By Count Friedrich von Olsen
Is Ontario flying by the seat of its pants?
Now that Ontario has regained control of its hometown airport, Ontario officials would have us believe that the evil genii has been stuffed back into his bottle, Lucifer has been banned to the most distant spot in the universe and encapsulated in a million mile thick wall of ice surrounded by an impenetrable and inescapable ring of fire, God is in his Heaven, all is right with the world and things have gone from being execrably bad to perfect in Ontario. Ontario’s control of its own airport, which after all is its God-given right, has given it control of its very destiny and has already transformed life in the Inland Empire, as we know it. Last month, Los Angeles was hell bent on destroying the Inland Empire’s economy and had in its possession the means to do just that. Now that Ontario Airport has slipped from its grasp, Ontario is economically invulnerable…
According to Ontario officials, the activity at Ontario Airport was not an indicator of Ontario’s economy and that of the area surrounding the city, but the economic engine of Ontario, western San Bernardino County and the hub of the Inland Empire. Now that Ontario has control of the airport, in the days and weeks ahead, the number of airlines flying into and out of Ontario will go from the rather anemic eight currently to twice that number. By October or November there should be three times that many. Early next year there should be a good thirty airlines flying out of Ontario. Those already there will double and then triple the number of their flights. The airport’s problem next year will not be too few flights but rather too many. The planes will be backed up a couple of dozen at a time on the taxiways waiting to take off…
There is a common warning that people should be careful about what they wish for because sometimes those wishes come true. Ontario officials’ collective wish of regaining full control of Ontario Airport has now been granted. For a mere $260 million, far less than the $450 million to $550 million Los Angeles could have sold the airport for to a private company, Ontario will have complete autonomy over that facility. For the last five years, as ridership there continued to slip from the 7.2 million passengers that embarked or disembarked there in 2007 and as the airlines became increasingly reluctant to schedule flights into or out of Ontario, Ontario officials have attributed this to the incompetence, malevolence, and perfidy of Los Angeles…
Perhaps Ontario officials are correct. Under their Midas touch, the airport may make a comeback. But it is just as likely it will not. Whom will Ontario then blame? Will Ontario officials seek to demonize themselves?
A lot goes into running an airport. I happen to know that from experience. And my experience is just with a small airport. An international airport is a horse of a different color. One complaint registered against Los Angeles and its corporate entity, Los Angeles World Airports, over and over again was that the cost of flying out of Ontario was too high. Passengers, faced with ticket prices to travel to the same destination that were anywhere from $50 to $80 to $120 to $140 more at Ontario than Los Angeles, often opted to fly from Los Angeles International Airport. Ontario officials laid the blame for this at the feet of Los Angeles and Los Angeles World Airports. But this blame was misplaced. It is true that Ontario Airport imposed a higher enplaned passenger fee on the airlines than did Los Angeles International Airport. But it is barely significant: $14.50 per enplaned passenger at Ontario, which is $3.50 more than the $11 charged at Los Angeles International. The $3.50 difference was not what drove the airlines to charge higher traveling rates to passengers embarking at Ontario as opposed to Los Angeles. Rather, it is a basic principle of business economics controlling that difference: customer volume…
In business, whatever you do – making widgets, manufacturing Styrofoam cups, baking apple pies, cutting hair, laying concrete, repairing carburetors, flying airplanes – costs you money. You make money by having customers buy or pay for the products you make or services you deliver. An important component of going into business or taking on a certain job is having the confidence that you will have sufficient sales to defray your costs of production or service. The more customers you have, the lower you can set your prices, and therefore your profit margin, because increasing your volume of sales ensures you will have enough incoming revenue to offset or defray your expenses and, beyond that, provide you with a profit. If you do not have the confidence of having a decent volume of customers, you must then raise your prices to increase your profit margin per item or service delivered to ensure you will meet your production or service provision costs. Thus, this confidence has a synergistic effect: Low prices bring in more customers. More customers mean higher volume, allowing you to keep your prices low. But there is an anergistic effect from a lack of confidence: If you don’t have the guarantee of a lot of customers, you must charge more for each product or rendering of service to justify producing that product or providing that service in the first place. And the more you charge, the greater the likelihood that your potential customers, faced with the possibility of purchasing the product you sell or the service you deliver at a lower cost elsewhere, will elect not to do business with you…
The few airlines flying out of Ontario were beset with this anergy. For them to schedule flights into and out of Ontario, they ideally wanted to have the confidence that there would be, not just on a single day or once in a while but on a consistent basis, a lot of passengers. Each flight costs the airlines a set amount of money for the plane’s flight crew, its ground crew, its fuel, its maintenance, its depreciation. It is therefore desirable that the planes be filled or be close to filled with passengers on those flights. A flight here or there with a half full plane is acceptable if the vast majority of that airline’s flights from or to that particular destination are near capacity. But if on a regular basis flights from a specific place or to a specific destination involve planes that are two-thirds full, or half full or at a third capacity, the airline is in danger of losing money. To offset this, the airlines must raise their prices for flying to or from those locations…
It is a simple fact that Los Angeles is a much larger place than Ontario. In addition, it is a more economically vital place than Ontario. Therefore, Los Angeles enjoys a greater volume of passengers at its airport than does the airport in Ontario. This is a simple mathematical reality. There is no sinister element there. There is no malevolence in Los Angeles by virtue of it being larger than Ontario. Los Angeles, Ontario’s big brother, did not seek to smother its little brother in his crib. The airlines were simply reacting to mathematical and economic reality in limiting their flights into and out of Ontario and in charging their passengers more for providing service from Ontario…
Volume or lack thereof manifests synergistically and anergistically in other ways. Ontario is about to learn this. Take fuel, for instance. Modern airports have fuel farms, i.e., large tanks or bladders, sometimes above ground but usually underground, which hold jet fuel of different types, such as kerosene or naphtha. The larger the airport, the more fuel it buys. The more fuel you buy, the better the price you can get. I will let my readers derive for themselves a rough mental comparison of how much fuel Los Angeles World Airports buys for Los Angeles International Airport and how much it buys for Ontario International Airport. I don’t know the precise number of gallons, but I can tell you it is a lot. When Los Angeles World Airports stops buying aviation fuel for Ontario Airport, it will still be buying a lot for Los Angeles International Airport. It will still be buying so much, it will be able to get that fuel at as about as low of a price as it can be purchased. When Ontario starts buying aviation fuel for Ontario Airport, it will be purchasing at most about ten percent of the fuel that Los Angeles World Airports is purchasing. My guess is Ontario will be paying more for the fuel that will go into Ontario Airport’s fuel farm than Los Angeles World Airports will be paying for the fuel that goes into its fuel farm. So when the airlines fuel up at Ontario Airport, they will be paying more than they will pay in Los Angeles. Those prices will be reflected in the ticket prices passengers will purchase for flights from those respective airports. Tell me again how Ontario owning and running Ontario Airport is going to make it a more viable aerodrome…
Before and during World War II the Nazis whipped the German people up into a frenzy through the use of propaganda. That propaganda consisted of telling the Germans that they were the Übermenschen, the supermen, and that foreigners were Untermenschen, or subhumans. I have a great deal of respect for Germans and German culture. As far as appealing to German pride goes, telling them they were very capable and had a lot of potential was probably okay, and they did well for themselves and their country, at least initially, constructing the Autobahn and an impressive industrial sector that made it very difficult to defeat them when the war came. The problem, or one of the problems, however, was that along the way the German people started to actually believe the propaganda. They believed they were supermen and that all others were subhuman. It took a Herculean effort and a lot of ugly things and destruction and the shedding of a lot of blood I would rather forget about, but in the end, the German people learned that the propaganda they were fed was just not true…
Ontario’s officials engaged in a propaganda campaign. They have suggested they are supermen and that Los Angeles officials are evil and selfish men from whose clutches Ontario Airport needed to be plucked so that Ontario can assume its rightful spot as the economic center of the Inland Empire. They, and they alone, they assured all of us, could make the local economic engine hum if they were just entrusted once again with control of airport, which is the key to financial security for the rest of the coming generation. A lot of people have come to believe this propaganda. The deal returning the airport to Los Angeles has been worked out but it will take another year or so for it to be finalized, with the city councils for both cities having to vote on this and the Federal Aviation Administration having to approve the hand off. The deal could yet be rescinded or called off if the parties determined that it is in their own or mutual interest to allow Los Angeles to continue to guide Ontario Airport’s operations…
I ask again: Is Ontario flying by the seat of its pants?