Dallas at Hub of Discontent Over Growing Airline Clout
On a breezy morning last month, American Airlines flight 468 emerged from a cloudbank over Dallas/Fort Worth Airport and burnt the first black rubber lines on a new runway.
To American Airlines' executives in attendance, it was a joyous moment. The new East Runway should reduce delays by 75 percent and make this airport the world's busiest by the year 2000: good news for a carrier that produces 60 percent of all traffic here.
But not everyone was smiling.
At a time when discount airlines are increasing their market shares, major carriers like American are consolidating their operations at fortress hubs like Dallas/Fort Worth (DFW). As federal airport funds level off and demand for air travel grows, hub airports and their host cities are becoming more dependent than ever on their principal airlines.
Although hubs have always been sought as engines for economic growth, the increasing power of companies like American in their home markets could have a dark side. For passengers, airports, and host cities, one airline's dominance could mean reduced competition, higher fares, and less control over airport expansion.
"In places like Dallas, big airlines already call the shots," says Louis Jurika of Avmark, a Miami-based aviation consulting firm. "They basically tell the airports what to do."
Ever since Congress deregulated the airline industry in 1979, major US carriers have focused operations around cities or "hubs." In addition to cutting maintenance costs and eliminating unprofitable routes, the strategy has often improved service and lowered fares nationwide.
But in the past decade, most major airlines overexpanded, and a coterie of smaller low-cost carriers like Southwest offered cheaper fares. In response, airlines like American, Northwest, and Continental pulled out of smaller hubs to focus on airports where they dominate the market.
For now, it seems to be paying off. Many carriers are posting the first solid profits in a decade.
But in recent years, Congress has frozen funding for airport improvements. In addition, forecasters expect demand for air travel to climb by about 4 percent annually. As airports search for new sources of private revenue to fund expansion, they'll depend more than ever on the clout and cooperation of their hub carriers.
The American edge
Nowhere is this phenomenon more evident than in North Texas. American, based in Fort Worth, has a reputation for being one of the industry's fiercest competitors. Through a combination of corporate brashness and political involvement, the airline has helped steer a large portion of federal airport money to its principal hub, and shape local, state, and federal legislation.
In this election cycle alone, American has given more than $258,000 to congressional candidates from both parties - nearly twice as much as its closest competitor, United Airlines. It has contributed to candidates in 25 of Texas's 26 congressional districts and has contributed $480,985 to state candidates.
It's a tradition of patronage that's paid off in myriad ways. First, American's clout has helped generate legislation advantageous to the airline. The best example is the Wright Amendment, which states that no airline operating out of Dallas's other airport, Love Field, can fly beyond the five contiguous states surrounding Texas. In effect, the amendment prevents Love Field's lone carrier, Southwest Airlines, from offering direct flights to major cities outside the Southwest.
When Kansas Sen. Nancy Kassebaum (R) offered a bill to repeal the amendment last year, members of the Texas delegation banded together to bury it.
American's power is also evident locally. When a coalition of nearby communities won a 1991 lawsuit awarding them some control over expansion decisions at DFW, American began a massive lobbying effort in the Texas legislature that yielded a change in state law that nullified the suit. In May, after American contributed heavily to city council elections in Irving, Texas the city's new council voted to drop a lawsuit against the airport over jet noise.
But the most visible sign of American's clout is its ability to steer federal funds to its primary airport. Seventy-five percent of the new DFW runway's cost was shouldered by the federal government, and the FAA also paid $166 million for the system of control towers and navigational systems supporting it. With the exception of Denver's new airport, DFW has received more federal funds since 1982 than any other facility.
Still, American spokesman Tim Smith says that business is very competitive, and the airline has done nothing wrong by trying to boost its profitability and lobby for airport improvements. He says construction at DFW will not only benefit American, but also will boost the nation's air capacity by 18 percent.
In addition, Mr. Smith notes, the same towns that complain about jet noise and falling property values from the new runway benefit from the estimated $8.5 billion the airport pumps into the economy. "I think it is safe and accurate to say that most communities like having air hubs," he says.
Yet Mr. Jurika and other analysts warn that as big airlines increase their clout at hubs, they'll have an easier time squeezing competitors. That may mean less incentive to hold down ticket prices and cooperate with local communities.
"Whatever American wants gets done," says Walt Leonard, a Fort Worth attorney who has represented local communities in suits against the airline.