Airport Business

APR 2018

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COVER STORY AB: Why was the decision made to create an airport authority? What were the benefits and how is it run? MT: The airport authority model was suggested back in 2012 by major airlines providing passenger and cargo service [here]. In response to this guidance, the city of Ontario and San Bernardino County established a Joint Powers Agreement (JPA) that created OIAA in August 2012 to manage the airport for the benefit of the Southern California economy and the airport's four-county— San Bernardino, Riverside, Orange and Los Angeles counties — catchment area. The JPA provides for OIAA to be led by a board of airport commissioners, comprised of two elected officials from the city of Ontario, the San Bernardino County supervisor who represents the county's 4th District, which includes the airport, as well as two at-large seats for the appointment of community and business leaders who reside within the airport's air service region. Current OIAA Commissioners are Mayor Pro-Tem Alan Wapner (president), retired Riverside Mayor Ronald Loveridge (vice president), Ontario Council Member Jim Bowman (secretary), San Bernardino County Supervisor Curt Hagman and retired East West Bancorp Inc. executive Julia Gouw. AB: In the 2013 Strategic Plan, the stated mission was to "operate and grow Ontario International Airport as one of the most competitive, efficient, innovative and customer-friendly passenger, cargo and business airports in the United States as a key economic asset serving the Inland Empire and the entire Southern California region." How far along are you on this mission? MT: We've made great progress in each of these areas. Since the transfer to local control, we have: • Added domestic and international passenger flights • Entered into new multi-year concession agreements to increase non-airline revenue streams and transform the customer experience • Expanded and diversified the airport's advertising and sponsorship program in both terminals and on surrounding airport property • Allowed private, app-based companies such as Lyft and Uber to provide their services at the airport for the first time • Fostered an environment for continued growth by the three major U.S. integrator airlines, United Parcel Service, Federal Express, and Amazon Prime Air • Developed a land-use plan that will accommodate future growth by integrators, all-cargo airlines, freight forwarders, etc.; and allow the airport to expand its role as a global air freight and e-commerce gateway • Secured federal grant funding for airfield repairs, such as improved taxiways. Market response to these improvements has been very positive. In September, we recorded the 13th consecutive month of increased passenger volume, the longest period of sustained growth since 2007. In addition, sustained double-digit air cargo traffic growth at the airport has us on track for record-level traffic for CY 2017, with 650,000 annual tons within reach. It's clear that airlines and passengers are becoming more bullish about the airport, and the steady passenger and cargo traffic increases show that we are on track in our efforts to transform into a gateway airport with facilities and amenities that appeal to air travelers and global logistics companies. AB: One concern in the plan about Ontario International Airport breaking away from LAWA was that the airport's costs were too high, which meant it couldn't compete with other airports in the region. What have you done to address this issue? MT: Our uncompetitive cost structure was identified as a barrier to retaining and increasing air service the white paper Ontario International Airport – A Recovery Plan, prepared for the city in September 2010. A LAWA/Jacobs Report in 2010 noted that "ONT's total operating expenses per enplaned passenger are more than twice the average for U.S. medium hub airports." Several steps have been taken and are being taken to address the long-standing problem, including: • A consortium of signatory airlines at the airport, known as ONT-TEC, is assuming responsibility for most landside functions, such as facility equipment maintenance and custodial and landscaping services • OIAA is evaluating the contracting of airport operations and airside maintenance to a privately run partner • By the second quarter of 2018, all remaining LAWA employees will become OIAA employees, or transfer back to LAX, in accordance with the terms of a staffing transition plan agreed to between the city of Los Angeles and the OIAA as part of the 2015 settlement agreement • Because the airport operates under a double-residual financial model (residual landside and airside cost centers), per its existing use and lease agreement with its signatory airlines, any growth in non-airline revenue represents a de facto decrease in the airports operating costs • Reached numerous short-term use agreements with companies to lease airport real estate on land that had, in many instances, remained Ontario International Airport Ontario International Airport 26 airportbusiness April 2018

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