Dallas Isn't So Sure It Wants to Let Virgin America Fly Out of Love Field

Categories: Transportation

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There was an odd little dance on Friday between the city of Dallas and Virgin America after the carrier announced that it had struck a deal with American Airlines and would begin flying out of Love Field on October 13. Company executives predicted city approval would come swiftly and was little more than a formality. The city responded by saying, hey, not so fast.

What's going on? Why wouldn't the city sign off on a deal that had already been approved by two established airlines and green lit by the Department of Justice, which is the one forcing American to give up its two Love Field gates over antitrust concerns?

See also: Virgin America Is Now Booking Flights Out of Love Field

The answer came Friday night in the form of a City Council briefing, set to be delivered this afternoon, concerning the two gates. Included in the briefing is a study the city commissioned from L.E.K. Consulting that identifies Southwest Airlines, and not Virgin, as the best option.

Southwest, the study concludes, would offer more nonstop destinations, a greater increase in passenger traffic (i.e. revenue), and exert stronger downward pressure on fares. Southwest would also be better for the region because flights originating from the two new gates wouldn't have been offered before, whereas Virgin would be taking them away from DFW.

The study doesn't mean Dallas will decide in favor of Southwest. That will be up to City Council members, at least some of whom are skeptical. Here's Philip Kingston's Facebook comment on The Dallas Morning News piece detailing city staff's seeming reluctance to endorse the Virgin deal:

This is bad. Bad, bad, bad. Keep in mind that council has no legal right to weigh in on who gets the gates. I know that from our own lawyer, and I know that all my colleagues got the same analysis from him. So what could possibly be the point of hiring a consultant to tell us to put our thumb on the scale for Southwest? (more on this tomorrow at the briefing, but this study is deeply flawed) Who in her right mind would want to be seen as picking the winner between Southwest and Virgin? Especially when we're precluded by our contract with AA from meddling in this decision at all? We're missing a fantastic opportunity to shut up and let the market work.

Kingston, alas, isn't on the committee that will be briefed this afternoon. But maybe someone who is -- Lee Kleinman? Sandy Greyson? -- will think to ask some of those questions.

Send your story tips to the author, Eric Nicholson.

Dallas City Council Love Field Gates

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63 comments
snotme
snotme

If anyone thinks giving SWA more gates will somehow lower prices, I've got a road inside a floor levee to sell them. Morons, I tells ya!

An added airline is the only thing that might push fares lower and offer competition to Southwest. 

The scary part is that the news radio this morning reported that the City Manager is the one who has final say in all this, not the Council.

don.abbott
don.abbott

I hope Dallas gets sued and a federal judge grants Virgin a TRO to start flying at Love at 12:01am on October 13th.  Southwest will play legal rope-a-dope for as long as possible to block the very principle that they fought Dallas and Braniff so hard for in that 70's cage match.  If Southwest gets the two gates, you'll need a platinum credit card to fly them long haul out of Love.

casiepierce
casiepierce

Salting the popcorn now, this is going to get really good.....

ScottsMerkin
ScottsMerkin topcommenter

Southwest has never wanted competition in Dallas, if it did, it would have flown out of DFW, and now that a legitimate competitor wants in at Love, the City is doing Southwests dirty work.  Whether you like Virgin or not, you cant tell me that $79 RT fares wont make Southwest lower their fares

RTGolden1
RTGolden1 topcommenter

"Who in her right mind....," Is Kingston giving away a little bit here?  EBJ?

Subnx
Subnx

The Virgin America proposal is much better. There is no comparison flying VA and SWA to New York or Washington. VA is much nicer.

raymbala
raymbala

We don't need more of the SWA - AA duopoly in Dallas.  We need less.  We have already provided our hometown air carriers with a controlling portion of the North Texas consumer air traffic market - thus rewarding them for being-hometown.  More carriers allowed to  compete will force even SWA to lower its fares to stay competitive, and give Dallas consumers what they deserve. . .a more competitive market.  Giving SWA all of the gates at Love and AA a continued (average) 80% of the gates at DFW, only gives each carrier incentive to raise/maintain rates to fly out of either airport they control.


Let Virgin have the gates. The North Texas area's flying public will be better off for it.  Let  this be about the flying public, and not about how to further reward our hometown carriers.

mavdog
mavdog topcommenter

Just the City standing by one of its own in supporting Southwest, who wants those gates and the arrival/departure slots they represent.

Not sure how giving the gates to Virgin makes any difference as they already have the ability to fly planes out of DFW to all of the cities they mention.

thechuckwilliams
thechuckwilliams

Virgin at Love Field is good for the consumer. Period. 

s.aten
s.aten

Vonciel Hill will adjourn the meeting for some obscure holiday to keep anyone from asking to many questions.

P1Gunter
P1Gunter

As crooked as this appears, and as much as I'd like to see Virgin flying out of Love, Dallas owes Southwest a lot for staying here during this 40 year old Wright amendment mess that is finally about to end.

bmarvel
bmarvel topcommenter

Hey. We all love Southwest. We kind of think of it as "our" airline, the way Denver eons ago thought of Continental as "its" airline. 

Sharing a bit of Love with Virgin -- a class operation -- isn't going to hurt Southwest and might keep that airline on its toes. What if Southwest decides to move its headquarters out of Dallas, something it threatened once upon a time? Are we still going to feel as warm and fuzzy about those big blue and orange jets?


One more thing: I wish those commenters here with professional or career ties to Southwest would self-identify. Just so we know who we're talking to.

yankee011
yankee011

Virgin America is the best domestic airline of course AA and Southwest don't want them to have anymore flights than they currently have because the Virgin product is SO much better.

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

I say do the simple thing.  AA relinquishes the gates back to the City and the City puts them up for bid.


Besides, what about the equity thang?

whocareswhatithink
whocareswhatithink

Perhaps Dallas City missed the second memo the DOJ sent along with the first. There is only one airline mentioned on here for a reason, do as we say, don't make a fuss and maybe we wont have the IRS up your a$$ for the next 5 years.....alternatively Richard Branson could get into some dog fighting and get the key to the city, that could be another way around it.

Tipster1908
Tipster1908

For once, I am actually on the City of Dallas's side in this one (much to my own surprise, I assure you). The city has the right to reject the assignment of the lease. Kingston has quoted the language in the contract as saying that city approval of the sublease agreement is "not to be unreasonably withheld" (I haven't checked that personally). But the standard for what is "reasonable" in contract law of this sort actually gives very wide latitude to the entity with the power to reject. I'm not saying the city is doing this for the right reasons. I am sure that the revenue maximization argument is a strong one, but the cozy relationship between Southwest and the city is sure to have played a part. But to say that the city has no legal ground to stand on is just incorrect.

therealarod1
therealarod1

Here is why it was naive and borderline idiotic for VX to hold that victory parade on Friday.

1. The City has already rejected attempt number 1 by VX/AA to assign the lease. What VX announced Friday was basically they have come to a verbal agreement with AA to Sub-lease the gates. Which obviously hasn't been approved by the City either. Maybe you want to have that all buttoned up first before you throw a parade?

2. The City wants to maximize their about to be finished multi-hundred-million dollar investment. They will go with who drives up the most flight and pax revenue, and that will almost certainly be Southwest. The consultant is spot on this regard. Southwest's proposal for the two gates drives a much bigger net in regards to destinations, flights and pax, than Virgin moving from DFW and adding 3 net destinations and 12 flights.

3. SWA and the City have a long standing relationship going back to 1974, and the first fight with the Feds and American over the future of Love Field. There would be no Love Field, no airlines, no passengers today if SWA hadn't fought tooth and nail along with the City for it. And there would be no shiny new airport with two gates to fight over if not for SWA and the City of Dallas.

4. Most certainly the City of Dallas wants to rid themselves of the AA influence at Love Field. Having VX sub-lease those gates from AA means that whenever it is time to try and expand Love Field, they will have to deal with AA having a direct involvement in their airport. And you will most certainly have to fight AA for any expansion, why would you choose to have them with an "ownership" presence and a negotiating chip, when you can rid yourself of their presense once and for all TODAY! If the COD rejected a lease assignment, why on earth would they be interested in American still owning the lease and only subleasing to VX?

Next time VX, maybe you wait to buy a bunch of booze, kazoos, and party hats, and hold off on the A320 flyby until you have actually been awarded the gates. Just a thought

raymondmcrawford
raymondmcrawford

This has everything to do with Vonciel Hill pulling on her kinky boots and holding the leash on AC's collar. As Kingston pointed out, this has nothing to do with the Council's input, but only AC just signing off on what the DOJ has already ordered them to do.

mrsouthpaw68
mrsouthpaw68

@ScottsMerkin There was something called the Wright Amendment. It ends October 2104. Then, any flight can come in or go out of Love Field. It was passed in 1979. As of the time passed, only flights within Texas could land and only flights going anywhere in Texas could take off.Missouri slipped in an amendment that got SW around for their state. It ran every other airline off.


When the Amendments ends, look out. SW has outstanding position for downtown Dallas for businesses coming in. Taxi fares are 1/3 the rate/distance. They control almost all of the gates there. They'll be able to travel all over the country now. 


Have a meeting in downtown Dallas? You'll want to fly to Love instead of DFW. Less time and money to get there. They control the fares at Love. No competition.

don.abbott
don.abbott

@ScottsMerkin The first commandment of Dallas-Fort Worth aviation:  DFW Airport and Love Field are very different.  Southwest fought the 1000 year war to stay at Love because of its convenience to the gold-plated demographics around it.  Never ever compare the two.   

Tipster1908
Tipster1908

@ScottsMerkin the fares are $79 one way, they're promotional only, and they are only for non-peak travel dates/times. other than the $79 promos, I haven't seen anything on their site that's a much better deal than southwest.

WylieH
WylieH

Vonciel Jones Hill, Rawlings' choice to head the Transportation Committee.

WylieH
WylieH

Why didn't the City stand by its own during the Wright Amendment debate? What's changed?

nakedlens
nakedlens

@P1Gunter  Yes, I'm sure it was horrible for them to have a total monopoly on the only major airport in the middle of Dallas.

Tipster1908
Tipster1908

@bmarvel that's right. because anyone who disagrees with you must have a financial tie to the other side. I've got absolutely no ties to anyone in the airline industry, or any derivative industry for that matter. Nor do I fly Southwest. I just hate when people make good points (that the city of Dallas should allow Virgin to take the gates) with dumb and incorrect arguments (that the city has no authority to involve itself in the matter).

therealarod1
therealarod1

@bmarvel I'm have no ties to SWA.  I am someone who has always been extremely interested in aviation, follow it almost obsessively, and who feels like you mentioned to start your post.  Think of SWA as "our" airline.  I worked at Love Field Airport for a sub contractor of the City of Dallas for nearly 3 years, had an office in the terminal when the LFMP started.   So while I am biased towards SWA, I have no vested interest in SWA.  Just a guy. 

therealarod1
therealarod1

@whocareswhatithink  Yes, the DOJ says they approved the sub-lease agreement.  But that is because it is the only "agreement" thus far that has been submitted to the DOJ.  They haven't explicitly ruled out Southwest, like they did Delta.  Meaning, that if the City went to the DOJ with an "agreement" with Delta, the DOJ has already said they would reject it.  However, if the City goes to the DOJ with an agreement with Southwest, tthe DOJ has made no such proclamation, they would likely approve it.

WylieH
WylieH

I hear what you're saying... Not sure a judge would agree with your interpretation.

Dub919
Dub919

See, I think this was their genius move. Parade around like you got them, drum up public support, and make SWA the villain if you don't get them. They trotted out there knowing they didn't have the gates but attempted (and possibly succeeded) in turning the public against a well-liked local institution.

MikeWestEast
MikeWestEast

@therealarod1 I think with the US Air people in charge, AA will not quite be so Dallas centric, revisiting and focusing on bad history.  I'm sure they will defend their rights, but would just as soon move on to new opportunities.  They won't jerking anyone's chain just for the pleasure of yanking it.  The legacy AA management would and did.

Montemalone
Montemalone topcommenter

@raymondmcrawford  

That is a mental image that will require multiple mind altering substances to erase. 

Thanks ever so.

mavdog
mavdog topcommenter

@WylieH

Why do you believe they didn't do similar during the Wright Amendment debate?

remember, the Wright Amendment issue is integrated with the City of Dallas agreements with the City of Fort Worth. Dallas needed to be careful not to violate their committments made to FW.

bmarvel
bmarvel topcommenter

@Tipster1908 @bmarvelTipster --I'm not accusing anybody here of having ties. I'm asking those who do have ties to reveal them.

WylieH
WylieH

Except, of course, it is American, not the City of Dallas, that has the right to assign its gates. And it has a signed, legal deal with Virgin.

Tipster1908
Tipster1908

@WylieH there's case law to back this up. I've literally seen cases where a 3rd party has the right to consent to a contract between two private parties and whose consent is "not to be unreasonably withheld". the party chose not to consent because they said that the CEO of the potential assignee had bad morals. it held up in court. the city would absolutely win a lawsuit if it said that it was doing this to maximize its revenue rather than create competition because it is reasonable that the owner of the airport would want to maximize its income from an asset like this. all the rest is just a PR nightmare for everyone.


the real risk to the city of Dallas is that their lawsuit with AA or Virgin ends up revealing all the real reasons the City of Dallas operates the way it does, including the fact that not only are they considering revenue maximization, but that they have long carried water for Southwest and their decision here is little more than continued back scratching. the discovery process is really what the city has to fear in this potential lawsuit

therealarod1
therealarod1

@Dub919  Maybe they turn SWA and The City into a Villian for a short while, but they also will be remembered for declaring themselves the winner and announcing $79 fares starting on 10/14/14, only they didn't win anything.  It will be like Muse Air when they declared they were flying DAL-LIT, only they hadn't leased the LIT gates yet, and SWA swooped in and leased them and started service.  SWA looked like the bad guy there too, but hey.....don't announce you've won anything until you've actually won.  Dallas City Council circa 2006 NBA Finals Game 2 is another perfect example.

therealarod1
therealarod1

@MikeWestEast   Maybe so.  You are actually quite right that the new AA will be much different.  However, my opinion here is that the City would rather not chance letting AA have a bargaining chip in 2 gates by allowing them to continue with their lease.  We are talking 10-20 years down the road before, and if, there is ever a fight to retire the Wright Compromise, but it could happen....

Anon.
Anon.

Bleach. Lots and lots of bleach.

Dub919
Dub919

Precisely. These are gates, not federally-controlled slots.

MikeWestEast
MikeWestEast

@Tipster1908 @raymondmcrawford It can order AA, SWA and Virgin Airlines to do what it wants.  It told AA to sell them and, if desired, will only allow Virgin to use them.  City of Dallas can either accept the deal or let the gates go unused.  I assume SWA could go to court, but would spend a lot of money over two gates at a small airport.  Court action would also build a lot of ill will at DOJ and payback will come.  You have to pick the hills you are willing to die on.  These gates are not such a hill.

RTGolden1
RTGolden1 topcommenter

@wcvemail @WylieHI kind of thought the 'right mind' comment could have applied to either EBJ or VJH.  I went with EBJ because of her concessions interest at Love, but VJH makes more sense.

therealarod1
therealarod1

@WylieH Then I wonder why Virgin Amercia is waiting on approval from the City of Dallas? 

MikeWestEast
MikeWestEast

@therealarod1 That does not seem to agree with DOJ review.  Subleasing, the only way per that reasoning that AA would have any say, would not seem to qualify as divesture.  If AA held anything resembling even nominal control, DOJ would have tossed it.  You cannot sign agreements and have them reviewed by DOJ if you have nothing to transfer.  If presented with such a situation, DOJ would have said don't waste our time.  We will only provide feedback once the real signer, not just an approver, the City, has a deal.  That is not what happened or appeared to happen, unless DOJ had some free time on its hands.

therealarod1
therealarod1

@MikeWestEast Not trying to be difficult but this is factually incorrrect.  AA has no say in the divestiture.  It can sublease, but the City has to approve it.  Otherwise, they are out of the picutre.  The DOJ has authority to reject or approve the City's agreements as the City is the owner of the airport.  The DOJ has stated it does not see Delta as appropriate to use these gates.  But it has not ruled out SWA. 

MikeWestEast
MikeWestEast

@therealarod1 @MikeWestEast I would think AA has more to say with DOJ than Dallas City Council.  Technically DOJ is not punishing AA and the gates are its to release.  If it strikes an approved deal, DOJ would likely see no reason to void it.  We need to stop thinking Dallas City Council really matters. 

therealarod1
therealarod1

@MikeWestEast   The DOJ has not explicitly stated it would rule against an SWA agreement, only Delta.  No agreement with SWA has been presented to DOJ yet, only an agreement between VX and AA, which it approved.  SWA would likely be approved as well if the City presents it.

Tipster1908
Tipster1908

@raymondmcrawford @Tipster1908Right, but the point is that the DOJ and the city have different interests in these gates and there is no reason that the city needs to approve a sub-lease just because the DOJ wants them to.

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