Not So Fast, LAX

AirTran, Alaska Airlines, ATA, Frontier, LAX - Los Angeles, Midwest Airlines, Southwest

To say that this was a bad week for LAWA (the organization that runs LAX) would be an understatement. I mean, if this were a football game, there would have been a flag for unnecessary roughness. Judge Goodwin absolutely dropped the hammer on them. By the time I got to the end of the 210 page ruling (read at your own risk), I was surprised he hadn’t insulted the airport director’s mother.

07_05_18 wapnerBut let’s back up for a second. What the heck am I talking about? There have been a few lawsuits flying around between LAX and the airlines lately, so let me try to clarify which one this is. This lawsuit, I believe, has nothing to do with the $10 surcharge that United added to their LAX fares a few weeks back. That one is in protest of the across-the-board rent raise that LAWA instituted on all LAX tenants.

From what I can tell, this lawsuit is about the Maintenance & Operations (M&O) fees which were dramatically increased by LAWA as well as the rent. (If I’m off base here, someone please help me.) These fees, however, only went up for airlines in terminals not tied to a long term lease. That means the airlines in Terminals 1 (T1) and 3 (T3) as well as those in the Bradley International Terminal (TBIT), on a separate lawsuit, had to pay up. Here’s a map:

07_05_18 laxt13

Not only did LAWA increase the fees, but they made them retroactive all the way back to January 2006, so there was a lot of money in the balance here. The airlines balked and took LAWA to court, the People’s Court. Ok, it was actually the DOT, but close enough. In the end, the judge ruled against LAWA on everything. Now, this isn’t final. The judge’s ruling goes to the Secretary of Transportation who can accept it or override it in the next month. With a ruling this strongly worded, I would be surprised if she didn’t accept it though. Even then, either party can still take this to federal court, so we’re far from done here.

But, this is what we have now . . . so, wait, what exactly DO we have now?

Basically, LAWA’s plan to charge higher M&O fees to those airlines not under long term leases isn’t kosher. Since all the airlines have facilities that are effectively the same (don’t tell that to the airlines in ghetto Terminal 3), they can’t charge dramatically different amounts or use different methods for determining those amounts.

LAWA was also trying to start charging the airlines not under long term leases for the areas they don’t directly use (like the bathrooms or restaurant spaces), but that doesn’t fly either. And, they wanted to start charging based on what the market would bear instead of based on actual costs. That’s another no-no.

So if this ruling stands, the airport has to pay back all the increased fees collected since January 2006 and they have to pay interest on the money for as long as they’ve had it. Ouch.

But that was just the beginning. The judge then went on to discredit pretty much everything LAWA has ever done. He chastised them for using LAWA employees to determine the new rates instead of using an external auditor. He even questioned LAWA (and the Mayor’s) policy of airport “regionalization.” He said it could be against DOT policy, and it should be investigated.

07_05_18 badmathNot enough? The judge said that LAWA was clearly using enough bad math to call every one of their assumptions into question. For example, the increase in fees related to security would mean that T1 and T3 are responsible for 70% of the total increase in security costs at the airport. Uh huh.

Sounds like they’re just trying to get the airlines in T1/T3/TBIT to cover some of the costs they can’t pass on to the other airlines in long term leases. And the judge won’t have any of that.

If the Secretary of Transportation agrees, this will impact LAX flyers. Lower costs for the airlines may make more new service
possible, but it also means that LAX will continue to be a dump. Without additional money, they can’t fix up the airport, and we all know it needs it. LAWA is going to have to find a legal way to collect additional funds, and apparently this isn’t it.

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