Los Angeles World Airports has settled a four-year dispute with its biggest tenant, United Airlines, agreeing to pay the carrier $35 million after reaching a deal for a revised lease.
The agreement calls for United to relinquish four gates at Los Angeles International Airport’s Terminal 6 that LAX officials plan to allocate to other expanding airlines. The airline will also give up ownership of the terminal’s baggage system. The airport intends to install an in-line baggage security system that other airlines can use.
In addition, United will give up ownership of Terminal 7’s customs facilities, allowing LAX to charge airlines higher customs fees.
United, along with receiving cash compensation, will be allowed to keep its small commuter planes at Terminal 8. Previously, the airport had filed a lawsuit over the planes, contending that United was overcrowding the area, endangering passengers by forcing them to walk on the tarmac near passing jets. To improve safety, United will keep the Terminal 8 gates closest to the street and farthest away from jet traffic.
Both parties benefit from the agreement, said LAWA Executive Director Gina Marie Lindsay.
“This will mean improved use of the real estate at the airport, especially at Terminal 6 where airlines could expand,” said Lindsay, who noted that discount airline JetBlue will start operating out of the terminal in June. “Although we are paying out a settlement, the end result will be better for our end of the business.”
United Airlines officials did not return inquiries for comment. But Jack Keady, an air transportation consultant in Playa del Rey, said that United comes out a winner from the deal.
“I think it’s a big plus because of the $35 million and getting to keep the planes at Terminal 8 without prolonging the lawsuit,” Keady said. “Whatever they were going to give up was probably not needed anyway, as they are trying to overall consolidate operations amid a slump in passenger traffic.”
UAL Corp., parent of United Airlines, posted a $1.3 billion loss in the last quarter of 2008, compared with a loss of $53 million a year earlier.
The exact settlement amount paid to United will be $34,061,895, but airport officials are placing the funds in escrow while United makes the required adjustments at LAX, scheduled to be completed by late August.
Cutting Back Hours
How times have changed.
Back when trade was booming, the ports of Los Angeles and Long Beach jointly established an independent not-for-profit agency called PierPass to develop and manage a program to keep the ports open four weeknights and on Saturdays as a way to reduce truck traffic.
In order to subsidize the program, PierPass charges $50 per 20-foot cargo container, known as the Traffic Mitigation Fee, on cargo processed during weekdays.
But now that cargo growth has dipped by double digits and terminal operators are looking to stay in the black, the ports next month will start cutting back the hours during which cargo can be processed.
Terminal operators will eliminate either an evening shift on Thursday or one Saturday shift per week starting April 6, depending upon when business is expected. If marine terminal operators close after hours on Thursday, they will stay open on Saturday that week, and vice versa.
“We evaluated a range of options and consulted extensively with our stakeholders,” said PierPass President Bruce Wargo. “The choice of eliminating either one shift per week gives each terminal operator the flexibility to determine which closure would be least disruptive.”
Trade Talk
Reports last week that February container shipments were down 40 percent at the Port of Long Beach and 32 percent at the Port of Los Angeles generated fears that the downturn in trade that started last year appears to be accelerating.
But one local trade expert believes that while international trade is at or close to its nadir, the outlook is not nearly as gloomy as some would have it.
“The second quarter of 2009 will be the worst on record in many years for trade,” said Joseph Magaddino, chairman of the economics department at California State University, Long Beach. “But there is some indication that we will start to rebound toward the end of the year and shouldn’t overly panic when we see this quarter’s bad numbers.”
Magaddino is one of seven panelists, from trucking company owners to shipping line executives, who will discuss the dramatic decline in trade at Long Beach port’s annual Pulse of the Ports event.
The free event, set for 7 a.m. Wednesday at the Hyatt Regency Long Beach, is nearing its capacity of 500. Reservations are required and can be made by sending an e-mail to Adriana Sanchez at [email protected] or calling (562) 590-4110.
Staff Reporter Francisco Vara-Orta can be reached at [email protected] or (323) 549-5225, ext. 241.
