May 6, 2014

Branson says Virgin America is David to Southwest’s Goliath

The British entrepreneur says Virgin America, in which his company holds a minority stake, can provide new competition to Southwest Airlines at Dallas Love Field.

British billionaire Richard Branson interrupted a spell of rest and recreation in the British Virgin Islands to try to help Virgin America overcome opposition from Southwest Airlines over gaining two gates at Dallas Love Field.

After headlining a huge Cinco de Mayo rally and party Monday night at the Rustic bar and restaurant, where the 63-year-old tycoon downed tequila and fell from the stage to surf above the crowd of revelers, Branson held court with reporters Tuesday to press Virgin’s case.

The Dallas City Council was scheduled to be briefed on the situation this morning.

Praising Southwest’s underdog legacy, Branson said that the airline, which is based at Love Field and handles more than 95 percent of its traffic, is now one of the nation’s biggest airlines and shouldn’t be allowed to gain two more gates at Love.

“They’re no longer the David. They are the Goliath, and sometimes the Goliath needs a little bit of competition,” he said. Branson’s Virgin Group is a minority owner of Virgin America.

Virgin America, which sells itself as cool, wants two gates that American Airlines must surrender under an antitrust settlement with the Justice Department related to its merger with US Airways. The Justice Department has said it would favor discount carriers for gates that American must divest to spur competition.

Virgin and American have reached an agreement on a lease transfer for the gates, and Justice has signed off on the transfer. But it also requires approval at Dallas City Hall.

Southwest and Delta Air Lines want the gates as well. While Delta is a long shot, Southwest is making a hard push with the city, which owns Love Field.

The main arguments:

• Virgin America and the Justice Department say that only Virgin can provide new competition at Love Field.
• Southwest says it needs to expand at Love Field to compete with American, the dominant carrier at the much-bigger Dallas/Fort Worth Airport. Both airports should be considered part of the same local market, Southwest says.

Each side trots out studies and statistics showing that if it wins, Dallas travelers will enjoy lower fares. Both plan to add new destinations from Love Field in October, when the Wright Amendment restrictions expire.

The two differ greatly, however, in their tactics. While Branson partied and did media rounds, Southwest took a low-key approach and declined to make an executive available for an interview.

Quizzed by reporters last week, Southwest CEO Gary Kelly said the city, not the Justice Department, should decide the fate of the gates. If Southwest wins, he said, “that is what’s best for the city; we think that is what’s best for the traveling public.”

Virgin America flies from DFW to Los Angeles and San Francisco but wants to move those flights to Love Field. If it wins, it would add flights to New York and Washington in October and Chicago next year.

Branson’s crowd-surfing was the kind of publicity stunt that might have been done a generation ago by Herb Kelleher, Southwest’s colorful co-founder. Kelleher once settled a legal dispute by arm-wrestling another airline’s leader for the rights to an advertising slogan that both were using.

If the fight between Virgin America and Southwest ends up in lawsuits, Branson said in an interview, “maybe arm-wrestling will have to come back.”

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