Out of Love Field: Dallas Is Dumping Delta Air Lines, Inc.
Since 2009, Delta Air Lines has offered a few daily flights to Love Field, the closest airport to downtown Dallas. Beginning in July, 2009, Delta flew nonstop from Love Field to Memphis; in 2012, it began nonstop flights between Love Field and its main hub in Atlanta.
Last year, Delta announced its intention to add 18 daily departures from Love Field to a variety of major cities. However, those plans didn't come to fruition. Instead, Delta found out earlier this week that it will be unceremoniously booted from Love Field later this month.
Love Field: a strategic battleground
Dallas-Fort Worth International Airport has dominated air travel in the Dallas-Fort Worth region for the last four decades. American Airlines operates its largest hub there, carrying more than 85% of the airport's traffic on more than 750 daily roundtrip flights.
Other airlines have found it difficult to compete with American's massive flight schedule at DFW Airport. Delta tried operating a rival hub for many years, but it finally gave up in 2005. The only other airline with a significant presence in the Dallas area is Southwest Airlines, which currently operates about 118 daily departures at Love Field.
For the past several decades, air travel at Love Field has been severely restricted by the Wright Amendment, a law that prohibits most long-haul flights there. However, these restrictions end on October 13.
With Love Field opening for longer flights, several airlines have concluded that the best way to counter American's dominant position at DFW is by flying to Love Field, which is closer to downtown Dallas. As a result, Delta, Southwest, and Virgin America all made plans within the past year to expand at Love Field.
Not enough gates
The problem for Delta is that there are not enough gates to go around. As part of the agreement to repeal the Wright Amendment, Love Field was required to downsize from 32 gates to 20 gates. Given that it is logistically difficult to operate more than 10 flights a day from a gate, on average, this restriction sharply limits potential flight growth.
Moreover, those gates are assigned to particular airlines under long-term leases. Southwest, which for a long time was the only airline operating at Love Field, controls the lion's share of those gates: 16, in fact. United Continental controls another two gates.
The last pair of gates have been used by Delta in recent years under a sublease from American Airlines. However, American Airlines was forced to give up its gates as part of its merger with US Airways. The Department of Justice awarded those gates to Virgin America, which will start service at Love Field this month.
This leaves no gates for Delta. For the past several months, Delta had hoped it would at least be able to share United's gates to maintain its five daily flights to Atlanta. (United has recently operated just seven daily departures at Love Field -- far less than its gates' capacity.)
However, United is boosting its schedule to 12 daily departures in early 2015. United also forged an agreement with Southwest allowing the latter to use United's gates for overflow, when they are available.
Roughly 16,000 Delta customers who had already booked tickets for travel after October 13 will be left out in the cold. In all likelihood, Delta will need to give them the option of canceling or rebooking flights from Dallas Fort-Worth International Airport.
What does it mean?
Ultimately, Dallas Love Field is a very small station for Delta. Losing access to the airport won't have a significant long-term impact on Delta's overall financial results. That said, Delta will have to make amends with all the customers who had booked tickets from Love Field after October 13, and it will need to redeploy the planes that would have served Love Field.
The real losers are travelers who would have benefited from the additional service options at Love Field. Fortunately, they still have plenty of new service to look forward to, as Southwest and Virgin America will add a slew of new routes from Love Field starting later this month.
The "villain" in this story is the city of Dallas. Ultimately, the city had no control over the distribution of gates at Love Field. However, it made an unfortunate situation much worse by waiting until two weeks in advance to hand Delta its eviction notice. In doing so, it needlessly inconvenienced thousands of its own citizens.
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The article Out of Love Field: Dallas Is Dumping Delta Air Lines, Inc. originally appeared on Fool.com.Adam Levine-Weinberg is short shares of United Continental Holdings. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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