Anti-trust Issues Different From Real Estate When It Comes To Airlines

Written by Posted On Sunday, 13 November 2005 16:00

The Department of Justice is right on top of any real estate association that is even thinking of making changes to strengthen broker service requirements. After receiving a nastygram from the DOJ, the New Mexico Real Estate Commission just recently delayed consideration of changes to its real estate regulations that would require all real estate brokers in the state to provide a minimum level of service to consumers.

Why is the DOJ so focused on real estate when another giant industry is fighting over competition issues -- the airline industry? Why is it OK for the federal government to restrict trade without a peep from the DOJ, but not OK for the states to do so?

What's happening in Texas is that one airport's carrier doesn't want another airport's carrier to get any bigger by competing for the same long-haul routes.

Southwest Airlines is the nation's most profitable carrier. American Airlines is the world's largest. Southwest flies out of Love Field and American out of Dallas Fort Worth International. Both airlines are based in Texas and they are ready for a showdown. The two airlines, along with other interested parties, are testifying in front of a Senate Congressional committee about the repeal of the Wright Amendment, an amendment put in place over 26 years ago to mollify cities, airlines and upstart airlines, but which some feel is outdated due to current competitive and economic issues.

Here's the story. Over 30 years ago, there were two international airports within 30 miles of each other -- one in Fort Worth and one in the middle of Dallas. The FAA didn't want to serve both airports and got the federal government to hound the contentious, competitive leadership of both cities to get together and build one mega airfield. They did, but the catch was getting all the carriers to use it.

Fort Worth closed its airport, but Dallas kept Love Field open. At the time, Southwest was an upstart with stewardesses sporting loud orange and tan hot-pants uniforms pop historians love to recall. Their slogan was, "We really move our tail for you!"

Dallas Fort Worth International Airport was built, but Southwest didn't want to move there. It wanted to capitalize on the burgeoning commuter and fun fare market. If tickets were cheap, more people would fly, which is exactly what happened. Lawsuits ensued, and the Wright Amendment was the result. In exchange for following a few rules that wouldn't interfere with the big dogs at D/FW, Southwest could operate out of Love Field.

The Wright Amendment says Southwest can't fly to more than four states directly out of Love Field without a stopover, which means it is at a distinct disadvantage on long-haul flights out of Dallas. That suits American just fine. Southwest wants the Wright Amendment repealed so it can fly anywhere it wants. American would rather see Southwest move to DFW than get more routes to fly out of Dallas. The reason? Gates aren't full at DFW, and American knows that a full airport brings more business to all. American is afraid that Dallasites will choose to use Southwest for many long-haul routes that it currently considers its bread and butter.

Southwest maintains that Love Field is landlocked, limited to 32 gates, and that even with the addition of some long-haul flights, the airline poses little or no threat to American or D/FW.

But critics say D/FW is halfway between Fort Worth and Dallas, a grueling drive for many commuters of half-hour to two-hour stop-and-go traffic, due to inadequate roads and the mushrooming growth of bedroom communities around D/FW. With a Love Field commute available, many travelers would prefer to avoid D/FW and be home more quickly. Fort Worth, a tourist town that has burgeoned since D/FW's completion is afraid that the commerce the city was promised will migrate to the Dallas side of the metroplex and that D/FW and Fort Worth will lose approximately 35 percent of their revenues if Southwest gets its way.

Despite Love Field and Southwest's resistance to moving to D/FW, D/FW is now the third busiest airport in the world, with over 2000 flights a day serving 57 million passengers annually. It supports about 268,000 full-time jobs, and generates more than $14 billion for North Texas economics.

Southwest prospered, too, with what amounted to a governmental competitive subsidy never seen before or since.

The question is -- is it about the consumer, or the airports and carriers? Consumers or city management? Many supporting the repeal of the amendment are consumers. They feel repeal would end low fare restrictions based on preferred flight routes. Why should a round trip ticket to Memphis from Dallas be nearly $400 from D/FW while equidistant Little Rock is about $100 from Love Field?

If you read what the DOJ writes to real estate associations about competition, the consumer is omnipotent and the anti-trust division is mandated to make sure that competition flourishes so that the consumer benefits with the lowest prices and fairest treatment. But somehow antitrust laws have a different meaning when airlines, city councils, and local economies are involved.

In the real estate boondoggle, it's only allegedly about competition, with little regard for the economies that real estate impacts.

It's curious that there have been few anti-trust accusations flying around (couldn't resist) against the real estate industry until lately, when the real estate industry says it is not only highly competitive, but its actions are to encourage state legislatures to strengthen brokerage minimum service rules to include representing the seller in negotiations and contracts. Despite repeated attempts, the real estate industry has made little headway in convincing the DOJ, press and public that its actions are designed to protect the consumer, not inhibit more competition.

Arguments for both sides of the Wright Amendment are compelling, but what's confusing is that if all that matters is the consumer, why hasn't the Wright Amendment already been appealed? If airports, city economies, and past agreements are reasons to keep the federal Wright Amendment, why aren't supporting local economies and state licensing rules good enough for the DOJ when it comes to the real estate industry?

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Blanche Evans

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