IE Business Daily Business news for the Inland Empire.
Let’s get some facts out from the very beginning. The Airline industry has been running on shoe-string budgets for decades. Airlines go out of business every year. Competition and demand determine where and how many flights any airline makes. The cost of flying a plane is fixed based on aircraft costs, maintenance, fuel and staffing requirements.
Therefore, for an airline to function, it must get the maximum number of passengers on EVERY flight to keep prices competitive and make a profit (though most still do not.)
It is in this light that the transfer of Ontario International Airport to “local” control will make no difference. The idea that the City of Ontario will be able to manage costs any better than Los Angeles World Airports (LAWA) and attract more flights or increase air traveler demand is, unfortunately, wishful thinking.
Here is why. Air travel requires three basic things: An aircraft, an area to take off, and an area to land. The particular matters of takeoff and landing are conditional on an extensive area set aside to do so, Airports. Unlike taxis, you just can’t park a plane anywhere.
For commercial airlines to function profitably, they must also have passengers and cargo that will pay to fly, which means that airlines must have commercial passenger rates that are affordable, competitive, and have a suitable base of customers willing to pay for the service. It also requires centralization of those airport services as, unlike trains, aircraft cannot make multiple stops to pick up passengers.
And there is the rub. Even under the local control of the City of Ontario, the Inland Empire does not produce the necessary passenger traffic to keep costs lower than the centralized airport of LAX. Ontario doesn’t even have the passenger traffic to sustain international air traffic to Mexico. It really is simple mathematics.
Unlike so many other commodities, availability in the airline passenger market does NOT drive demand. We aren’t discussing the choice between red and green apples here. It really isn’t a choice between WHICH commodity to purchase. No one, outside of a few business interests actually HAS to travel by plane.
The same reasons San Bernardino “International” Airport can’t attract airlines is the same reason that Ontario International Airport continues to struggle: there isn’t enough demand for airline services. Additionally, the cost of routing a few airplanes to Ontario, like San Bernardino, is not cost effective based upon the demand for service. This requires higher ticket prices for more expensive flights.
The cost of running an airport doesn’t vary considerably whether an airport has one flight a day or 100. The costs of maintenance, utilities, security, labor and bond debt are fixed costs. Landing fees charged to airlines are in part based on recovery of those costs. Who controls the airport doesn’t change them, but it does prevent subsidies from LAWA now and in the future. Ontario will now be on its own.
Local Control will never change these factors. Purveyors of local control say they will do a better job and that LAWA has been favoring flights to LAX over Ontario. The facts are that airlines will always be able to control costs better at a single, centralized location.
LAWA would have hundreds more planes landing at Ontario Airport if the demand was there because the airlines would be demanding it. They aren’t.
So, while “local” control always sounds better and there are legitimate reasons for it, the concept that it is a panacea for Ontario Airport’s troubles, or for that matter San Bernardino’s airport, is a fallacy. San Bernardino and March Airports have been under local control for 20 years.
Unfortunately, government planners and bureaucrats haven’t taken an economics class. (Apparently, some economists haven’t taken one lately either.) The laws of supply and demand still dictate economic outcomes. Regulation, local control, and wishful thinking won’t change it any more than they have increased bus ridership or demand for high-density housing.
