Sheryl Jean updates us on the drama going on between Southwest and Delta along with United, the federal government, and the city of Dallas over gates at Dallas’ Love Field.
In Dallas Finds Itself Between Scylla and Charybdis: No Matter What Happens With Love Field Gates They’ll Be Sued I explain the story so far.
Dallas Love Field has 20 gates. They are legally forbidden to build more.
…Until recently Southwest controlled 16 of 20 gates. United controlled 2 and American 2. American leased its gates to Delta.
As part of the concessions for American’s merger with US Airways, the federal government required American to give up its Love Field gates. That would supposedly increase competition at Love Field, even though American didn’t fly from there. This set off a chain reaction that has left the airport in chaos and threatens to reduce competition there.
American’s gates were ordered to Virgin America. Delta, now in need of gates, leased United’s. But United offloaded their gates to Southwest, which wants to use the gates themselves. And that leaves Delta without a place to park planes…
The FAA has declared that all existing airlines have to be accommodated at the airport, even though additional gates are illegal.
So the city of Dallas is asking a federal court what to do.
Delta argued in court that it would be disastrous to Delta’s customers and its reputation if they were forced to give up operating at Dallas Love Field (where they do not have a lease for gates). They’d have to reaccommodate passengers with future bookings. Of course it’s Delta that has continued to sell tickets to those customers for flights without a lease for gates there.
And Southwest claims,
Delta previously has shifted passengers without any problems from flights at Love Field to flights at D/FW Airport.
Delta contends that if a court forced Southwest to alter its schedules, then Delta’s flights could be accommodated across gates at the airport.
Delta also did a “gate plot” analysis fitting its five flights plus its plan to offer eight more flights into Love Field gates based on Southwest’s published flight schedule, assuming at least 30 minutes of ground time between flights.
“We concluded there was plenty of space at Love Field,” Esposito said. “It all fit.”
However, he acknowledged that 10 slots did not provide enough ground time and where schedules would have to be tweaked.
Of course, testimony shows that United offered a deal for gates to Delta last September “and Delta didn’t want it.” They didn’t want to pay what United wanted, and now they want the court to give it to them on their own terms. Southwest paid $120 million plus monthly rent to United for those 2 gates.
Delta’s contention is that the gates are so valuable to Southwest precisely because if they hold 18 of 20 gates at the airport that reduces competition and Southwest is able to make more on its flights as a result.
Delta therefore claims the deal is illegal — anything that’s limited and really valuable to a company is thus anti-competitive. I wonder how that squares with all of those LaGuardia slots Delta holds. Just sayin’.
They make a nuanced legal argument that they served the airport already and thus should continue to be permitted to do so, but it’s not clear why that’s a greater benefit than having service at Love Field from – say – an ultra-low cost carrier. And at LaGuardia they paid quite a lot in cash and slots at Washington National airport to US Airways for limited slots, where competition is limited. Once again Delta looks to the government for their own advantage. Here they talk about wanting more competition and consumer choice — but at the same time they ask the government to limit consumer choices and raise prices in international markets.
I feel this will come down to whether DFW and DAL is considered to be the same or separate markets to the judge. If it is separate markets, then Southwest was permitted to operate 16 gates by the five party agreement, and any additional gates they use would be subject to scrutiny by federal agencies to ensure competition isn’t being harmed. At that point, it would be easy to say that competition is harmed by one carrier having 90% of the (capped) number of gates.
If DAL/DFW is deemed to be one market, it gets a lot murkier, and there is a good chance that Southwest would prevail in that instance.
I expect that no matter the ruling, the 20 gate cap will not be affected, as it was federal legislation put into place after other conflicting legislation, unless there is some Constitutional argument to be made for why it is illegal (which I can’t see).
@Ben oh, the 20 gate cap won’t be affected. which is itself the root of anything anti-competitive here.
@Gary – it was put into place with federal legislation, which should supersede most conflicting federal legislation before it, such as those relating to competition. But the legislation also only provides 16 gates to Southwest, not 18. At that point, other anti-competitive laws should step in and take precedence, which will not bode well for Southwest if the judge determines DAL to be at least a partially separate market from DFW.
Even if Southwest loses, the most likely outcome is that they are forced to go down to 16 gates.
@Ben capping the number of gates at Love is anti-competitive and that was THE REASON for the cap in the first place, it semi-bought off opposition from American to eliminating the Wright Amendment restrictions on flying only to a limited set of states while gaining the support of Southwest because it would limit their competition at Love.
Meanwhile this whole mess was put in play by the Justice Department’s taking gates away from Delta (the original American gates that were subleased) as part of the US Airways merger anti-trust settlement.
The government created this mess, created the cap on competition, in the first place.
@Gary, that’s not the only reason for the cap on gates. It also has to do with noise restrictions. DAL is surrounded by residential areas.
But DAL should have been closed to commercial traffic once DFW opened. Southwest continued to operate there due to a legal technicality. Now, if Southwest’s current argument is that DAL and DFW are the same, then let’s close DAL to reduce federal spending by consolidating commercial traffic at one major airport for Dallas Fort Worth (one of the goals of opening DFW).
Man, I know Delta runs a very good airline and does well financially but they just seems like the a$$holes of the group. United is that goofy friend who can’t seem to do anything right and tries to emulate the cool kid (Delta), American is just that likable guy that messes up sometimes but seems to generally be an OK, trust worth dude and Delta is the “friend” that no body actually likes. “Oh crap, here comes Delta, that guy is such a jerk. Now what is he going to try to weasel his way into.”
Maybe this is a terrible idea, but what’s stopping Delta from operating service without a gate (IE. busing passengers from the terminal to where a plane is parked away from the terminal?) I know this is old-school but I wonder if they would consider it given the constraints.
@Kevin that’s awesome.
@Andy DAL used to have 32 gates. Aircraft are quieter than they used to be. They could easily impose a curfew. This was pure protectionism.
Just to throw in something from 2000. Legend Airlines, a Dallas start up, operated out of the Executive Terminal on the east side of Love Field, with flights to LGA LAS & LAX, until AA decided to run them out of business. How did they get around the 20 gate rule? Maybe that’s an option for Delta.
Well, first of all the dispute at Love Field has nothing in common with the situation with the Middle East airlines. We’re not dealing with subsidized airlines collecting billions in annual subsidies from a gov’t. Here, all the players are for-profit airlines simply trying to play the regulations to their advantage. No saints or sinners, just normal commercial players. And all have some less-than-saintly deals in their past.
The absurd thing about this situation is that it was created by an idiotic federal ruling: which was requiring AA to divest gates they weren’t even using at Love in the name of creating more competition! The final outcome of this decision was to inadvertently eliminate a small player in that market, and giving more monopoly power to Southwest.
I’m not really sure how “the law” plays out here — and I’m not sure if there really is any law — but in a court of equity, Delta should win. It’s really not right for WN to be able to buy (at an absurd price) 2 more gates to give them control of 18 out of 20 available, and forcing out another competitor. The law should discourage such monopolies. We’ll see if the judge reaches the same pragmatic conclusion.
@iahphx Southwest paid a 20% premium over slots at DCA for ability to run equivalent flights at Love Field. What’s absurd?
@Gary — I don’t think anyone believes that 2 gates at DAL are worth $120 million — plus rent! Unless your goal is to be a monopolist and then raise fares. Indeed, WN tried to cover up the purchase price, until the court ordered the information produced.
Which is why my guess is that somebody — perhaps the DOJ which is apparently investigating that gate transaction — will stop this. It’s kind of wrong from a competitive standpoint, no?