American Airlines Chairman Tells U.S. Senate Panel That Repeal of the Wright Amendment Would Be Unfair and Unwise

WASHINGTON, Nov. 10 /PRNewswire-FirstCall/ -- American Airlines Chairman and CEO Gerard Arpey today urged a congressional panel to look beyond the slogans and sound bites concerning the Wright Amendment, a law that has allowed Love Field in Dallas, Texas, to remain open to limited commercial air service despite the express wish of the communities to close it over 30 years ago.

Looking at the unique history of the law and how it has made possible the development of one of the nation's premier transportation hubs, it is clear that the adverse impact of changing the rules would be significant and felt far beyond the Dallas/Fort Worth area. In testimony given to the U.S. Senate Committee on Commerce, Science and Transportation's Subcommittee on Aviation, Arpey said that the risks are too great to change long-standing public policy that has been relied on by virtually everyone involved over the years just to benefit a single company, Southwest Airlines.

Arpey pointed out that consumers in the Dallas/Fort Worth area don't need a change in the law to get the benefits of Southwest Airlines service. "Southwest can launch service to anywhere it would like and can charge whatever it would like from Dallas/Fort Worth Airport. And at this moment, there are plenty of gates at DFW ready for their use," said Arpey.

Arpey pointed out for the Senators that for more than three decades, Southwest alone has refused to join the nearly two dozen airlines competing head-to-head at DFW, and chooses instead to concentrate its activities at Love Field.

"Southwest wants to have its cake and eat it, too," said Arpey. "It champions the free market, but will not compete at DFW. It wants to lift restrictions on what it can do at Love Field, but opposes changes to the Love Field Master Plan that would let airlines, like American, challenge its dominance there.

"The question you might ask is why Southwest -- after all these years and after Southwest's Chairman Herb Kelleher has been quoted publicly as saying -- I pledged we wouldn't seek to overturn it -- now wants the law changed? Southwest is after one thing, a unique competitive advantage -- a monopoly that would mean a windfall for them," said Arpey.

If the Wright Amendment were repealed, Arpey said, American and other airlines will be forced to divert a significant number of flights from DFW to Love Field. The shift will mean fewer flights and connecting opportunities at DFW and would threaten the viability of international air service there.

Arpey also said that it is a smokescreen to suggest that the Wright Amendment debate has something to do with ticket prices. It is not about fares he added, because at DFW, any carrier -- Southwest included -- that is willing to compete can charge any price that it wants.

"Southwest's campaign to repeal the Wright Amendment imperils the economic health of the entire region," Arpey said. "Repeal would be unfair to the Greater North Texas community, to DFW Airport, other airlines and to investors who spent billions of dollars assuming that the rules of the game Southwest helped create -- and has benefited from for many years -- would remain in place.

"And, it would be unfair to those concerned about noise, traffic and other environmental impacts that would accompany a major expansion of Love Field," said Arpey. "The bottom line is that the repeal of the Wright Amendment would be unwise and efforts to change a 26-year-old law should be rejected."

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The address is: http://www.aa.com/ ORAL STATEMENT GERARD ARPEY CHAIRMAN AND CEO AMERICAN AIRLINES SENATE COMMERCE COMMITTEE NOVEMBER 10TH, 2005

THANK YOU, CHAIRMAN BURNS. I WANT TO THANK THE ENTIRE COMMITTEE FOR THE OPPORTUNITY TO BE HERE TODAY.

IT IS NO SECRET THAT THE AIRLINE INDUSTRY -- ONE OF OUR NATION'S FOREMOST ECONOMIC CATALYSTS -- IS IN A STATE OF FINANCIAL TURMOIL. AND CERTAINLY, PUBLIC POLICY INFLUENCES OUR BUSINESS IN MORE WAYS THAN WE HAVE TIME TO DISCUSS TODAY -- FROM AVIATION SECURITY TO INFRASTRUCTURE TO TAXATION TO PENSION REGULATIONS AND MUCH MORE.

SO IT IS WITH SOME REGRET, BUT WITH GREAT CONVICTION, THAT I APPEAR BEFORE YOU TO SPEAK -- NOT ABOUT ANY OF THOSE TOPICS -- BUT ABOUT THE MANUFACTURED CONTROVERSY SWIRLING AROUND LOVE FIELD AND THE WRIGHT AMENDMENT. I DON'T MEAN TO SUGGEST THAT THE ISSUE IS NOT IMPORTANT -- IT IS CRITICALLY IMPORTANT. BUT AT AMERICAN AIRLINES, WE WOULD GREATLY PREFER TO LIMIT OUR COMPETITION WITH SOUTHWEST AIRLINES TO THE MARKETPLACE, RATHER THAN BILLBOARDS, THE SIDES OF BUSSES OR THE HALLS OF CONGRESS.

SOUTHWEST COULD MAKE THAT HAPPEN BY SIMPLY FOLLOWING THE PUBLIC POLICY SET FORTH BY THE FEDERAL GOVERNMENT AND LOCAL COMMUNITIES THAT EVERY OTHER AIRLINE FOLLOWS WITHOUT ACRIMONY. SOUTHWEST CAN LAUNCH SERVICE TO ANYWHERE IT WOULD LIKE AND CHARGE WHATEVER IT WOULD LIKE FROM DALLAS / FORT WORTH INTERNATIONAL AIRPORT -- ONE OF THE WORLD'S LEADING AIRPORTS, JUST 12 MILES FROM ITS HEADQUARTERS. THAT OPPORTUNITY HAS ALWAYS BEEN AVAILABLE TO THEM.

AND AT THIS MOMENT, THERE ARE PLENTY OF GATES AT DFW READY FOR THEIR USE. BUT SOUTHWEST REFUSES -- AS IT HAS REFUSED FOR 30 YEARS -- TO CONSIDER DFW'S LEVEL PLAYING FIELD. AND THAT REFUSAL IS WHAT HAS BROUGHT US HERE TODAY.

ON ONE HAND, THIS DEBATE IS A COSTLY DISTRACTION AT THE WORST POSSIBLE TIME. IT IS EATING UP TIME, MONEY, AND ENERGY WE WOULD MUCH RATHER DEVOTE TO RUNNING OUR BUSINESS. ON THE OTHER HAND, THERE IS A LOT AT STAKE, NOT JUST FOR AMERICAN AIRLINES, BUT A NUMBER OF OTHER CONSTITUENCIES WHO YOU WILL BE HEARING FROM TODAY.

SO I AM HOPEFUL THAT TODAY'S PROCEEDINGS WILL SHED LIGHT ON AN ISSUE THAT, QUITE FRANKLY, HAS BEEN MIS-CHARACTERIZED BY SOUTHWEST. NOW, I WANT TO MAKE CLEAR THAT HERB KELLEHER IS A MAN I RESPECT AND ADMIRE A GREAT DEAL. HE IS A CHARISMATIC LEADER, AN INNOVATOR, A FIERCE COMPETITOR, AND AN EXCEPTIONAL LAWYER.

HERB HAS SET THE STANDARD BY WHICH A GENERATION OF AIRLINE CEOs, INCLUDING MYSELF, WILL BE MEASURED. AND THAT IS AN EXTRAORDINARILY HIGH STANDARD INDEED. BUT NONE OF THAT NEGATES THE FACT THAT, IN MY OPINION, HE AND HIS TEAM ARE SIMPLY WRONG ON THIS SUBJECT.

TO EXPLAIN, I HAVE TO STEP BACK AND REVIEW HOW WE GOT HERE IN THE FIRST PLACE. THE ISSUE WE'RE DEBATING TODAY GOES BACK TO THE 1960S, WHEN THE FEDERAL GOVERNMENT ORDERED THE CITIES OF DALLAS AND FORT WORTH TO COMBINE RESOURCES AROUND A SINGLE AIRPORT, IF THEY WANTED TO CONTINUE TO RECEIVE FEDERAL FUNDING. THE LEADERS OF DALLAS AND FORT WORTH CONCLUDED, VERY WISELY, THAT IT WAS IN THE INTERESTS OF BOTH CITIES TO COOPERATE WITH THE FEDERAL GOVERNMENT AND COMBINE RESOURCES IN SUPPORT OF A SINGLE REGIONAL AIRPORT.

THE RESULTS SPEAK FOR THEMSELVES. TODAY DFW AIRPORT IS ONE OF THE WORLD'S PREMIER AVIATION GATEWAYS. IT IS THE UNDISPUTED DRIVER OF THE NORTH TEXAS ECONOMY -- AND WITH THE RECENT COMPLETION OF A $2.6 BILLION CAPITAL PROJECT, PREMISED ON THE BASIS THAT THE WRIGHT AMENDMENT WOULD REMAIN IN PLACE, IT IS POISED TO MAKE AN EVEN GREATER CONTRIBUTION IN THE YEARS TO COME.

WHEN DFW WAS BUILT, BOTH DALLAS AND FORT WORTH INTENDED TO CLOSE ALL OTHER LOCAL AIRPORTS, INCLUDING LOVE FIELD, TO COMMERCIAL AIRLINE SERVICE. EVERY AIRLINE SERVING THOSE CITIES WAS TOLD THEY WOULD HAVE TO MOVE THEIR OPERATIONS TO THE NEW AIRPORT, AND IN 1970, EVERY AIRLINE SIGNED AN AGREEMENT COMMITTING TO DO SO. SOUTHWEST HAD NOT YET BEGUN SERVICE WHEN THAT AGREEMENT WAS SIGNED.

ITS SERVICE STARTED SHORTLY THEREAFTER AT LOVE FIELD, AND WHEN DFW OPENED IN 1974, SOUTHWEST EXPLOITED THE FACT THAT THEY HAD NOT SIGNED THE 1970 AGREEMENT, AND REFUSED TO LEAVE.

THEIR REFUSAL LED TO LITIGATION THAT ENABLED THEM TO STAY AT LOVE FIELD -- PROVIDING INTRA-TEXAS SERVICE ONLY -- WHILE EVERY OTHER AIRLINE WAS FORCED OUT. WHEN SOUTHWEST LATER SOUGHT TO FLY OUTSIDE OF TEXAS FROM LOVE FIELD, MORE LEGAL WRANGLING ENSUED, AND FINALLY, IN 1979, A COMPROMISE WAS REACHED.

SOUTHWEST AND OTHERS SUPPORTED FEDERAL LEGISLATION -- NOW FAMOUSLY KNOWN AS THE WRIGHT AMENDMENT -- THAT ALLOWED LOVE FIELD TO REMAIN OPEN, BUT LIMITED SERVICE TO MARKETS WITHIN TEXAS AND THE FOUR CONTIGUOUS STATES.

AT THIS POINT, I WOULD LIKE TO EMPHASIZE TWO THINGS IN PARTICULAR. FIRST, THE WRIGHT AMENDMENT'S RESTRICTIONS DO NOT APPLY UNIQUELY TO SOUTHWEST AND THEY NEVER HAVE. THEY APPLY TO EVERY AIRLINE.

SECOND, UNLIKE SOUTHWEST, AMERICAN AIRLINES PLAYED NO PART IN CREATING THE WRIGHT AMENDMENT. AT THE TIME THE LAW WAS ENACTED, AMERICAN WAS A MUCH SMALLER PLAYER AT DFW, AND WE HAD JUST MOVED OUR HEADQUARTERS TO FORT WORTH FROM NEW YORK CITY. TO MY KNOWLEDGE, WE PLAYED NO ROLE IN THE LAW'S CREATION, BUT IN THE YEARS SINCE IT TOOK EFFECT WE HAVE BASED BILLIONS OF DOLLARS OF INVESTMENT DECISIONS ON THE PRESUMPTION THAT A DEAL IS A DEAL -- AND THAT THE COMPROMISE REACHED IN 1979 WOULD BE HONORED BY EVERYONE.

SOUTHWEST TENDS TO DEPICT THE WRIGHT AMENDMENT AS AN ALBATROSS AROUND ITS NECK WHEN IN REALITY IT WAS A VICTORY FOR THEM, AND A DEFEAT FOR THE AIRLINES WHO HAD BEEN FORCED OUT OF LOVE FIELD -- AND FOR THE CITIES THAT WANTED IT CLOSED FOREVER. IN THE QUARTER CENTURY SINCE THE LAW WAS PASSED, WHILE DOZENS OF CARRIERS HAVE FOUGHT IT OUT AT DFW, SOUTHWEST HAS CHOSEN TO RESTRICT ITS DALLAS FLYING TO LOVE FIELD.

THE QUESTION YOU MIGHT ASK IS WHY SOUTHWEST -- AFTER ALL THESE YEARS AND AFTER HERB KELLEHER HAS BEEN QUOTED PUBLICLY AS SAYING "I PLEDGED WE WOULDN'T SEEK TO OVERTURN IT" -- NOW WANTS THE LAW CHANGED. THERE ARE TWO STRAIGHTFORWARD ANSWERS. FIRST, SOUTHWEST KNOWS THAT 60% OF AMERICAN'S DFW PASSENGERS LIVE CLOSER TO LOVE FIELD THAN TO DFW, AND SECOND, IT HAS A VIRTUAL LOCK ON THE LION'S SHARE OF LOVE FIELD'S ACTIVE GATES.

IN OUR OPINION, SOUTHWEST IS AFTER ONE THING: UNIQUE COMPETITIVE ADVANTAGE. THEY SEEK A DOWNTOWN MONOPOLY THAT WOULD MEAN A WINDFALL FOR THEM, AND CERTAIN DAMAGE TO AMERICAN AIRLINES, NORTH TEXAS AND MANY SMALLER COMMUNITIES AROUND THE COUNTRY.

IT IS IRONIC THAT SOUTHWEST'S PR CAMPAIGN SEEKS TO POSITION IT AS A CHAMPION OF FREE AND OPEN COMPETITION. THE BEST FREE MARKET LABORATORY I KNOW IS DFW, WHERE WE SLUG IT OUT WITH A LONG LIST OF CARRIERS, IN DOZENS OF MARKETS, EVERY DAY. IN CONTRAST, SOUTHWEST WANTS TO HAVE ITS CAKE AND EAT IT TOO. IT CHAMPIONS THE FREE MARKET, BUT WILL NOT COMPETE AT DFW. IT WANTS TO LIFT RESTRICTIONS ON WHAT IT CAN DO AT LOVE FIELD, BUT OPPOSES CHANGES TO THE LOCAL LOVE FIELD MASTER PLAN THAT WOULD LET AIRLINES LIKE AMERICAN CHALLENGE ITS DOMINANCE THERE.

ONE OF THE GREAT SMOKE SCREENS OF THIS DEBATE IS THAT IT HAS SOMETHING TO DO WITH TICKET PRICES. THE MEMBERS OF THIS COMMITTEE KNOW THAT AIR FARES HAVE DROPPED DRAMATICALLY IN RECENT YEARS -- AND VIGOROUS AND FAIR COMPETITION IS WHAT KEEPS FARES LOW.

BUT MOST IMPORTANTLY, IT IS NOT ABOUT FARES BECAUSE AT DFW, ANY CARRIER -- SOUTHWEST INCLUDED -- THAT IS WILLING TO COMPETE CAN OFFER ANY SERVICE, AND CHARGE ANY PRICE IT WANTS TO.

WHAT THIS DEBATE IS REALLY ABOUT IS WHETHER IT IS IN ANYBODY'S INTEREST -- BESIDES SOUTHWEST'S -- TO REVERSE PUBLIC POLICY, ON WHICH BILLIONS OF DOLLARS HAVE BEEN INVESTED AND SHRINK DFW TO GROW LOVE FIELD. I STRONGLY BELIEVE THE ANSWER IS NO.

NO REASONABLE PERSON CAN DISPUTE THE FACT THAT IF LOVE FIELD IS ALLOWED TO EXPAND, THAT EXPANSION WILL COME AT DFW'S EXPENSE. GIVEN LOVE'S CLOSER PROXIMITY TO LOTS OF PEOPLE IN DALLAS AND LOVE'S LOWER FACILITY COSTS, AMERICAN AND OTHER AIRLINES WILL DIVERT A SIGNIFICANT NUMBER OF FLIGHTS FROM DFW AND OTHER CITIES TO LOVE -- AND THAT WILL HAVE PROFOUND REPERCUSSIONS.

AS DFW FLIGHTS START TO THIN OUT, SO WILL THE CONNECTING OPPORTUNITIES THEY CREATE. AS THE MEMBERS OF THIS COMMITTEE KNOW, WHEN A COMMUNITY HOSTS A LARGE AIRLINE HUB, IT INEVITABLY ENJOYS MORE NON-STOP SERVICE, TO MORE PLACES -- AND MORE INTERNATIONAL DESTINATIONS IN PARTICULAR -- THAN IT WOULD OTHERWISE ATTRACT. THAT IS BECAUSE OF THE CRITICAL MASS OF CONNECTING TRAFFIC THE HUB CREATES.

THE DESIRABILITY OF HOSTING A LARGE HUB -- AND THE OBVIOUS EFFICIENCY OF CONSOLIDATING ACTIVITY AROUND ONE AIRPORT -- EXPLAINS WHY CITIES ALL OVER THE COUNTRY HAVE GONE TO GREAT LENGTHS TO ENSURE THAT THE NEW AIRPORTS THEY BUILD ARE NOT UNDERMINED BY THE AIRPORTS THEY REPLACE. IN DENVER, THE RUNWAYS AT THE OLD STAPLETON AIRPORT WERE IMMEDIATELY DESTROYED UPON THE OPENING OF THE CITY'S NEW AIRPORT.

AND IT SEEMS RELEVANT TO POINT OUT THAT JUST LAST MONTH, KING COUNTY, WHERE SEATTLE IS LOCATED, TOLD SOUTHWEST UNEQUIVOCALLY THAT IT WOULD NOT BE ALLOWED TO PROVIDE SERVICE AT THE CLOSE-IN BOEING FIELD, AS IT HAD BEEN LOBBYING TO DO.

PEOPLE ARE SOMETIMES SURPRISED TO LEARN THAT ON A PER CAPITA BASIS, CITIES WITH ONE LARGE AIRPORT -- FOR EXAMPLE DENVER, ATLANTA, AND MINNEAPOLIS -- ATTRACT MORE FLIGHTS PER DAY THAN CITIES LIKE CHICAGO, WASHINGTON, D.C., OR HOUSTON WITH MULTIPLE AIRPORTS. THE KEY POINT IS THAT COMMUNITIES BENEFIT FROM COMPETITION BETWEEN AIRLINES, NOT AIRPORTS.

THE LEADERS OF DALLAS AND FORT WORTH RECOGNIZED THIS AND MADE THE LOGICAL DECISION TO CONSOLIDATE THE REGION'S AVIATION ACTIVITIES AROUND ONE WORLD- CLASS AIRPORT -- INSTEAD OF MULTIPLE, LESSER FACILITIES. AND WERE IT NOT FOR TIMING, AND SOME STUBBORN LAWYERING BY SOUTHWEST, THEIR COMMON SENSE VISION WOULD HAVE BEEN REALIZED.

SOUTHWEST'S CAMPAIGN TO REPEAL THE WRIGHT AMENDMENT AT THE EXPENSE OF DFW IMPERILS THE ECONOMIC HEALTH OF THE ENTIRE REGION. DFW IS THE ENGINE THAT DRIVES OUR LOCAL ECONOMY, ATTRACTING BILLIONS OF DOLLARS IN ECONOMIC ACTIVITY THAT MIGHT OTHERWISE FLOW ELSEWHERE. DFW'S ANNUAL ECONOMIC IMPACT ON THE NORTH TEXAS ECONOMY IS ESTIMATED AT $14 BILLION - AND NEARLY 300,000 JOBS ARE SUPPORTED EITHER DIRECTLY OR INDIRECTLY BY THE AIRPORT.

BUT NORTH TEXAS IS NOT THE ONLY COMMUNITY IN JEOPARDY. THE VIGOR OF OUR DFW HUB -- THE FACT THAT WE ARE ABLE TO AGGREGATE AND DISTRIBUTE A HIGH VOLUME OF AIR TRAVELERS FROM A CENTRAL POINT -- MAKES IT ECONOMICALLY FEASIBLE FOR US TO PROVIDE SERVICE TO MANY COMMUNITIES THAT WOULD OTHERWISE BE CONSIDERED TOO SMALL.

WITH THAT IN MIND, WITH US TODAY ARE A NUMBER OF LOCAL OFFICIALS WHO ARE EAGER TO SPEAK OUT ON THIS ISSUE.

I HAVE ALSO SUBMITTED FOR THE RECORD A RECENT STUDY, CONDUCTED AT OUR REQUEST BY THE HIGHLY RESPECTED ECLAT CONSULTING GROUP THAT ILLUSTRATES HOW SERVICE TO DOZENS OF CITIES WOULD BE JEOPARDIZED BY THE REPEAL OF THE WRIGHT AMENDMENT.

THE BOTTOM LINE, FROM AMERICAN'S PERSPECTIVE, IS THAT REPEALING THE WRIGHT AMENDMENT WOULD BE BOTH UNFAIR AND UNWISE.

IT WOULD BE UNFAIR TO THE GREATER NORTH TEXAS COMMUNITY, TO DFW AIRPORT, AND TO ALL THE AIRLINES WHO HAVE INVESTED BILLIONS OF DOLLARS ASSUMING THAT THE RULES OF THE GAME SOUTHWEST HELPED CREATE -- AND HAS BENEFITED FROM FOR MANY YEARS -- WOULD REMAIN IN PLACE.

IT WOULD ALSO BE UNFAIR TO MANY BUSINESSES AND HOMEOWNERS WHO HAVE INVESTED IN THE NEIGHBORHOODS SURROUNDING LOVE FIELD AND ARE OBVIOUSLY CONCERNED ABOUT THE NOISE, TRAFFIC AND OTHER ENVIRONMENTAL IMPACTS THAT WOULD ACCOMPANY A MAJOR EXPANSION OF THAT AIRPORT.

REPEALING THE WRIGHT AMENDMENT WOULD ALSO BE UNWISE BECAUSE IT WOULD DO REAL DAMAGE TO DFW AIRPORT -- THE HEART OF OUR REGIONAL ECONOMY -- AS WELL AS AMERICAN AIRLINES AND THE TENS OF THOUSANDS OF ACTIVE AND RETIRED EMPLOYEES WHO DEPEND ON US. IT WOULD JEOPARDIZE BOTH DALLAS AND FORT WORTH'S HARD- EARNED STATUS AS CENTERS OF INTERNATIONAL COMMERCE AND CULTURE.

AND IN AN ERA WHEN GLOBAL CONNECTIVITY IS THE KEY TO PROSPERITY, IT WOULD BADLY DEGRADE THE MOST IMPORTANT LINK BETWEEN MANY SMALLER COMMUNITIES AND THE WORLD AT LARGE.

I WOULD URGE THE COMMITTEE TO TELL SOUTHWEST AIRLINES THAT THE SOUND PUBLIC POLICY THAT LED TO THE CREATION AND SUCCESS OF DFW AIRPORT, AND ON WHICH BILLIONS OF DOLLARS OF INVESTMENT HAS BEEN BASED, WILL NOT BE UNDERMINED FOR THEIR BENEFIT. THEY ARE FREE TO FLY ABOUT THE COUNTRY FROM DFW ANYTIME THEY WOULD LIKE.

I THANK THE COMMITTEE ONCE AGAIN FOR INVITING ME TO BE HERE -- AND FOR THE CHANCE TO REPRESENT AMERICAN AIRLINES AND ITS MANY CONSTITUENCIES.