Why Dallas Love Field Is Becoming a Strategic Battleground

For four decades, Dallas-Fort Worth International Airport has dominated air travel to, from, and through the Dallas-Fort Worth metro area. Love Field, which was previously the region's major airport, has been left with limited flight options -- primarily on Southwest Airlines (NYSE: LUV  ) -- because of regulatory and legal hurdles that were set up to support DFW when it was a brand-new airport.

However, the Wright Amendment, which has prevented most long-haul service from Love Field for the past 35 years, will be repealed as of mid-October. This has suddenly turned Love Field into a strategic battleground. Because of its proximity to downtown Dallas (just 6 miles from the city center), several airlines want to expand there to more effectively compete with American Airlines' (NASDAQ: AAL  ) megahub at DFW.

Ending the Wright Amendment
When Dallas-Fort Worth International Airport was under construction, all of the major airlines agreed to move their Dallas-area operations there. Only one airline stayed at Love Field: a tiny upstart called Southwest Airlines. At that time, before deregulation, Southwest was limited to flights within Texas.

Southwest Airlines has been the main carrier at Love Field for four decades.

Soon after deregulation went into effect, the federal government passed legislation prohibiting interstate flights from Love Field, except to a few neighboring states or on jets with 56 or fewer seats. Southwest has done well in Dallas despite these restrictions, but other airlines have mostly avoided Love Field.

Southwest has long been interested in offering longer flights in Dallas, and it began aggressively lobbying to repeal the restrictions, known as the Wright Amendment, about 10 years ago. Under a compromise signed into law in 2006, restrictions on domestic flights from Love Field will end this October. However, the number of gates at the airport will be capped at 20, ensuring that most traffic will remain at DFW.

Luring business travelers
With the Wright Amendment gone, Love Field will become a strategically valuable airport. Being both smaller and much closer to downtown Dallas than DFW, it's a more convenient option for people traveling to or from Dallas. That is an important selling point with business travelers, who tend to pay higher fares.

American Airlines dominates Dallas-Fort Worth International Airport. (Photo: American Airlines.)

This is particularly important, because American Airlines absolutely dominates DFW today, with more than 750 peak-day departures. The huge selection of flights American offers at DFW is a big attraction for business travelers. Any airline trying to compete for business traffic needs to differentiate itself in some way -- and operating at a smaller, more convenient airport is one way to do that.

As a result, while Southwest Airlines has already announced plans to expand at Love Field, Delta Air Lines (NYSE: DAL  ) and Virgin America have also started jockeying for the right to join Southwest. With American Airlines being forced to give up its two gates at Love Field, whichever airline wins the gates will have the ability to add about 20 flights.

Delta had hoped to fly from Love Field to its hubs and international gateways in Atlanta, Detroit, Minneapolis/St. Paul, New York, and Los Angeles. However, it looks like the Department of Justice will block Delta's bid for gates at Love Field.

Delta Air Lines' campaign to expand at Love Field may have reached an untimely end.

Meanwhile, Virgin America has proposed to move its flights to San Francisco and Los Angeles from DFW to Love Field if it gets gate space there. It would also add flights from Dallas to New York's LaGuardia Airport, Washington's Reagan National Airport, and Chicago's O'Hare International Airport.

Delta and Virgin America both recognized that they could compete much more effectively at Love Field than at DFW. While American will always offer the most schedule options in the Dallas-Fort Worth area, the convenience of Love Field is an equalizing factor that would attract customers: including some high-value business travelers.

What it means for American
No matter what happens at Love Field, American Airlines will still be the "top dog" in the Dallas-Fort Worth region. That said, it will have to work a little harder to keep customers from defecting to new competition at Love Field.

For example, today American is the only airline flying from the Dallas-Fort Worth area to Reagan Airport -- the preferred airport for business travelers going to Washington, D.C. However, Southwest already plans to start flying from Love Field to Reagan Airport this fall.

Virgin America could attract business travelers who wouldn't fly Southwest. (Photo: Virgin America.)

If Virgin America wins gates at Love Field, that critical route will get a third competitor. Furthermore, Virgin America offers more premium amenities than Southwest, such as a first class section, assigned seats, and in-flight meals for purchase. Thus, even business travelers who wouldn't consider flying on Southwest might opt for a Virgin America flight from Love Field over an American flight at DFW.

Foolish wrap
Once an airline builds up a dominant position at a hub airport, it can be very hard for competitors to break into the market. They need some way to attract passengers without going toe-to-toe with the dominant airline on every route.

In Dallas, operating from the smaller, more-convenient Love Field may be the solution for airlines wanting to compete with American Airlines. As a result, with precious gate space becoming available and flight restrictions lifting this fall, Love Field has become a strategic battleground for Southwest, Delta, and Virgin America.

Check out our top stock pick of the year!
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 16, 2014, at 11:43 AM, Tyeward wrote:

    I have been to Dallas quite a few times. I really like Love field being open to greater options. The only problem I see that will really be an issue is traffic getting into and out of Love Field. That´s more of an industrial road than a highway that leads into Love Field, and it will be a major pain, plus not to mention a residential area has developed in the area since then. Love Field also has a limited amount of gate space, and I am certain that it will be left with no choice but to have a rolling operation to maximize efficiency. Rolling hub or major Rolling operations can be quite annoying, and I sort of see that being an issue with the residents who live in the area.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2877200, ~/Articles/ArticleHandler.aspx, 11/28/2014 8:50:24 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 17,827.75 12.81 0.00%
S&P 500 2,072.83 5.80 0.00%
NASD 4,787.32 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/26/2014 3:59 PM
AAL $44.97 Up +0.82 +0.00%
AMERICAN AIRLINES… CAPS Rating: **
DAL $44.24 Up +0.16 +0.00%
Delta Air Lines, I… CAPS Rating: **
LUV $39.28 Up +0.77 +0.00%
Southwest Airlines CAPS Rating: ****

Advertisement