Ontario faces heavy lifting to get airport back on its feet

Aug. 6, 2015 5 PM PT

Now that Ontario has regained control of its airport in a deal struck with Los Angeles, the small Inland Empire city faces a substantial challenge to revive a struggling facility that has lost more than a third of its passengers since 2007.

The sale agreement announced Thursday could also have ramifications for regionalizing air traffic, a legal mandate to spread some of the growth in passengers from busy Los Angeles International Airport to other commercial airfields in the Los Angeles Basin.

Los Angeles World Airports, which operated Ontario as well as LAX and Van Nuys Airport, is required to pursue regionalization under a 2006 court settlement that ended a lawsuit challenging the airport expansion plans of former Mayor James K. Hahn.

There has been considerable controversy surrounding whether Los Angeles has met the goals of regionalization. Since the 2006 settlement, LAX has gained market share while other airports have lost some.

“This transfer advances that regional aviation strategy,” Los Angeles Mayor Eric Garcetti said at a news conference Thursday. “We benefit when Ontario grows....It relieves some of the air and car congestion around our airport.”

Under terms of the sale agreement, officials said Ontario will pay Los Angeles $190 million over 10 years, assume $59.5 million in debt and provide job protection for 182 employees. The deal will also settle a lawsuit brought by Ontario two years ago in its attempt to wrest control of the facility from Los Angeles.

The payment is far less than the $400 million to $475 million that Los Angeles officials had sought during earlier negotiations with Ontario. But officials say the amount will substantially reimburse Los Angeles World Airports, the current operator, for investments made in the airport — a condition of the deal.

The settlement must be approved by city councils and airport commissions in Los Angeles and Ontario, as well as the Federal Aviation Administration. The process will take about a year.

“Together we’ve reached a deal that will benefit everyone,” Garcetti said. “I am thrilled that we can stop litigation and focus on a partnership that expands Southern California’s commitment to superior air travel.”

Once they obtain control of the airport, Ontario officials say, they will take steps to rebuild passenger volumes and lower the now-high cost for airlines, which put the airport at a competitive disadvantage.

They include streamlining the staff, eliminating a $9-million annual administration fee collected by Los Angeles, more aggressively courting airlines and replenishing a marketing and advertising budget that was slashed in recent years.

Already, Southwest Airlines, the largest carrier at the airport, wants to explore adding service at Ontario in “a more favorable cost environment,” said Andrew Watterson, a senior vice president for the carrier.

John Husing, an economic consultant in the Inland Empire, said the airport is primed for a comeback because the region’s economy has recovered from the recession and will have added 110,000 new jobs by 2016.

Ontario International’s market area includes about 4.4 million people, he said, a population larger than Oregon and 24 other states. By restoring flights and destinations, Husing contends that travelers from Riverside County, San Bernardino County, Orange County and east Los Angeles County will be more encouraged to fly out of Ontario than the often congested LAX.

“It is crucial to the region’s economy to rebuild the base of flights,” he said. “They must get the airport costs down for carriers and intensively market the airport. This will all take time.”

If forecasts are correct, the Southern California Assn. of Governments has predicted that Ontario International could have 11 million to 19 million annual passengers by 2035.

But airline industry consultants question whether the new owners can easily or quickly restore Ontario International’s passenger volumes, which peaked at 7.2 million in 2007 and plummeted to less than 4 million in 2013.

“Both sides might be a little disappointed,” said Jack Keady, an aviation consultant based in Playa del Rey. “L.A.’s airport empire has shrunk and it did not get the price it originally sought. Ontario won’t get the flights they think they will. It’s going to be interesting to see how this plays out.”

Keady said Ontario will have a hard time wooing carriers because its market is largely based on economy flights and does not have that many full-fare business and first-class travelers.

But in some ways, he said, the deal is a “win-win” because Ontario will reacquire its hometown airport and Los Angeles will get out from under a legal cloud and look good by freeing up one of its satellite airports.

“It puts the city in a better light,” Keady said. “Now it can concentrate on LAX, which is really needed.”

Michael Boyd, an airline consultant and principal of the Boyd International Group in Colorado, said it was good that Ontario will gain control of its own airport. But he added that the city will have difficulty attracting new service because the airlines are now making money and don’t necessarily have to add seats to remain profitable.

“If they think they will suddenly add service,” Boyd said, “they are dreaming. The airlines already have what they can get.”

In 2014, the airport handled about 4.12 million passengers, a slight increase over 2013 but less than the volumes of the 1980s.

Ontario City Councilman Alan Wapner, who heads the Ontario International Airport Authority, said he was optimistic that the airport will be able to accommodate the increasing demand for air travel in the future. He noted that the market was there and that the airport can be developed to generate a healthy revenue stream.

The agreement is “a win for all of Southern California,” Wapner said.

The ability to attract new airline service has significance for the effort to spread air traffic from LAX to other airports.

Los Angeles was supposed to use two of its airports, Palmdale Regional Airport and Ontario International, for that purpose, according to the 2006 court settlement. But Palmdale is now closed and under the control of the city of Palmdale.

The Alliance for a Regional Solution to Airport Congestion, a coalition of cities and community groups that has fought expansion plans at LAX, praised the transfer and predicted it will reduce growth at LAX and related environmental impacts on surrounding neighborhoods.

“This is a day …we have looked forward to for a long time,” said alliance president Denny Schneider. “The return of Ontario International Airport...will be a tremendous boost to the entire regional economy.”

The group contends that Ontario will be able to add service and take some travelers away from LAX, which will contribute to regionalization.

“Transferring control of Ontario International will help us fulfill the promise of developing a truly regional approach to accommodating the growing air traffic in Southern California,” said Los Angeles City Councilman Mike Bonin, whose district includes LAX. “It will provide passengers throughout the region better travel options, give the residents of Ontario a say over their own airport and ease the burden of traffic and congestion on the neighborhoods surrounding LAX.”

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