Reliever Airports Face Increasing and Competitive Woes

Reliever airports, once touted as the solution to major metropolitan airport congestion and its environmental impacts on surrounding communities are now facing daunting financial and competitive challenges from the very same airports they were supposed to relieve.

Reliever airports, defined as “general aviation airports in major metropolitan areas that provide pilots with attractive alternatives to using congested hub airports,” Federal Aviation Administration (“FAA”) Advisory Circular 150/5070-6B, Appendix A, Glossary, were typically developed to occupy a market niche in their local regions.  For years, they succeeded in their task.  Since 2009, however, reliever airports throughout the country have lost substantial proportions of their passengers to the major urban airports.  In Southern California alone, reliever airports such as Ontario International Airport (“ONT”) and Long Beach Airport (“LGB”) have seen massive reductions in their passenger counts.  Now these airports are forced to take drastic steps to remain viable. 
 

ONT, located in San Bernardino County, California was developed by the City of Los Angeles (which entered into a Joint Powers Agreement with the City of Ontario, California, its original owner, in 1969) to serve travelers in Eastern Los Angeles County and Northern Orange County, and to take the pressure off Los Angeles International Airport (“LAX”) which, until 2007, was fast approaching its airfield constrained level of operations of 78.9 million air passengers (“MAP”) a year. 

To enhance ridership, the City of Los Angeles invested hundreds of millions of dollars in new terminals and parking lots and other facilities at ONT.  With the 2007 recession and subsequent economic downturn, however, LAX management came to see the use of ONT as competitive with LAX for scant passengers and made affirmative attempts, including reduction in ONT’s marketing budget, to lure airlines to LAX and away from ONT to reduce the competition and perceived drain on LAX resources.  As a consequence, ONT has lost 9.27% of its revenue producing passengers over the last year alone, and is now on the verge of closure as a result.  The City of Ontario has taken legal action against the City of Los Angeles to reclaim ownership of ONT, based on, among other things, Los Angeles’ alleged breach of their 1969 Joint Powers Agreement. 

A similar syndrome has impacted an airport 3,000 miles across the country in Long Island, New York.  Between 2009 and 2012, MacArthur Airport, in Suffolk County, went from a $758,448 annual profit to a $2,068,017 annual loss.  MacArthur’s woes are due not as much to its competition with the major New York airports, LaGuardia and Kennedy which are closer to New York, but to bad bargains with Southwest Airlines (whereby MacArthur paid for the building of eight new gates for Southwest that are now sitting largely idle), and a parking lot operation whose contract with the airport is draining 25% of the airport’s potential profits from concessions.  MacArthur’s management sees privatization, i.e., sale to a private airport operating company, as a possible fix.  That, however, is a difficult road because MacArthur has received millions of dollars in airport development funds from the FAA over the years, which may have to be paid back in its entirety by the private operator as a condition of sale. 

Finally, some frustrated airport operators are attempting to take the drastic step of closure.  The City of Santa Monica, operator of Santa Monica Municipal Airport (“SMO”), is now challenging on constitutional grounds the rule promulgated by FAA which requires, as a precondition of closure, not only the repayment of funds paid by FAA for development of airport facilities, but also reimbursement to FAA of the current fair market value of the property upon which the airport is located, if any portion of the property was purchased with federal funds.  See, City of Santa Monica v. United States of America, et al., U.S.D.C. Case No. CV13-08046.

Of course, there are exceptions to every rule.  Southern California’s John Wayne Airport (“SNA”) and Palm Springs Airport (“PSP”) have increased in ridership even during the economic downturn, largely because of the relative economic viability of local markets in those locations.  These, however, are anomalies in the larger picture of reliever airport economic deterioration. 

Understanding that there is no problem to which there is no solution, however, remedies can be found, not only in the independent upturn in economic viability of target markets, but also in conversion to local control of those reliever airports which are jointly controlled with major airports, such as LAX, to remove the inherent conflicts and competitive interests, and to allow local authorities most benefited by the airports to develop innovative methods to support them. 
 

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