Ontario, Businesses Vie to Land Control of Airport

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Ten companies, including one based in Santa Monica and a leading private equity firm, are expressing interest in managing LA/Ontario International Airport.

The companies responded to a recent solicitation of interest from Los Angeles World Airports, which wants to divest itself of the airport after being stung by criticism a more than 30 percent drop in passenger levels since 2007. The airport had fewer than 5 million passengers last year.

But the companies may have some stiff competition from the city of Ontario, which has been in talks with the Los Angeles city agency to take over the airport’s management.

Relations between the two sides have been frosty, with the Ontario City Council – a chief critic of LAWA –authorizing staff in January to take whatever means necessary to gain control of the airport, including litigation.

Ontario City Manager Chris Hughes said he is optimistic that talks with LAWA will result in an agreement in which the city manages the airport. Negotiations are ongoing, and Ontario’s goal would be to begin managing it by midsummer.

Accordingly, Ontario did not respond to the solicitation because the city believes it is best positioned to run the airport.

“We understand the airport is an economic tool and we would promote the airport the way we do every other business in this city,” said Hughes. “Our long-term growth plan revolves around making the airport a transportation hub.”

Hughes said that the airport, under LAWA management, has been overstaffed, charging that at its peak in 2007 it employed about 425 people.

“That’s four times the manpower we should have had out there,” he said. “Other airports recovered after 9/11, but Ontario continues to decline.”

The city would cut overhead at the airport as a way of lowering the cost for airlines to use it. He pledged that airport staffing, which he counts at less than 300, could be cut nearly in half to 150.

Hughes added that the costs of Los Angeles International Airport’s ongoing multibillion-dollar expansion and renovation ultimately will be borne by carriers, so it’s possible more airlines will be attracted to Ontario. He believes the city’s convention center and 11,000-seat arena make it a logical hub for regional air travel.

Located in western San Bernardino County, the airport largely serves the Inland Empire and the eastern portions of the San Gabriel Valley.

The expression-of-interest solicitation, issued by LAWA in early January, drew responses from airport and infrastructure management companies around the world, including ones in India and South Korea.

Among the companies that responded are American Airports Corp. in Santa Monica, which runs five smaller airports in California, and Airport Property Ventures in Los Angeles, which manages the Oceanside Municipal Airport in San Diego County.

Other responders include Goldman Sachs Infrastructure Partners, a unit of the New York investment bank that has interests in airports and ports, and Washington, D.C., private equity firm Carlyle Group.

Scott Hamilton, managing director of Issaquah, Wash.-based aviation consultancy Leeham Co., said a private operator could improve retail and restaurants at the airport, which would generate more revenue and possibly lead to lower landing fees. That could attract more airlines.

“For decades, airports had food and gift shops that were overpriced and under quality. As part of a revenue-generating strategy, they started bringing in these companies, so now they have real, honest-to-good shopping malls at airports, good restaurants and brand-name stores,” he said, noting that private operators are more common in Europe.

Mike Molina, LAWA’s deputy executive director for external affairs, said in an e-mail statement that the agency would continue talks with Ontario and that a final decision would be made by the board overseeing the agency.

“While the city of Ontario did not submit an (expression of interest), we continue to work with city officials in the possible transfer of airport management,” Molina said. “All options will be reviewed thoroughly before we bring a recommendation to our Board of Airport Commissioners.”

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