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LA World Airports Smartly Reconsiders Regionalization Strategy

By Brett Snyder

Updated on: July 22, 2010 / 10:06 AM EDT / MoneyWatch

I've had plenty of harsh words for the Los Angeles World Airports' (LAWA) so-called regionalization plan to push traffic from LAX to other airports around Southern California. It appears that LAWA is now starting to feel the same way as airport commissioners seem to be publicly question the strategy. It's about time.

In a recent meeting of the LA Board of Airport Commissioners, several members showed their hesitancy to support pushing traffic to other airports considering that LAX has been shedding traffic for years. LAWA CEO Gina Marie Lindsey said it quite nicely.

Continuing to pursue a strategy that actively pushes traffic away from the City of Los Angeles to other jurisdictions could be viewed as a little self-destructive.

This chart gives a rundown on what exactly has happened to airport traffic in Southern California since 2000, when it hit its peak.

Long Beach is an anomaly here. That huge growth was due to JetBlue's entry into the airport. Burbank and Orange County had done better until this last recession when even they saw the bottom fall out. You can see where Ontario was doing well, but it has now become the laggard of the group. LAX suffered in the early part of the decade more than most, but it has outperformed other airports since that time. Still, it's nowhere near where it needs to be.

Back in 2000, LAX topped 67 million passengers during the year, and the airport was reaching capacity. The surrounding communities, apparently forgetting that LAX had been there far longer than them, ratcheted up the fight and several lawsuits were making their way through the courts.

In 2006, LA Mayor Antonio Villaraigosa stepped in and agreed to a sweeping compromise with the communities. This deal ended the fight and put forth the requirement that beginning in 2010, LAX would discontinue using two gates per year through 2020 unless passenger traffic was below 75 million annually. In addition, it solidified the plan for what has been called regionalization around Southern California.

The idea was to encourage flights at the two other LAWA-operated airports. Palmdale, which lies 70 miles north of downtown Los Angeles was without service at the time, and Ontario, 40 miles east of downtown Los Angeles was still a small airport with plenty of room to grow. The plan failed miserably.

Ontario had a shiny new terminal, no curfew, and no angry nearby residents. But it also was (and is) nowhere near the big money centers of LA. Things looked good for Ontario when it became the first west coast destination for JetBlue (JBLU) and when ExpressJet (XJET) made it a large focus city for its west coast operation, but things soured quickly.

JetBlue had originally planned to make Ontario its west coast focus city, but LAWA didn't bring rates down enough to keep the airline around. JetBlue eventually moved its focus city to Long Beach, where rates were much lower and in the end, JetBlue pulled its only flight out of Ontario completely. ExpressJet's attempt at service failed and when the airline shut down, passenger numbers at the airport plunged. They have yet to recover.

Things at Palmdale were no better. The government shelled out a bunch of money to start flights from Palmdale, and United Express began service to San Francisco. The service was a flop, and despite a bevy of excuses rattled off by LAWA, the service disappeared the day the subsidy ended. In the end, LAWA decided to walk away from Palmdale, and the airport is now in the city's hands.

As you can see, the regionalization effort has been a failure, but that is unlikely to be the reason why some commissioners are interested in reconsidering the effort. The biggest reason is actually a number: 56,520,843 to be precise. That's the number of passengers that used LAX in 2009.

Remember, LAWA was thinking that LAX would be bumping up past 75 million right now, but instead, the airport is still 20 million passengers behind that, as the above chart showed. With passenger numbers so depressed, it makes one wonder why the operators of the main airport in LA would be trying to push traffic elsewhere.

The reality is that regionalization is a joke. If the demand is there, airlines will start flying. And in fact, we have seen increases in flying at regional airports, just not the ones that LAWA owns. You can't just push airlines to serve another airport through gentle encouragement. You either force them to move or you let market forces take over.

In the case of LAWA, LAX should be the main focus. Ontario should be trying to compete with LAX for flights, not just sitting there waiting for leftovers. If the market is allowed to work, Ontario can get aggressive at lowering rates and offering incentives as it sees fit. But for LAWA to do that goes in the face of what it should be doing at LAX.

It makes sense that the commissioners are thinking about this twice. Ultimately, they should decide to let Ontario fight its own battles and kill this misguided regionalization plan.

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Photo via Flickr user jondoeforty1