The Evolution of Ontario Int'l Airport (OIAA)

The Evolution of Ontario International Airport
BY BENÉT WILSON ON APR 6, 2018

On November 1, 2016, the city of Ontario achieved a major milestone: after five years of negotiations and litigation, it took back control of Ontario International Airport from Los Angeles World Airports (LAWA). The move ended an almost 50-year partnership.

Back on October 18, 1967, the city of Ontario asked the city of Los Angeles to enter into a Joint Powers Agreement (JPA) for the operation, management, and control of Ontario International Airport. On June 19, 1985, the city of Los Angeles acquired Ontario International Airport and placed it under the auspices of LAWA.

In 2006, LAWA renamed the facility LA/Ontario International Airport as a way to highlight its proximity in the Los Angeles metro area and avoid being confused by the Canadian province of Ontario. But by 2010, the city was not happy with the way LAWA was managing LA/Ontario Airport. After protracted negotiations, LAWA gave control of the airport back to the city of Ontario in exchange for being reimbursed for investments in the airport, job protection for 182 employees and settlement of a lawsuit in which Ontario sought to regain control of the airport.

The airport is now run by the Ontario International Airport Authority (OIAA). Mark Thorpe is the CEO of Ontario International Airport. He spoke to Airport Business magazine on topics including the benefits of operating as an airport authority, keeping costs low, maintaining its dominance in the cargo arena and staying competitive in the Southern California market.

Airport Business: Why was it necessary for Ontario to break away from LAWA and what was the process?

Mark Thorpe: The case for local control of the airport was articulated by Ontario City Council Mayor Pro Tem Alan D. Wapner, now president of OIAA, in an op-ed published in the Los Angeles Times on April 18, 2010. In a nutshell, the need for local control was attributed to a decision communicated to the city of Ontario leadership by LAWA executives in 2010 to concentrate on modernizing Los Angeles International Airport and growing traffic [there] to increase revenue and pay for that modernization. This decision reversed a decade-long commitment by LAWA and the city of Los Angeles to encourage the “regionalization” of passenger and cargo traffic through the growth of aviation activity at Ontario International and Palmdale Regional airports.

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 2017, 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 dormant and unoccupied, in some cases, for more than 19 years
• Begun to re-appraise the airport’s non-terminal real estate for the first time since 2005

AB: What are you doing to market Ontario International as an airport of choice for airlines, cargo carriers and passengers in the region?

MT: There is a compelling case for airlines to choose us. Our primary catchment area -- San Bernardino and Riverside counties -- is the fastest-growing area within the five-county Southern California region. The airport has the second-highest average household income among airport catchment areas in Southern California, second only to John Wayne Airport and higher than LAX and San Diego. The population and local GDP of our two-county primary catchment area are both roughly 1.5 times that of San Diego, which enjoys far more extensive domestic and international passenger traffic than does Ontario. We are the only unconstrained airport for growth in Southern California, in terms of operational and infrastructural capacity, passenger traffic caps and noise-related restrictions. We’re also the only airport in Southern California, other than LAX, with runways long enough to accommodate long-haul and trans-oceanic international passenger and freighter flight operations.

Because of the nature of peak-period traffic flows in Southern California, 10.3 million of the region’s 18 million residents can access the airport conveniently in a counter-flow direction for morning departures and afternoon/evening arrivals, avoiding 12 of the 40 worst U.S. traffic bottlenecks that surround LAX and other Southern California coastal airports

The airport sits between U.S. I-10, less than a half mile away, the most important east-west highway spanning the U.S. Sun Belt and CA-60, less than 2.5 miles away, one of Southern California’s most important east-west state highways. It’s also five minutes away from U.S. I-15, the major freeway artery that runs from San Diego to Las Vegas and on to Salt Lake City. And there are four access points to the airport from U.S. I-10 on the north, four access points from the south on CA-60 and one direct access point from U.S. I-15 on the east.

AB: You have a nice mix of airlines -- Aeromexico, American, Alaska, Delta, Frontier, Southwest, United and Volaris -- but they are pretty West Coast heavy. What are some of the dream cities you’d like to serve?

MT: Ten years ago, we had nonstop flights to several longer-haul domestic destinations, including New York City, Atlanta, Nashville and Honolulu, as well as various regional markets such as Boise, Eugene, Tucson and Colorado Springs. We would certainly like to bring back nonstop service to these destinations, as well as other major destinations throughout the U.S. that we don’t currently serve. We’re excited about new Frontier Airlines services to Austin and San Antonio, which will enable our passengers to reach Washington, D.C., without changing planes.

We’re also very excited about China Airlines’ service to Taiwan that begins in March 2018, because we are confident that this service will demonstrate that we are a viable second gateway between Southern California and numerous points throughout Asia, Europe, Mexico and Canada.

AB: What new airlines and cities have you added since the change to an airport authority?

MT: Frontier Airlines began operations in October 2017, serving Denver, San Antonio and Austin. The San Antonio and Austin nonstop flights continue to Washington Dulles International Airport, providing the first same-plane service in the ONT-IAD market. Southwest Airlines began service to Dallas Love Field in January 2017. American operated seasonal service in the ONT-ORD market in the summer of 2017.

On the international front, Mexican airline Volaris introduced service to Leon, Mexico, while North Carolina-based Dynamic Airways operated charter service between Ontario and Nanchang, China, during the summer months.

On March 25, 2018, China Airlines will begin four-time-a-week Boeing 777-300ER service to Taoyuan International Airport in Taiwan. This service will mark the first nonstop transoceanic service from an airport other than LAX in the history of aviation in Southern California.

AB: You went back to the name Ontario International Airport. What are you doing to market that name and not have it confused with a Canadian airport?

MT: We went back to the name Ontario International Airport because local research shows that Southern Californians are aware of us and see us as a very convenient and easy-to-use airport when flights are available to destinations where they want to fly. Given the fact that tens of millions of passenger flights originate in Southern California each year, our primary marketing focus will be in Southern California. So there is not a need to tell Southern Californians, who are aware of the airport’s location, that it is located within the greater Los Angeles region.

For people living in areas outside of the area, we include Southern California within our logo as well as in our new tagline “So Cal. So Easy.” This is an easy phrase that expresses what people inbound travelers to Southern California/Greater Los Angeles want from an airport in our region – ease of getting to and through an airport, plus the amenities that make it a pleasant part of the travel experience at the airport.

In addition, we know that people are strongly impacted by images so, whenever possible, we include imagery that reflects those aspects of living and doing business in Southern California that make our region so attractive the world over. For example, we recently ran an outreach campaign promoting new service on Expedia, which included a custom landing page for Ontario International that featured palm trees with our airport beauty shots and the very distinctive San Bernardino mountain range.

AB: You serve as a West Coast cargo hub for UPS. How important is cargo to the airport’s bottom line?

MT: Extremely important! We were the number six airport in the world in 2016 as reported by Air Cargo World. We continue to see double-digit, year-over-year growth in total air cargo tonnage. Through the first nine months of 2017, our airlines handled 462,989 tons of cargo, up 14 percent compared with the same period in 2016. Landing fees collected from cargo airlines help keep our costs low, making the airport more attractive to passenger carriers.

AB: What do you think has been the most important change at Ontario International since becoming an airport authority?

MT: There’s been a major internal cultural shift away from being reliant on another organization like LAWA. Instead, we are now accountable to ourselves and our local partners on how we do business and the results we achieve. It’s ownership not just on paper, but in everything we do. I believe that this attitude is apparent in the deliberate, cooperative way that we work with our current and prospective airline partners to bring in new flights, pursue new concession agreements and market ourselves as a Southern California gateway airport.

As a result, our brand is very different today than it was before the transfer. What we have to offer — to our airline partners, passengers and the region we serve — is very much top of mind, both in Southern California and increasingly throughout North America and the rest of the world.

AB: What do you hope ONT looks like five years from now?

MT: We want to build on the momentum and successes of the past 12 months and further establish ourselves as a vital domestic and international gateway airport for Southern California. We want more nonstops to major domestic destinations and more international flights to Asia, Europe, Canada and Mexico.

We also see the airport as a major economic driver for the city of Ontario, the Inland Empire and Southern California, attracting businesses and industries to the region. We are uniquely positioned to do so. Having a great airport where passengers can fly to and from, with an unmatched passenger experience while they do so, is so important for us as we work to bring the world, not only to these two counties, but also most of Southern California’s residents and business travelers.