Was Wright Wrong? An Examination of Airfares in Dallas After Partial Repeal of the Wright Amendment

In 1980, Congress passed the Wright Amendment - legislation that placed strict limitations on commercial air traffic into and out of Dallas Love Field. The primary component of this law mandated that most flights into and out of Love could only serve airports within Texas and the four adjacent states of Arkansas, Louisiana, New Mexico, and Oklahoma. Later revisions to the law added states to the allowable area; Alabama, Kansas, and Mississippi were added in 1997 and Missouri was added in 2005. In 2006 a two-stage plan for repeal of Wright was enacted that immediately abolished some service limitations followed by the elimination of all current restrictions in October 2014.;This paper uses aviation data from the Department of Transportation in a difference-in-differences model to examine how airfares changed after policy revisions on routes between the Dallas region and cities in the states added in 1997 and 2005 as compared to control cities in unaffected states. A frame of contestable markets theory is used to postulate how incumbent airlines in a market may react to the policy changes based on the likelihood of an immediate competitive threat from another airline who could easily start service on the route but had been legally prohibited from doing so. Multiple panels of control cities and economic data are used to check estimates for robustness.;The results for the states added in 1997 are mixed, with most estimates indicating no significant change to fares after the policy was enacted, even if a new competitor was able to start the route. However, one city did show significant fare declines in some models. In contrast, findings for the 2005 change suggest unambiguously that fares fell significantly on routes where new competition was likely.