The 4I’s for SWA in 2004 Issues Delta Airlines reduction of flights from Dallas Fort Worth (DFW) producing opening for Southwest Airlines (SWA) entry at DFW Wright Amendment prevents SWA and other commuter/discount airlines from making long-haul flights on larger aircraft Interests Larger airlines, especially American SWA employees, board, and shareholders Smaller commuter/discount airlines who are direct competitors with SWA and who could benefit from repeal of Wright Amendment Airport hub cities who could benefit from additional air traffic Institutions Congress, federal and local (Texas) governments, Commerce, Science and Transportation Committee Air transportation lobbyists Information Relative gate costs between DFW and LUV Relative revenue differences between direct / indirect flights out of LUV/DFW Historical lobbying expenses for

Interest Group Spreadsheet Determining whether to lobby to repeal the Wright Amendment Supporters Substitutes Group Magnitude Per Capita Magnitude Size Geographic Coverage Political Resources Cost of Organizing Expected Influence Commuter airlines Not making long flights Medium Small Large Travelers Buses, cars, expensive airlines Smaller airports (LUV) None? Opponents Substitutes Group Magnitude Per Capita Magnitude Size Geographic Coverage Political Resources Cost of Organizing Expected Influence Large airlines None? Large Large/med Small Large airports/DFW Smaller airports Medium

Benefits and Costs Costs Benefits CONCENTRATED: Southwest airlines (fly unrestricted to all states) DISPERSED: Passengers (a) Benefited by Southwest‘s cheaper prices or competitive prices (b) Existing passengers using LUV field as connection (inconvenienced by two tickets and check in) (c) Passengers preferring to travel to LUV Field instead of DFW CONCENTRATED: DFW –loss with passengers shifting and other airlines who may follow American Airlines – lose opportunity and low price competition Costs Benefits SCENARIO I: IF Southwest does not Campaign DISPERSED BENEFITS & CONCENTRATED COSTS --- dominate SCENARIO II: Southwest Campaigns CONCENTRATED BENEFITS & CONCENTRATED COSTS---- dominate

Using Wilson-Lowi Matrix Benefits of Repeal of Wright Amendment (Compared to Status Quo) Dispersed Concentrated Interest Group Politics Entrepreneurial Politics Client Politics Majoritarian Politics Costs of Wright Amendment Compared to Status Quo Concentrated Dispersed SCENARIO II: Southwest Campaigns:  CONCENTRATED BENEFITS & CONCENTRATED COSTS High costs and the benefits to both the opponents   Interest Group politics dominates Southwest and AA & DFW combination have incentives Both sides are likely to spend money LIKELY OUTCOME: Determined by amounts spend on & effectiveness of campaign by each side. SCENARIO I: IF Southwest does not Campaign: DISPERSED BENEFITS & CONCENTRATED COSTS   Entrepreneurial politics dominates DFW airport and AA have stronger incentive. An entrepreneur may be required to mobilize ala MC Mehta in the CNG case LIKELY OUTCOME: Status Quo

Discussion Questions Should Southwest Airlines seek to overturn the Wright Amendment? Yes, to the extent the American Airlines response is not overly strong Benefits from allowing direct flights from LUV could amount up to $3MM p.a. to the extent SWA can charge non-stop / direct flight premiums What is the effect of Wright Amendment restrictions on Southwest Airlines' prices? Loss on revenue for longhaul passengers Increased mileage / landing / operational costs for stopover / indirect flights If Gary Kelly decided to try to overturn the Wright Amendment, which Senator on the Commerce, Science and Transportation Committee should he choose as the main sponsor? Richard Shelby (R)and Tom Daschle (D) who SWA have existing relationships with.

Appendix Note: 62 Flights acquired based on LUV gate limitation. Option 3 assumes only 62 daily flights acquired, but likely more can be acquired as no physical gate limitation