Wednesday, November 2, 2011

The decline of Ontario International Airport

The following is great article on Ontario Airport (ONT/KONT) which appeared in the L.A. Times on Monday October 31, 2011. Cheers Michael.

It's the middle of the business day and the cavernous baggage claim area in Terminal 2 at L.A./Ontario International Airport is deserted. Upstairs, the food and beverage shops are closed. At the information desk, a volunteer quietly waits for travelers who never come.

Out at the curb, Miguel Del Valle of Moreno Valley arrives for a flight to Colorado, looks at the empty terminal and asks an idle skycap if the place is closed.

"No, no, no. Come on in," the skycap assures him, reaching for his luggage.

"I was shocked," said Del Valle, the only passenger at the United Airlines ticket counter. "I called my wife and told her that I've only seen five people here."

After three decades of steady growth and earning a Forbes magazine nod as one of the nation's top "alternative airports," Ontario International is now among the fastest-declining midsize airports in the country.

A pillar of pride for the Inland Empire, which rode the housing boom to a colossal bust, the sprawling facility owned and operated by the city of Los Angeles lost a third of its 7.2 million annual passengers between 2007 and 2010.

The airport is on track to lose an additional 200,000 this year — setting it back to 1987 levels, when Ronald Reagan was president and the Dow was below 3,000. Nationally, only Cincinnati is shedding travelers at a faster pace.

The economic pounding suffered by the Inland Empire, where unemployment peaked at more than 14%, is a significant factor in the airport's decline. In addition, the highest fees in the region for air carriers, and fares that can be twice those at other Southern California airports, have driven airlines and hundreds of thousands of passengers to other portals, particularly Los Angeles International Airport.

But Inland Empire leaders suspect something more insidious is at work. Increasingly, they are convinced that Los Angeles World Airports, which operates both LAX and Ontario, has become an absentee landlord bent on a multibillion-dollar modernization of LAX at the expense of its weaker stepchild and potential competitor 56 miles to the east.

"It really smacks of economic warfare against the Inland Empire," said John Husing, an economic consultant with a local business coalition. "Los Angeles officials cannot be trusted.... They have done everything in their power to ruin this airport."

Los Angeles officials counter that Ontario is a victim of economic forces largely beyond their control and might not recover until travel demand returns to pre-recession levels.

"It's really an unhappy situation," said Gina Marie Lindsey, executive director of Los Angeles World Airports. "We have the Great Recession combined with related structural changes in the airline industry."

Inland Empire officials aren't buying it, noting that while Los Angeles County has had 12.4% to 13% unemployment, LAX has grown.

Their disenchantment has fostered an effort to regain local ownership of the airport, which Los Angeles acquired at no cost in 1985 after operating it since 1967. The idea has the backing of 20 other cities and the Southern California Assn. of Governments, an influential regional planning agency.

Under the current management, Ontario officials say, an estimated 8,000 airport-related jobs and $400 million in yearly business activity already have been lost. For travelers, Ontario was a popular discount fare portal before the economic crash. Now there are 47% fewer flights, about 60% fewer destinations, a dearth of discount carriers and often sharply higher airfares.

"Today, I can fly to Paris out of Miami for the same price as flying into Ontario," said Scott Schroeder, a West Palm Beach attorney, who regularly used the Inland Empire airport until rising ticket prices forced him to switch to LAX.

Unless there is a quick turnaround, Ontario officials say, Los Angeles will squander an aviation asset with the potential to serve 30 million passengers annually. That's partly because it is unencumbered by the court-ordered passenger caps, noise restrictions, outdated facilities and community opposition that have slowed growth at LAX and other local airports.

Ontario City Councilman Alan Wapner complains that Los Angeles officials have not reduced airport staff and costs in line with the passenger drop, which he says has kept Ontario's overhead too high for airlines.

Last year, the fees that Ontario charged air carriers per passenger averaged $14.50, about seven times those charged at Burbank, more than twice those at Long Beach, 45% more than Orange County's John Wayne Airport and 31% higher than LAX.

"It's been a dog-and-pony show at Los Angeles World Airports for the past 11/2 to 2 years," Wapner said.

Since 2008, Ontario's annual marketing and advertising budgets of up to $1.5 million have been slashed nearly 90%, and the airport manager's job was reduced to a part-time position. In the latest blow, Los Angeles airport commissioners recently awarded a new advertising contract to L.A. Inc. —the city's visitors and convention bureau — that focuses on LAX and eliminates money to promote Ontario.

Three years ago, Los Angeles Mayor Antonio Villaraigosa said savings from closing Palmdale Regional Airport — an estimated $7 million annually — should be directed to Ontario. But that hasn't happened. Lindsey said she has not spoken with Villaraigosa about the matter and needs more direction on the use of the money. The mayor's office could not explain the delay but indicated Villaraigosa would agree to use some of the Palmdale funds in a joint marketing effort with the city of Ontario.

Lindsey also said Ontario's expenses and staffing have been reduced, lowering this year's per-passenger fees for airlines to $11.73 — although they remain the highest in the region. Efforts to attract airlines are continuing, albeit unsuccessfully, and advertising for Ontario can be purchased as needed, she said.

But Ontario city officials say Los Angeles has not been aggressive enough in promoting the airport with air carriers. They point to a 1967 agreement that calls on Los Angeles to "exercise its best efforts" to obtain air service for Ontario. And they note that a 2006 court settlement requires Los Angeles to spread the growth in air traffic around the region to reduce the impact on areas around LAX.

Since the settlement, however, LAX's market share compared with the five other commercial airports in the region has increased from 69.6% to 74.1% and its passenger volume is up about 5.6% this year. Ontario's market share has fallen from 8.2% to 5.4%. Only Palm Springs and Long Beach have realized slight gains.

"Regionalization is not being realized," said attorney Barbara Lichman, who represents Ontario as well as Inglewood and Culver City, two plaintiffs in the lawsuit that put limits on LAX growth. "A great deal of resources are being expended on modernization. They don't want to divert airlines from LAX."

That theme was echoed by a consultant hired by Los Angeles World Airports to develop a strategy to spread air service among other cities. She accused the airport department of mismanaging the regionalization effort and thwarting her work.

"The result was nothing was accomplished, and the burden of blame has fallen on me," according to emails obtained by The Times that were sent to Lindsey from consultant Peggy Ducey.

Lindsey said she is reviewing Ducey's final report and defended her department's years of effort to decentralize air traffic and promote Ontario. Ducey declined to comment.

If they can regain control of the airport through a simple transfer of ownership, Ontario city officials say they would aggressively market it and create incentives to lure new airlines, including slashing carrier costs to below $4 per passenger — less than a third of current fees.

Operational savings can be achieved, they say, by deeper reductions in airport staffing, paying employees lower wages typical of the Inland Empire and eliminating an $8-million-to-$9-million annual administrative fee charged to airlines.

But Ontario officials face a formidable opponent in Villaraigosa, who wants L.A. to retain ownership as well as political control of the airport. Organized labor could weigh in on any plan that could cut wages, though Ontario officials say they have had encouraging communications with professional associations representing airport workers.

Lindsey has renewed an offer supported by Villaraigosa to let Ontario officials handle the airport's advertising and marketing — a compromise rejected by Inland Empire leaders as incapable of solving the airport's many problems.

Such a limited fix, said Ontario City Councilman Jim W. Bowman, "makes no sense and offers no benefit to anyone."

(Dan Weikel - Los Angeles Times)

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