Story By Brian Sumers | Inland Valley Daily Bulletin Staff Writer
July 11, 2013

There’s a cold war brewing between Los Angeles and Ontario. And it’s all happening over an airport that is serving 3 million fewer passengers per year than it did six years ago.

Ontario politicians and business leaders insist their city must take control of L.A./Ontario International Airport, or the economic consequences for the area will be dire. They’ve enlisted an impressive group of supporters, including chambers of commerce, members of the L.A. County Board of Supervisors and newspaper editorial boards.

Ontario officials have rejected what they say was an outrageous offer from Los Angeles — a $474 million sale price — and filed suit against the city for mismanaging the airport, which Los Angeles World Airports has operated since 1967.

There’s no guarantee this tough approach will work, but it appears Ontario officials are making progress. Ontario could have an ally in new Los Angeles Mayor Eric Garcetti, who might be more open than his predecessor to selling the facility at a reasonable price.

Around the Inland Empire, optimism is high. Perhaps, some say, Ontario can turn the airport from a sleepy backwater into a viable alternative to Los Angeles International Airport.

“We’d like to see direct flights from here to Washington, D.C., and from here to New York City and other places,” said Frank Williams,
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executive director of the Ontario Airport Alliance, a group of community and business leaders who support local control. “After all, we are an international airport. We’d like to see more foreign airlines here.”

But boosters might be overreaching. Attracting air service is a cutthroat business, and airports from San Jose to Sacramento to Pittsburgh have tried for years to attract new flights, with limited success. Evidence suggests improvements brought about by new management could be slow and incremental.

Airline analysts and executives say Ontario’s best chance at growth may come from short-haul flights along the West Coast. And even attracting those flights will not be easy. Ontario will be competing with facilities like Burbank Bob Hope Airport and Long Beach Airport.

“I don’t think it’s hopeless,” said Andrew Nocella, senior vice president for marketing and planning at US Airways, which will soon merge with American Airlines to become the world’s largest carrier. “I think you just have to put into the framework what the possibilities are. I would tend to think the best opportunity for Ontario is bigger aircraft and more service to hubs that are within a thousand miles of the airport.”

Officials with the Ontario International Airport Authority, which is leading negotiations, declined to comment for this story, though they did send a statement written by an official with a Los Angeles public relations firm. In the statement, officials said they plan to grow the airport by starting with shorter flights and then moving to attract longer ones.

Ontario officials also underscored the need to increase traffic by making the airport cheaper for airlines. At Ontario, airlines pay an average of about $11.12 in fees for every departing passenger, or about $2 less than they pay at LAX. Aviation analysts say the Ontario airport will be more competitive if it can lower that rate to somewhere around $3 to $6 per passenger.

Officials suggested Ontario plans to save by shedding high personnel costs it currently pays as a member of the Los Angeles World Airports system.

But while analysts say the airport should regain some flights with a new operator and lower fees, many question if Ontario will ever again reach its 2007 peak of about 7.2 million passengers. The current economic model preferred by major airlines — they’re generally concentrating flights at larger airports — may not bode well for Ontario.

“There is this belief that if we take our airport back, we can get everyone to fly here,” said Brett Snyder, an airline industry analyst who lives in Long Beach. “I absolutely agree with their premise that they can do better than LAWA. But you’re not going to see crazy growth.

“They are not going to become this mecca for amazing air travel.”

Industry economics

Historically, network carriers — big international airlines like American, US Airways, United and Delta that shuttle passengers from their hubs to cities around the globe — have been the go-to airlines for airports seeking to boost flights.

But in the past five years, in an attempt to increase profits, those airlines have moved away from serving outlying airports like Ontario, instead concentrating flights at bigger airports close to business travelers and wealthy individuals. Those travelers are profitable for carriers: At American, 20 percent of passengers account for 70 percent of the carrier’s revenue, an executive said.

Major airline executives say they believe the most lucrative customers prefer LAX, both because of its location in the west side of Los Angeles and the scale of its operation — passengers can fly to almost any major city in the world from the airport.

Executives say Ontario does not have the business traffic of LAX.

“If you look at the business travel, it seems to basically demand Los Angeles,” said Bob Cortelyou, senior vice president for network planning at Delta.

Last year, Delta canceled what was the longest nonstop flight from Ontario, a flight to Atlanta. Cortelyou said the yields — essentially the average price paid per ticket — were not satisfactory.

“Sometimes you come out of Ontario versus Los Angeles, there is very little corporate travel,” he said. “The yields tend to be lower. You look at the gas prices these days and a long flight from Ontario to Atlanta just becomes uneconomic for us to fly.”

If Ontario officials gain control, they likely will visit major airline headquarters to lobby executives. They will probably distribute a recent consultant report suggesting the population of the Inland Empire will continue to grow and that employment will keep rising.

Williams, executive director of the local airport alliance, said Ontario airport is well-positioned to attract new passengers.

“It’s all about location,” he said. “The Ontario airport is in a perfect location to reach from anywhere in Southern California. It’s a whole lot better than LAX.”

But Nocella, the US Airways executive, said it might be difficult to convince airline executives to change the way they see Ontario airport.

“I know that could be a hard thing for the community to understand but it’s the economics,” Nocella said. “The whole airline produces a 4 to 5 percent margin in a good year. We have to be very careful with flights that we put in and out.

“It depends on the geography and the demographics and so many other variables, which say Ontario is going to be a very successful market in these short-haul operations but not in the long-haul.”

Attracting other airlines

Two other types of airlines — low-cost carriers and ultra-low-cost carriers — might find Ontario more enticing.

The historic low-cost leader is Southwest, which accounts for about 56 percent of total traffic in Ontario. But under its current corporate strategy, there’s no indication Southwest would considerably expand in Ontario, even if terminal and landing fees dropped. (In an email, a Southwest spokeswoman said only that the airport has performed well for the airline.)

Like its competitors, Southwest has been looking to boost profits and is seeking more business travelers, with services such as priority boarding and security screening. Meanwhile, Southwest has been focusing less at outlying airports it once dominated, like Providence, R.I., and Oakland, and adding them in places like Boston and San Francisco.

Other successful low-cost carriers include Virgin America and JetBlue, neither of which serves Ontario. Virgin America has its Southern California base in Los Angeles while JetBlue is in Long Beach. Of the two, JetBlue could be more likely to turn to Ontario, as Long Beach Airport is capacity controlled and the carrier has no room to grow there.

But neither carrier has shown much interest in Burbank’s Bob Hope Airport, which has by far the lowest terminal rental and airline fees of any Southern California airport. Burbank’s decline has not been as steep as Ontario’s, but it too is facing trouble. It served 4.2 million passengers in 2012, down from 5.9 million in 2007.

There is some good news.

If the new airport authority can lower fees, Ontario likely will attract airlines focused on providing the lowest possible ticket prices.

These are airlines now serving LAX, such as Allegiant Air, which recently abolished its toll-free reservations line, Spirit Airlines, which charges for most carry-on baggage, and Frontier Airlines, which announced it will charge some customers for drinks. Cost-conscious international airlines, such the Mexican carrier Volaris, might also consider Ontario.

“We will seek new and additional service from all airlines, but the most cost-sensitive airlines are likely to be the initial focus — especially airlines that previously expressed interest in serving ONT but indicated that its costs were prohibitive,” officials with the Ontario airport authority wrote in their statement.

There is some question as to how much economic impact these carriers would have on the Inland Empire. Analysts say the ultra-low-cost airlines are known for grabbing every penny they can from communities without providing much in return. They also often enter a market with less than daily service to leisure destinations, meaning they might not be much use for business travelers. And if a market is not profitable for these carriers, they usually pull out almost immediately.

In a recent interview, Los Angeles World Airports Executive Director Gina Marie Lindsey said the airport is already trying to attract these carriers, and has been working to lower fees for airlines.

Lindsey has become the top enemy for those who think Ontario is mismanaged, but she said there is only so much officials can do, given the facts of airline economics.

“I understand their hopefulness,” she said of Ontario’s boosters. “At some point, we do need to be practical about what is possible and what’s not. I would love to see a plan or a set of suggestions from them as to what we should do differently.”

Williams, executive director of the airport alliance, said he is optimistic Ontario officials can considerably grow traffic if they take over. But he said even if growth is slower than some hope — and even if the only new flights come from smaller leisure airlines like Spirit — the business community will be patient.

“Incremental growth is better than no growth, and right now we have no growth,” he said. “Simply put, I have more faith in the city of Ontario officials than I do the LAWA officials in deciding what is best for Ontario airport.”

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IMPROVING LA/ONTARIO

The Ontario International Airport Authority has been coy on exactly what steps it will take to improve air service at L.A./Ontario International Airport, if it can take control of the facility. But it has compiled an outline of general principles:

• Aggressively market ONT to incumbent airlines and airlines with the potential to serve ONT.
• Develop effective community support programs to build local demand for flights from ONT.
• Develop air service incentive programs.
• Develop ONT advertising and marketing campaign aimed at airlines and passengers.
• Expand international air traffic growth to serve the local and regional demand.
• Assess all customer touch points for ways to improve service and reduce costs.
• Implement new technology solutions for parking revenue management and other services.
• Survey and benchmark ONT customer satisfaction on regular basis.
• Aggressively seek out local and national firms interested in improving the ONT experience.
• Partner with area and regional tourism agencies and organizations to promote.
• Maximize the use of ONT to foster tourist activities in Southern California.

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