Clipped wings
MORE THAN A QUARTER-CENTURY after the deregulation of the airline industry, the nation’s most successful airline is inexcusably barred by the government from flying to Southern California from its home base. An obscure 1979 amendment sponsored by then-House Majority Leader Jim Wright prohibits Southwest Airlines from flying anywhere beyond an adjacent state from its home base of Love Field in Dallas. This was actually a compromise. Wright, who was seeking to protect Dallas-Fort Worth International Airport, initially sought to ban all interstate traffic out of Love Field -- a year after airlines ostensibly had been freed to fly wherever and whenever they wanted, charging whatever fares they wanted.
The Wright Amendment costs California hundreds of millions of dollars in lost economic activity, according to the Los Angeles County Economic Development Corp., which is lobbying for its repeal. It also illustrates a larger problem: government intervention that is hobbling the nation’s airline industry, which is projected to lose $5 billion this year.
Although the industry would be far healthier if some money-losing carriers simply folded, the federal government is overly protective of failing airlines. The abuse of bankruptcy laws, for example, is becoming routine in the industry -- United now has been flying under Chapter 11 protection for nearly three years -- but the government allows failing airlines to continue in operation without needing to pay all their bills. (At least the government denied United the federal loan guarantees made available to US Airways, which is also in bankruptcy.)
Yet even as the government tries to keep troubled airlines from going out of business, it often stands in the way of allowing sickly airlines to consolidate or take other steps to avoid being perennially referred to as “perennially troubled.” Taxes on airline ticket prices can be as high as 26%, in part because the government wrongly treats the cost of aviation security as a user fee, not a matter of national security. Washington disastrously opposed a US Airways-United merger in 2001, and more recently resisted a code-share agreement among Continental, Delta and Northwest. Such moves make no sense given the surplus of large network carriers facing growing competition from a new generation of low-cost airlines.
Outdated restrictions on foreign ownership of U.S. airlines are another impediment to needed consolidation, investment and innovation. Northwest is showing welcome signs of surviving a strike by its mechanics union, but there still is a need for Congress to consider changes to the Railway Labor Act that would make airlines less hostage to big labor.
There are plenty of other factors preventing market forces from prevailing, such as aircraft leasing companies that do not want to see their customers liquidate. And in the case of the Wright Amendment, American Airlines has consistently opposed its repeal, fearing reduced fares at its Dallas-Forth Worth hub because of competition from Southwest.
But it is the federal government that is in the best position to fulfill the promise of airline deregulation. Allowing Southwest the freedom to fly anywhere it wants from its home base would be a good start.
