I’ve covered the ongoing saga of Ontario Airport here in Southern California for years, and now it looks like we finally have a resolution. The new Ontario International Airport Authority (OIAA) will be taking over management of the airport from LAWA, the Los Angeles authority that also runs LAX. The people in Ontario like to villify LAWA as the destroyer of everything, and now they’ll have their chance to prove that to be true. Oh, just one problem. It’s not entirely true.
This is going to be tough, but I know what I’d do if I had the chance to run Ontario. As I mentioned on AirTalk last week, the singular goal should be to get airline costs as low as possible. That means cutting airport costs and finding alternative revenue sources, like this one….
For those who aren’t familiar with the area, the LA/Ontario International Airport lies about 45 miles (or 4 hours at around 5pm) by car east of downtown Los Angeles in what is known as the Inland Empire. This area is a sprawling mix of suburbs and industry. While the IE has a lot of people living there, the people aren’t as affluent and likely to travel as in other parts of Southern California. In addition, Ontario is hardly a destination other than it being a gateway to Palm Springs (which has its own airport anyway). It does have decent proximity to some places. Orange County isn’t all that far to the south, and there is a Metrolink rail that takes people to downtown LA. The train stops short of the airport, but it’s close.
Decades ago, LA World Airports took control of Ontario Airport and put it into its “regionalization” strategy. This was supposed to see LAX growth tempered by shifting shorter-haul flying to regional airports like Ontario and the formerly LAWA-run Palmdale. In the late 1990s, LAWA built two brand new terminals (that make the airport seem far bigger than it is since they’re named Terminal 2 and Terminal 4) and passenger traffic grew. Ontario hit a high in 2005 with just over 7.2 million passengers served. That held for a couple years and then the wheels fell off the place.
In 2008, the airline industry was in a rough spot as oil prices shot through the roof, but Ontario remained relatively unscathed. Its traffic numbers were elevated by the ill-fated ExpressJet effort to fly point-to-point service between secondary airports. But other airlines began to cut to account for a world with higher oil prices. That year, Ontario served 6.2 million passengers. By 2009, ExpressJet was gone and Ontario saw traffic plummet to 4.8 million passengers. It hit a nadir of 3.97 million in 2013, a number which bounced up slightly to 4.13 million in 2014.
While traffic was falling, local residents were looking for a scapegoat. It couldn’t just be the combination of higher fares, higher oil prices, and consolidation that hurt Ontario, could it? It had to be LAWA’s fault. The reality is somewhere in between. The industry trends mean that Ontario was bound to have traffic loss, just like many other regional airports. But LAWA’s mismanagement of the facility, which has some of the highest costs around, undoubtedly made things worse.
So it was that Ontario and the surrounding communities wanted to take over management of the airport. This was a contentious battle that went back and forth for years. It ended up in a lawsuit which would have gone to trial in the next couple of weeks. But as often happens, as the trial date neared both sides decided an agreement was a better plan. To be fair, it wasn’t just timing. The previous mayor Antonio Villaraigosa had a hilariously wrong view of what the airport was worth. Back in 2012, Ontario offered to pay $250 million. The mayor wanted $474 million. When Villaraigosa left, the new mayor of Los Angeles Eric Garcetti didn’t consider this an important issue. He of course wanted to make sure that the deal wouldn’t hurt him politically but he was more than happy to just see this thing go away.
Now it’s basically a done deal though there have to be a variety of approvals and signatures. Ontario has formed the OIAA along with the county and it will run the airport going forward. In exchange, Los Angeles will get paid. Including the assumption of debt, LA will receive about $250 million. Yes, that’s the same amount Ontario offered way back in 2012. This whole drama could have been avoided if the previous administration in LA wasn’t so pig-headed.
It’s effectively a done deal, so now what? It’s easy to throw rocks from the other side of the fence, but now Ontario, or rather, the OIAA, has to actually make things happen. Nobody asked me, but without question the number one priority needs to be to get costs down. The cost per enplanement for Ontario in 2013 was a very high $12.73. Regional airports should not be anywhere near that range, mostly because CPE has a much greater impact on shorter flights.
If an airline pays $12.73 per person on a flight to China, that’s ok. But if it pays that on a flight to Oakland, then it’s not. In particular, think about where the growth is in the US. It’s coming from the ultra low cost carriers. Those guys are more cost-conscious than anyone. In fact, even though there are other airports in the LA area that might be more attractive, if the price is a right an ultra low cost carrier might take another look at Ontario.
I hope OIAA comes in and slashes costs as low as possible. The agreement with LA does have some job protections in there, but they appear to be temporary. That is a huge piece of the airport’s operating costs, of course. But it doesn’t have to be all about slashing costs. It can also be about finding ways to increase non-airline revenue so airlines can pay less. This airport needs some serious creativity to make it attractive to airlines, but it also has to work under the rules of the FAA.
I’d like to say I’m optimistic that they’ll assemble a team to really do something innovative. I’d like to say that, but it’s so rare to see it actually occur. Traffic won’t return overnight, but now nobody can blame LAWA. This airport will sink or swim on its own.
[Original image by Frederick Dennstedt (originally posted to Flickr as Ontario Airport) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons]