knight of Aviation”. I always saw them as the railroad robber barons of the sky.
Guess we will just have to see if JSX can bribe their way into the market. You know, WN style.
Yall are missing a really important distinction about part380 which is that it is categorically unscheduled. Go read the regs. The regs even clarify that 380 flights can APPEAR to be scheduled in nature because a time date and location has to be given to passengers, but that, systemically and categorically, it is an unscheduled class of operations. Part121 airlines cannot fly part380 flights because Part121 airlines are scheduled.
How I understand it, Part 135 “on demand ” charters can apply to aircraft with up to 30 seats, so it doesn’t make economic sense to charter “on demand” a 777 configured to only 30 seats, above which Part 121 rules apply……
MaxPower,
Max, you’re reaching (I suspect purposely) with this statement:
“JSX could just as easily extrapolate this business model to sell scheduled international service….regardless of number of seats so long as the separate “Charter” company stayed separate. Again, an extreme example, but what JSX is doing means they could “charter” 777s in their own JSX livery and configuration and fly to… wherever.”
Sorry Max, once JSX were to move beyond 30 seats/Part 135, they’d be required to operate under either Part 121 (scheduled) or Part 125 (charter).
I enjoyed the catfight Delta had with SW concerning a gate at Dallas Love field. The lawyers really earned their keep on this one. IIRC, Delta has control of the gate for 5 to 6 years via a sublease.
Just let the JSX thing play out. Catfight #2.
Aaway
I appreciate the correction. My understanding was incorrect
Could Jsx not replicate their model with a larger plane?
Aaway, to be clear, the aspect of using a shell company to book tickets with a different company chartering planes of any size.
That strikes me as replicable and the JSX model.
Max – “Could Jsx not replicate their model with a larger plane?” – I’ll answer this way. If you’re making a theoretical assertion that JSX could fly B777s at 30 or fewer seats – okay….yes, can be done.
However, aside the economics of such an operation, that would introduce other operational complexities – both airline and airport level – that renders the current JSX operating model nonviable.
Part 125 would not be allowed using the JSX business model. Therefore JSX is very astute to exploit the Part 135 ,380 without breaking any rules. I would not call this a “loophole”. Those who do so are just calling it sour grapes.
I agree with the writer..this is collusion by American and Southwest if you prefer a nicer term than “cartel”. To limit Love Field to 20 toal gates with 95% control by Southwest is a monopoly “plane and simple”, not “plane smart”. Build more gate and get rid of the cartel five party agreement..yep it’s a cartel.
Tony and Maxpower must not believe in free enterprise and competition at Love Field.