L.A. official says legal claim undermines Ontario airport talks

April 11, 2013|By Dan Weikel
  • A 2003 photo of LA/Ontario International Airport, when it opened two new terminals, 265,000 square feet each. Since then, passenger numbers have dramatically declined.
A 2003 photo of LA/Ontario International Airport, when it opened two new… (Irfan Khan / Los Angeles…)

Los Angeles City Administrative Officer Miguel A. Santana said Thursday he was shocked by a legal claim filed by an Inland Empire group attempting to gain control of L.A./Ontario International Airport.

Santana, who has been moderating talks over a possible airport transfer, said he thought the parties were having productive discussions. The legal action, he said, could undermine further efforts to reach a deal.

“It violates the spirit of the negotiations,” Santana said. “We’ve spent a lot of time and resources to set up a fair process. I am not sure what is next given the legal claim. It’s hard to have meaningful discussions. They are essentially walking away from the table.”

Ramping up their effort to acquire the regional airport, Inland Empire officials lodged their legal claim against Los Angeles, alleging that the city has mismanaged the struggling aviation hub and violated agreements to act in the airport’s best interest.

The city of Ontario filed the action -- the first step toward bringing a lawsuit -- a day after rejecting an offer from Los Angeles World Airports to sell Ontario International for almost $475 million.

In addition to monetary damages, the action seeks a transfer of ownership and the termination of a 1967 joint powers agreement in which the Los Angeles airport department became the operator of Ontario on the condition that it improve the facility. Los Angeles assumed ownership in 1985 at virtually no cost.

The 30-page claim alleges that Los Angeles officials have violated the terms of the 1967 agreement, which requires them to exercise their best efforts to attract and obtain airline service.

“Unfortunately, the current situation at Ontario is one of chronic neglect and mismanagment by its operator and the operator’s unwillingness to comply with its contractual and other legal obligations,” the claim states. “As a result, the financial and operational situation at Ontario is now dire and increasingly urgent.”

Passenger volumes have plummeted from 7.2 million in 2007 to 4.2 million last year, more than 40%. The latest projections indicate that the passenger level could fall below 4 million in 2013. Meanwhile, the number of travelers at other commercial airports in the region has been increasing.

Instead of exercising its best efforts to attract airlines, the claim states that Los Angeles has squandered the asset by slashing Ontario’s advertising/marketing budgets and failing to act fast enough to reduce the airport’s high costs for carriers, a disincentive for providing service.

The city’s airport department has asserted in the past that Ontario’s problems stem from the worst recession since World War II, which has prompted airlines to reduce flights and move service to well-established markets at larger hubs, such as Los Angeles International Airport. Efforts to cut costs and lure airlines back to Ontario, they say, have been unsuccessful.

However, the claim states that at a Los Angeles City Council meeting in October, several members expressed a need to “protect LAX as the prime regional airport” and asked whether Ontario International under new ownership “would steal our business from LAX?” One said “it would be a sin” to transfer the airport.

It is further alleged that Los Angeles airport commissioners and airport executives have made similar remarks about their preference for LAX.

Ontario city officials also assert that Los Angeles World Airports has not complied with a 2006 court settlement that required it to try to spread some of the growth in air traffic at LAX to other airports in the area, such as Ontario International. Progress has been so slow that the claim describes the effort  as “a fair weather policy.”

Los Angeles officials have said that they support regionalization and have taken adequate steps to do so, but they cannot force airlines to locate at certain airports.

Ontario City Councilman Alan D. Wapner said the claim was filed out of legal necessity and does not preclude the two cities from working toward an amicable agreement to transfer control to the recently established Ontario International Airport Authority.

Both sides are now far apart on the terms of any deal. While Los Angeles estimates that the airport’s market value is as high as $605 million, a study by Ontario’s consulting firm, Oliver Wyman, asserts that the facility has a negative worth of $78 million to $104 million because of its uncertain future and severe decline.

“We remain hopeful of finding a mutually agreeable path to return Ontario to local control,” Wapner said. “At the same time, we are prepared, if necessary, to take additional measures to obtain control."


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