There are two big trends in airlines these days. The first is to start an ill-conceived subsidiary with an annoying single-word name and waste a bunch of time and money on it. The second is to grow in Los Angeles. At an employee meeting in LA, United President Scott Kirby confirmed as hinted previously that United wants to turn up the heat at LAX. The only question is… how?
Less than a decade ago, LAX was serving under 60 million passengers per year. In 2009, it hit a nadir of 56.5 million. Since then, traffic has absolutely exploded. Take a look.
We only have traffic through August of this year, but it looks like LAX is on track to be near 85 million passengers, far above what it was designed to handle. If you’ve been through, you know that it is bursting at the seams. The roadways are gridlocked, security lines are long, and taxi times are some of the highest you’ll see anywhere. Air traffic delays have become much more common. And yet, more and more airlines want to fly there.
We’ve already spent a couple years watching other airlines posture. American added flights until it could add no more due to physical gate constraints. It even went too far and had to pull back some. Delta is spending billions on its move to Terminals 2 and 3 where it will do major work to create a new home. Southwest has been waiting to grow until its remodel of Terminal 1 is done next year. And Alaska is bullish on LA after buying Virgin America. It seemed like the only sane airline was United, but now that’s out the window.
In the townhall, Kirby says he wants to add more flights to smaller destinations like Medford. Both American and Allegiant already serve that small market, but apparently United thinks there’s room for one more. He wants more markets like those to help feed big international flights, like the surprise announcement of LA to Singapore. In other words, he wants to re-build what United has spent years dismantling.
I find it funny that in the FlightGlobal article, Kirby is quoted as saying “Of the big carriers, we are the most profitable carrier in Los Angeles.” I guess he wants to change that. It’s hard to imagine how every one of these airlines can be successful financially in this market. As a consumer who lives in this market, I’m thrilled and expect to see price wars making air travel far cheaper than it should be. But if I’m an airline investor, I’m wondering why everyone wants to play this game.
It would be one thing if airlines could throw some airplanes into the market and see if it works, but it’s not that simple. The aging airport can’t handle much more, so a lot of expensive work is required to even be able to try to grow.
It’s clear where the airport is going from a design perspective. It’ll be carved up into 5 fiefdoms.
- Southwest will finish its remodel of Terminal 1 and it hopes to build a Terminal 0 to expand on the site of an existing parking lot. That’s an old engine plant and I imagine it will require some long and expensive clean-up work.
- Delta and SkyTeam will make Terminals 2, 3 and the north side of the Bradley Terminal into its domain. This multi-billion projects is underway but it won’t be done for quite some time.
- American and oneworld can control the south side of Bradley along with Terminals 4 and parts of 5. But it still has a problem with those remote American Eagle gates and will need to find a way to grow further (the rest of 5?) so it can make for a better passenger experience. It also can’t grow without more gates.
- Alaska will rule at Terminal 6, but it too has no room for growth even though it wants some.
- United is in the middle of its own massive remodel in Terminals 7 and 8. It wants to build Terminal 9 on the other side of Sepulveda (near where the remote Eagle gates are) so it can house its Star Alliance friends. That’s going to take years and a lot of money if it ever happens.
The unaligned airlines of the world will be relegated to wherever they can fit. We already see that happening today where some airlines have ticket counters in Terminals 2 or 3 but gates in Bradley. The new midfield concourse which is connected to Bradley will help when it’s built, but that only helps with having physical gates. There’s still the issue of gridlock on the roadways. The airport thinks the landside modernization program which will build a train and a new rental car facility will help, but that won’t be done until well into the next decade.
And ultimately, you can add gates and build trains, but without more runways, there will always be a cap on growth. Unlike in Atlanta where a fifth runway was recently opened, there is no prospect for any runway growth at LAX. Heck, the airport couldn’t even get the community to agree to move an existing runway a few feet closer to their homes to provide a center taxiway to improve safety.
So what does this mean? Well, there are billions upon billions of dollars of projects underway. Airline operating costs are going to go through the roof with this kind of spending. That means a flight like United’s to Medford is going to get awfully expensive to operate, and airlines may need to cut back. But in an arms race like this where every airline wants to “win,” it means irrational decisions get made.
Even with this mad spending, LAX will run out of room. And once that happens, then what? Long Beach and Orange County have strict caps. Burbank has a little room to grow but not much, and it has short runways so will never be more than a regional airport. Ontario is just about the only option, unless you want to go even further away from LA. It’s remarkable that a region that thrived and grew with the aerospace industry in its heyday has trouble even finding an airport with room these days.