Texas Appellate Court Says Restrictions on Airport Development
in Bond Issue Violated Airline Deregulation Act

MAY 25, 2000

The Texas 2nd Court of Appeals, voting 2-1, said restrictions on development of Love Field contained in the bond ordinance that Fort Worth and Dallas adopted in 1968 to build Dallas-Fort Worth Airport are preempted by federal law.

Although the Love Field service has been in operation since a federal court cleared the way in February, the latest ruling is still significant for bondholders who invested in Dallas-Fort Worth Airport (D/FW). And the ruling could factor into the U.S. Supreme Court's decision on whether to hear a petition in a related case.

The 1978 Airline Deregulation Act bars states and cities from regulating air travel prices, routes, or other services. Airport owners can adopt some restrictions if they are reasonable, nonarbitrary, and nondiscriminatory, and if they are designed to address problems such as noise, pollution, and airport congestion, or to prevent an airport from having to shut down. But the court said "there is no showing here that the bond ordinance restrictions are necessary to further any legitimate operational or safety goal or to maintain the financial viability of D/FW."

In the majority opinion, Chief Justice John Cayce wrote, "Since the deregulation of the airline industry under the ADA, neither the federal courts nor any federal agency charged with the responsibility of administering the ADA has ever allowed a local government to impose restrictions at its own airport, or a neighboring airport, for the mere purpose of limiting competition with another airport preferred by that government."

The court also ruled that airlines can fly anywhere in the United States from Love Field with jets seating no more than 56 passengers. Justice Sam Day joined the opinion; Justice Lee Ann Dauphinot dissented.

The case arose when Fort Worth sued Dallas in 1997 over development of Love Field. State District Judge Bob McCoy had ruled that the bond ordinance and another 1968 agreement between the cities could be used to block new long-distance service at Love Field authorized by Congress. The appeals court said McCoy had authority to rule on the issue instead of deferring to the Transportation Department, but the justices reversed McCoy's decision.

The appellate court's opinion essentially tracks what the Transportation Department and the 5th U.S. Circuit Court of Appeals said about the bond ordinance in a separate federal suit, though that case also involves other issues. Fort Worth, American Airlines, and the Dallas-Fort Worth Airport board have appealed the 5th Circuit's ruling to the Supreme Court, which could decide by summer whether to hear the case.

In her dissenting opinion Dauphinot wrote that the majority opinion does not address the impact on the cities' ability to repay Dallas-Fort Worth Airport bonds if that airport loses revenue to Love Field as a result of the 1978 deregulation act, weakening the 1968 agreements.

The decision is another victory for start-up carrier Legend Airlines, which started flying 56-seat planes from Love Field to Los Angeles and Washington, D.C., in April. Legend also flies to Las Vegas, and it got landing rights this week at Chicago's O'Hare Airport. American Airlines, which has fought Legend's efforts to offer Love Field service, launched Chicago and Los Angeles service from the airport this month.

An attorney for a Dallas-Fort Worth Airport bond investor group has threatened to sue Dallas if the city builds new gates or opens long-dormant gates in Love Field's old East Concourse to accommodate requests for gates by American Airlines and Atlantic Southeast Airlines, a Delta Air Lines regional affiliate.

Source: Star-Telegram, Fort Worth, Texas