Airport Files Flight Plan to Financial Independence

Los Angeles World Airports is embarking on a strategy to make Van Nuys Airport financially independent through a series of increased fees and costs to leaseholders and users of the San Fernando Valley airfield. The money coming in through lease payments and a fuel flowage fee doesn’t cut it anymore for the operations and administration of the airport. This budget year, for example, Los Angeles International Airport needed to make up for a $9.7 million deficit. A recent study commissioned by the Los Angeles City Controller’s office on the four airports operated by LAWA laid out ways for Van Nuys to attain financial self-sufficiency. Even without that report the agency’s board of directors was already taking steps to generate more money at Van Nuys. A board vote on increasing the fuel flowage fee was delayed to give staff time to compare the Van Nuys fee with comparable general aviation airports. A proposal sent to the board for its Jan. 12 meeting would have raised the fee over three years from $0.03 to $0.11 in 2011. If that plan had been approved an additional $688,000 would have come into the airport’s coffers in the first year. Also being looked at by LAWA is a recommendation from the KH Consulting Group study to consistently collect a landing fee for aircraft using Van Nuys. <!– Landing: Fees collected inconsistently. –> Landing: Fees collected inconsistently. The goal of these fee increases is not to make a profit from the airport but to just have it break even, said LAWA Executive Director Gina Marie Lindsey. “We are looking to be sure it pays all of the capital and operating costs,” Lindsey said. One option for self-sufficiency not on the agency’s plate is a recommendation from KH to look into contracting out management of Van Nuys to a private company. The airport was identified as a good candidate for private management because there would likely be more bidders because of fewer barriers to entry and its less complex regulatory environment as compared to Ontario Airport, which handles commercial flights. There are no active discussions between LAWA, Mayor Antonio Villaraigosa and the City Council about privatizing any of the airports, said agency spokesperson Nancy Castles. “We need to put that one to rest,” Castles said. A Fight Ahead? Van Nuys is the world’s busiest general aviation airport and has long played a role of handling private jet and piston aircraft traffic to give relief to LAX. While tension exists between the airport and surrounding residential neighborhood over aircraft noise the airfield is still recognized as a vital component not just to the city’s economy but the region’s as well. Dozens of aviation-related companies are located at the airport itself, not to mention those in adjacent industrial areas benefitting from that close proximity. Airport tenants are unlikely to go without a fight against any new or increased fees being considered by LAWA. “Why would one be inclined to accept increases when it doesn’t result in the delivery of improved services or anything of that light?” asked Robert Rodine, a consultant with aviation clients and co-chairman of the Valley Industry & Commerce Association Aviation Committee. The Airport Deficit Recovery Program, for instance, is meant to recover charges from use of common areas such as runways, taxiways and service roads. No details of the program have been provided to tenants, which one leaseholder said flies in the face of his lease agreement. The delay by the board on the fuel flowage fee was welcomed by Rodine as an opportunity to press the VICA committee’s case that the fee should not be more than $0.06. Rodine and others suggested that LAWA needs to look at where it can cut its expenses before going to the tenants to make up any budget shortfall. “The bottom line in business is you cannot raise your fees just because you are not meeting expenses without looking at those expenses,” said one long-time leaseholder. The airport is aggressively looking at where it can makes cuts in its budget, said manager Selena Birk. Some budget items are mandated through city ordinances, for safety reasons and for their community benefits, such as the soundproofing programs, Birk said. “There are costs that I do not have a lot of discretion to look at,” Birk said. Real Estate Missing from the KH study was any mention of property at the airport that lack leases. A 5.8 acre parcel on Valjean Avenue has long been empty and much coveted by existing leaseholders. The LAWA board had placed on an agenda in May going out for proposals to develop the land but then pulled the item. No action has been taken since. The former Jet Center property has also long been unused. Interested parties have for years submitted proposals to turn the seven acres on Daily Drive into a fixed-base operation. Elite Aviation had been negotiating to lease the property and then pulled out in June as the company’s vision changed. Castle & Cooke Aviation Services, second choice among the multiple proposals for the land, is currently in negotiations for a lease and awaiting the results of a California Environmental Quality Act review of the property. That both properties remain undeveloped has led to grumbling that LAWA is dragging its feet and losing out on money it could make from those leases. Lindsey conceded the agency was not “consistently rigorous” at pushing best business practices when it comes to managing its property at Van Nuys. It is unique property, comparable to beachfront property, and LAWA is in midst of dispensing with the backlog of potential leases, Lindsey said. “As we clean up some of the lease opportunities that have been out there lingering for a while we are certainly going to be looking to make wise business deals that represent the value of the land out there,” she added. Another recommendation in the consultant’s study now under review is collecting a landing fee at Van Nuys. While such a fee has been in place, it has been inconsistently collected, both Lindsey and Birk said. The matter has been turned over to LAWA’s finance division and the city attorney’s office to get it straightened out. One challenge faced by the airport is a process to accurately track landings, which can be difficult to do at a general aviation airport because there is no scheduled service. Another challenge is that other airports use varying criteria of collection it can be a flat fee, based on weight or even just applied to itinerant aircraft. “There is no pattern at general aviation airports,” Birk said.