Will Southwest Allow Delta To Operate At Dallas Love Field – Permanently?

+20.76%
Upside
29.39
Market
35.50
Trefis
LUV: Southwest Airlines logo
LUV
Southwest Airlines

The battle between Southwest and Delta reached a ceasefire last week, when Southwest temporarily allowed Delta to operate five daily flights using two of its gates at the Dallas Love Field Airport beyond the expiration of their gate-sharing arrangement on 6th July. While the airline awaits the court’s verdict – which is not expected to be out until Labor Day in September – to decide its future course of action, we believe that despite having legal rights over the gates, Southwest will be forced to accommodate Delta’s operations at Love Field going forward even at the expense of curtailing its own expansion plans. Here’s why we think so:

  • Southwest has a monopoly over the flights operating from Dallas as it holds 18 out of the 20 gates at the Love Field Airport. The low cost carrier currently operates 166 flights from Love Field and aims to increase that to 180 by August 9, 2015. On the contrary, Delta operates only five daily flights from the airport and has requested to launch eight more flights – two to each of its hubs at Minneapolis-St. Paul, Detroit, Salt Lake City, and Atlanta – starting mid-August. Given that Southwest already has a strong pricing power in Love Field, there is a high probability that the court will pass the judgment in Delta’s favor to promote competition in Dallas.

Dallas Love

  • The US Department of Transportation (DoT) has issued a letter enabling Delta to operate at the Dallas Love Field Airport even after the gate-sharing agreement expires in July. While this letter has been challenged by Southwest, Delta has continued to book tickets for flights beyond the July deadline. The Atlanta-based airline has sold more than 20,000 tickets to Love Field through May 2016 and claims that the discontinuation of its operations would cause significant financial harm to the airline as well as to its customers. While Delta has an option to divert its flights to the Dallas/Fort Worth International Airport, in the interest of the public at large, the court’s decision is expected to be inclined towards Delta.

Dallas Passengers

  • The ongoing conflict between Southwest and Delta is one of the tacit reasons for the downward slump of US airline stocks that began last month. In one of our recent articles, we had explained how Southwest’s effort to push Delta out of Dallas Love Field has triggered a fear of pricing wars among investors (Read: Airlines’ Stocks Drop As Fear Of Price War Clouds The Industry). Consequently, the stock price of Southwest has plummeted more than 16% over the last one month. If Southwest goes ahead with its expansion plans, the investors will become more skeptical about the fundamentals of the overall US airline industry and continue to penalize Southwest’s stock. On the contrary, if Southwest allows Delta to co-exist at the Love Field Airport, both airlines will be able to charge profitable air fares, which will not only boost their bottom line growth, but will also reinforce investor confidence in the airline industry as well as the individual airline stocks.
Relevant Articles
  1. What’s Behind The 15% Fall In Southwest Airlines Stock Earlier This Week?
  2. What’s Next For Southwest Stock After A 20% Rise This Year?
  3. Gaining 20% In 2023 Will Delta Continue To Outperform Southwest Stock?
  4. Will Southwest Airlines Stock Recover To Its Pre-Inflation-Shock Level?
  5. Here’s A Better Pick Over Southwest Airlines Stock
  6. Southwest Airlines Stock Has Shed 30% Since Late 2019: Here’s Why

See our complete analysis for Southwest Airlines here

Useful Links

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research