MIT Study Suggests LA’s Ownership Of Ontario Airport Is Not Its Problem

(May 17) A study of airport traffic trends compiled by researchers at the Massachusetts Institute of Technology released last week has undercut claims that the city of Los Angeles’ management of Ontario Airport is at the heart of a downward trend in passengers there.
According to the Massachusetts Institute of Technology (MIT) study, all airports, and medium and small sized airports in particular, have been hard hit by airline mergers, the continuing recession and increases in fuel prices, all of which incentivized airlines reducing service throughout the United States.
Those categorized as mid-size airports such as Ontario International, Bob Hope Airport in Burbank, and John Wayne Airport in Santa Ana suffered an average 26.2% downturn in their flights from 2007 to 2012.
The study, carried out under the aegis of MIT’s International Center for Air Transportation, found that airlines have adopted a strategy of eliminating less-profitable routes while concentrating on servicing more traveled and higher-profit connections.
City of Ontario officials for the last two years have been making ever more strident charges that Ontario Airport, which reached peak ridership capacity in 2007 when 7.2 million passengers enplaned there but dropped to 4.2 million last year, is being exploited by Los Angeles World Airports, the corporate entity that runs airports for the city of Los Angeles. Ontario maintains that as Ontario Airport has foundered, Los Angeles World Airports has undertaken an energetic improvement plan at Los Angeles International Airport, where ridership has increased.
In 1967 Ontario and Los Angeles entered into a joint powers agreement to allow Los Angeles to use its clout with airlines to increase flights into and out of Ontario International, which at that time was servicing fewer than 200,000 passengers per year. Under Los Angeles’ stewardship, the airport grew, more airlines began flying out of the facility and improvements were made to its runways and terminals. In 1985, after all of the conditions set down in the 1967 joint powers agreement had been met, Ontario deeded the airport to Los Angeles for no consideration.
Ontario officials have now undertaken an aggressive campaign to force Los Angeles to redeed the airport back to Ontario, publicly insisting that the larger city should do so at no consideration because the airport is considered a public benefit property which has no sale value. Privately, however, Ontario has offered Los Angeles $250 million for the airport as Los Angeles has sought potential private and public buyers for the aerodrome at prices ranging from $225 million to $650 million. Ontario considered Los Angeles’s revelation of its private $250 million offer to be an affront and has since formed with the county of San Bernardino the Ontario International Airport Authority, an entity intended to take over ownership and operation of the airport once Los Angeles relinquishes it.
Last month Ontario, through the Washington, D.C.-based law firm of Sheppard Mullen Richter & Hampton, filed an administrative claim, considered to be the precursor of a lawsuit, against the city of Los Angeles and Los Angeles World Airports, charging them with chronic mismanagement of the airport.
The decrease in passenger traffic is a central tenet of Ontario’s claim against Los Angeles. But the MIT study, titled “Trends and Market Forces Shaping Small Community Air Service in the United States,” indicates that there are other more pervasive factors at the root of Ontario Airport’s current malaise.
“The past six years have been challenging ones for domestic air service in the United States,” according to the MIT report’s primary authors, researchers Michael D. Wittman and William S. Swelbar. “Most airports have seen a reduction in scheduled domestic flights. The United States’ 29 largest airports (by 2011 enplanements) lost 8.8% of their yearly scheduled domestic flights between 2007 and 2012, compared to a 21.3% reduction in scheduled domestic flights at smaller airports during the same period. Much of this service reduction at smaller airports is a result of large network carriers reducing frequency to large hubs and removing direct flights to other small- and medium-sized communities.”
For the purposes of their study, Wittman and  Swelbar defined “smaller airports” as airports classified as medium-hubs, small-hubs, or non-hubs by the Federal Aviation Administration. Ontario is a medium hub.
“Smaller airports have suffered significant capacity reductions,” Wittman and  Swelbar wrote.
Moreover, Wittman and  Swelbar suggested Ontario’s diminishing flight dilemma will likely continue, no matter who owns or controls the airport.
“Most likely, small communities will not be able to recover the same level of service in the near term that they received during the capacity-expansion era. These airports will likely see fewer flights operated by smaller aircraft belonging to a new breed of ultra-regional carriers. Airports in close geographic proximity to major hubs and those with a systemic lack of local demand may be at risk of losing all of their network carrier service in the next five years, although some of these flights may be replaced by infrequent  ultra-low cost carriers’ service to vacation destinations,” Wittman and Swelbar maintained.
Ontario, which sustained a 41 percent drop in its passenger traffic in the five years between 2007 and 2012, appears to be a particularly egregious example of an alarming trend within the airline industry, Wittman and Swelbar said.
“While the large-hub airports have been spared from much of the brunt of airline service reductions, smaller airports have seen a much more severe decline in service. In fact, medium-hub airports — not the small-hub or non-hub airports —  saw the largest decrease in departures as a percentage of total from 2007-2012 at 26.2%,” the report states. “Most of the reductions in departures at medium- and small-hub airports have been on routes to other smaller airports.”
In the report, Wittman and Swelbar reference Southwest Airlines, one of the few airlines that has continued to prosper in the severely challenged economy. While Southwest is the major carrier at Ontario Airport, that airline’s operations in Ontario have in some measure accounted for some of its competitors abandoning the Ontario market. Now, however, according to Wittman and Swelbar, Southwest will be making adjustments that will decrease its own flights out of Ontario, which  will prove troubling to Ontario Airport in the near future.
“Today’s medium-hub airports include Oakland, CA, Providence, RI, and Love Field in Dallas, TX — airports that Southwest Airlines targeted in the early stages of its development to serve as alternative options for passengers wishing to avoid the crowded hubs of competing airlines,” Wittman and Swelbar wrote. “In response, network carriers started to cut service to these airports in the face of stiff competition from Southwest on both frequency and price. In many instances, these medium-hub airports can be found in metropolitan areas with multiple airports. Recently, network and low cost carriers alike have been consolidating their service offerings around one point in a metro area versus an equal distribution of service among many airports serving the same metropolitan area. Specifically, as operating costs at Southwest have continued to rise, the nation’s largest low-cost carrier has started to undertake the capacity discipline strategies also practiced by larger network carriers. Southwest cut nearly 10% of its domestic departures from 2007-2012. This has left some medium-hub airports in a precarious position — with both network carriers and Southwest cutting service, these ‘secondary airports’ are often no longer able to compete on service or price with larger, nearby hubs. As such, many of the medium-hubs in multi-airport regions in the United States have seen the biggest reductions in service and connectivity over the past six years. We expect to see these medium-hubs begin to resemble current ‘small-hubs’ in domestic service selection over the next five years, potentially increasing congestion as airlines and passengers alike continue to gravitate towards large airports.”
Ontario officials seemed unfazed by the MIT study. Pointing to the increase in flights at Los Angeles International Airport and the efforts to modernize that facility further as well as Ontario Airport’s passenger traffic downturn in excess of the national average, they continue to maintain that Los Angeles is purposefully mismanaging Ontario Airport and they are stepping up the pressure to wrest the aerodrome back.

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