Ontario Airport's High Costs Showcase Missed Opportunity

Just last week I wrote about the anger increasingly being directed toward LA World Airports by Ontario Airport stakeholders. Now, it appears that Ontario is getting more serious as the city looks at potential alternatives for the airport, something that might involve taking management away from LAWA. Looking at some numbers, it seems incredibly clear that they should very seriously consider doing just that. Their costs could and should be dramatically lowered.

The nice thing about airports is that most of them are public and so are their financials and traffic. We all know that Ontario has a cost problem - cost per enplanement is expected to land around $14.50 this year and that's the highest among good-sized commercial airports in California by a long shot. Actually, San Francisco comes relatively close at just under $14, but I think it's safe to say that the fact that Ontario is still more than SFO is a real problem.

So why are costs so high? Well one thing we know is that air traffic has been shrinking at the airport dramatically. The loss of ExpressJet and, to a lesser extent, JetBlue combined with traffic reductions from others, particularly Southwest, has left the airport with fewer passengers over which to spread out its fixed costs. That's why we might not have even hit the cost peak yet.

Surprisingly, it's not debt that's the problem. I've always assumed that the new airport terminal project from a few years ago had made the costs untenable, but that's actually not it. Much of that debt has been paid off by now, and what remains doesn't require outrageous repayment levels. So again, what is it?

It looks like it's airport operating costs that make up the bulk of the waste, and labor is a key part of that. Ontario's wage/benefit costs per enplanement are higher than at any other Southern California airport. Some airports outsource more, so they have higher dollar amounts under "contract services," but even if we combine the two, Ontario is a couple bucks per enplaned passenger higher than LAX and more than double other comparable airports.

So are they paying too much or do they have too many people? Yes.

It's my understanding that there are around 365 employees working for Ontario Airport right now. Believe it or not, that's after 75 to 100 people were sent back to LAX earlier this year. There are more employees at Ontario's airport than at San Diego's airport which has three times as many passengers and a far larger operation overall. In fact, if we assume about 2.5 million enplanements at Ontario this year, the airport will have 146 employees per million enplanements. That's nearly double Orange County and triple Portland, for comparison. Even Indianapolis (an airport not known for cost restraint) is on the high side . . . but Ontario still has a third more employees per million enplanements. LAX is also high but Ontario is still 20 percent above that level. See a pattern here?

It's not just that they have a lot of employees, but they pay them a lot. It looks like the average salary is around $100,000. Yeah. Seriously.

But wait, there's more. Ontario also has to pay an administrative charge to LAWA - this year it's $10.2 million. Spread that over 2.5 million passengers and it adds another $4 to the cost per enplanement. That's more than Burbank's ENTIRE cost per enplanement. What does this magical fee pay for? I'm going to assume that it's some general stuff that most airports have to handle themselves. But Ontario has a lot of extra employees already. Couldn't they find a way to handle these tasks for less?

If Ontario found a way to get rid of LAWA and bring in someone else (or do it in-house), they could instantly and dramatically bring down costs by doing some housecleaning. Heck, just dropping the LAWA administrative fee would be tremendous. I'm surprised it's taken Ontario this long to look into its options. It's about time.