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LAX Airlines Cry Foul Over Rents - Part II  
User currently offlineLaxintl From United States of America, joined May 2000, 26022 posts, RR: 50
Posted (7 years 10 months 2 weeks 4 days 4 hours ago) and read 2986 times:

As follow up to previously locked topic ( http://www.airliners.net/discussions...general_aviation/read.main/3157380 ) under which airlines primarity operating in T-1 and T-3 would have their rents increased signifcantly under new formula taking into account variable such as actual square footage rented plus total flight and passenger volume at the facilities.

The airlines yesterday lost out on their appeal to the Los Angeles City Council to review the proposed new rates.

Council lets stand LAX fee increases

Panel refuses to review an Airport Commission decision, despite protests from air carriers.

By Jennifer Oldham, Times Staff Writer
January 13, 2007


Resisting pressure from the powerful airline industry lobby, the City Council declined Friday to intervene in what carriers alleged was an unprecedented increase in terminal rents and fees at Los Angeles International Airport.

As a result, the council let stand a controversial decision by the Airport Commission last month to quadruple terminal fees for low-cost carriers at LAX in Terminals 1 and 3.

Discount airlines vowed to file a protest with the federal Transportation Department. Carriers have until mid-February to file voluminous documentation supporting their argument that the new terminal charges are discriminatory because they don't apply to carriers at LAX with long-term leases.


http://www.latimes.com/news/local/la...story?coll=la-headlines-california

I'm not sure what the DOT can or would do, as the new fees are certainly within industry norms and lower than other airports such ORD, while its the airlines own decisions to remain on month-to-month terms instead of decade long leases such as adopted by many larger carriers such as AA & UA which help insulate them cost wise.


From the desert to the sea, to all of Southern California
25 replies: All unread, showing first 25:
 
User currently offlineIkramerica From United States of America, joined May 2005, 21562 posts, RR: 59
Reply 1, posted (7 years 10 months 2 weeks 4 days 3 hours ago) and read 2951 times:

Quoting Laxintl (Thread starter):
I'm not sure what the DOT can or would do, as the new fees are certainly within industry norms and lower than other airports such ORD, while its the airlines own decisions to remain on month-to-month terms instead of decade long leases such as adopted by many larger carriers such as AA & UA which help insulate them cost wise.

Bingo.

With flexibility comes cost, in any business. You want to live month to month? There are apartments that will rent to you, but they cost more. You want a short term lease on a car, ditto. You want "flex space" at an airport, with the ability to pull out if the airport doesn't do what you want, you should pay more.

I think part of the issue is that these airlines thought they were in a position of power, by always holding the "we'll just pull our operations out" threat over the LAWA's head. But the LAWA is not dumb. They know that there's no place left to go, and that there are other airlines who want the space, so why not charge for the privilege of being there?



Of all the things to worry about... the Wookie has no pants.
User currently offlinePanAm747 From United States of America, joined Feb 2004, 4242 posts, RR: 8
Reply 2, posted (7 years 10 months 2 weeks 4 days 2 hours ago) and read 2916 times:

Quote:
I think part of the issue is that these airlines thought they were in a position of power, by always holding the "we'll just pull our operations out" threat over the LAWA's head. But the LAWA is not dumb. They know that there's no place left to go, and that there are other airlines who want the space, so why not charge for the privilege of being there?

I agree with you completely, but let me ask this: Is it a true statement that Alaska Airlines has been trying to improve facilities at T3 and get some international services put in?

IF LAX is going to raise rates, that's there business - and from what I understand, their rates are among the most competitive in the nation, so no sympathy here for "short-termers". Let's just hope that T3 is brought up to standards that force it to be every airline's LAST choice!!



Pan Am:The World's Most Experienced Airline - P(oor) S(ailor's) A(irline): San Diego's Hometown Airline-Catch Our Smile!
User currently offlineMariner From New Zealand, joined Nov 2001, 25561 posts, RR: 86
Reply 3, posted (7 years 10 months 2 weeks 4 days 2 hours ago) and read 2896 times:
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Quoting Ikramerica (Reply 1):
You want to live month to month? There are apartments that will rent to you, but they cost more.

But usually, landlords try to tart up an apartment before they quadruple the rent.

Helloooooo, T3?

mariner



aeternum nauta
User currently offlineSocalatc From United States of America, joined Jan 2004, 529 posts, RR: 1
Reply 4, posted (7 years 10 months 2 weeks 4 days 2 hours ago) and read 2862 times:

Like I said before if LAWA actually uses the increased fees to improve the rundown 1960's terminals of T1-3 then I would support the increase . However, I do not believe they will, and will more than likely go towards other airport needs that may not be as important.

User currently offlineIkramerica From United States of America, joined May 2005, 21562 posts, RR: 59
Reply 5, posted (7 years 10 months 2 weeks 4 days 2 hours ago) and read 2856 times:

Quoting Mariner (Reply 3):
But usually, landlords try to tart up an apartment before they quadruple the rent.

Only if they have to. If they can rent if for 4 times as much without putting the money it fix it up, they will do so.

Airlines in T1/3 want rent controls imposed by the DOT. But it's not like SWA or AS are bankrupt airlines in need of relief...



Of all the things to worry about... the Wookie has no pants.
User currently offlineMariner From New Zealand, joined Nov 2001, 25561 posts, RR: 86
Reply 6, posted (7 years 10 months 2 weeks 4 days 2 hours ago) and read 2823 times:
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Quoting Ikramerica (Reply 5):
Only if they have to. If they can rent if for 4 times as much without putting the money it fix it up, they will do so.

You must deal with some shonky landlords.  Smile

Quoting Ikramerica (Reply 5):
But it's not like SWA or AS are bankrupt airlines in need of relief...

It was my understanding that Alaska was/is prepared to part with money to get better facilities.

Maybe I'm wrong.

mariner



aeternum nauta
User currently offlineLaxintl From United States of America, joined May 2000, 26022 posts, RR: 50
Reply 7, posted (7 years 10 months 2 weeks 4 days 1 hour ago) and read 2773 times:

Quoting Socalatc (Reply 4):
rundown 1960's terminals of T1-3

T-1 is far from being rundown and is not 1960s vintage at all. Built in 1984 for a fact, and has seen several renovations including the recent security re-design and added food and shopping choices.

T-3 story goes back to TWA whom was the exclusive lease holder of the faciliy since its opening and simply failed to keep it up thru the decades until AA walked away from the place in 2002.
The terminal by default reverted back to the city, whom honestly did not want to be in the business of running terminals as a landlord.



From the desert to the sea, to all of Southern California
User currently offlineMariner From New Zealand, joined Nov 2001, 25561 posts, RR: 86
Reply 8, posted (7 years 10 months 2 weeks 4 days 1 hour ago) and read 2760 times:
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Quoting Laxintl (Reply 7):
whom honestly did not want to be in the business of running terminals as a landlord.

Maybe they did not want to be the landlords of T3, but they became so and they are quite happy to raise the rent.

But being a landlord has certain obligations as well.

Or - let it go. Sell it to the highest bidder.

mariner



aeternum nauta
User currently offlineLaxintl From United States of America, joined May 2000, 26022 posts, RR: 50
Reply 9, posted (7 years 10 months 2 weeks 4 days 1 hour ago) and read 2739 times:

Quoting Mariner (Reply 8):
But being a landlord has certain obligations as well.

Or - let it go. Sell it to the highest bidder.

Which I am sure the airport would happily have done IF a carrier would have steeped forward and be willing to assume the terminal.
For all the talk of Alaska wanting more or better facilities at LAX, they certainly dont seem to have put their money where their mouth is.

As far as improving T-3, LAWA did sink recently in several million for much overdue improvements to public areas and is currently in review of rebuilding what will basically be an all new facility that would cost approximately $500 million.
http://www.syska.com/Aviation/projects/lax.html



From the desert to the sea, to all of Southern California
User currently offlineIkramerica From United States of America, joined May 2005, 21562 posts, RR: 59
Reply 10, posted (7 years 10 months 2 weeks 4 days ago) and read 2734 times:

Quoting Mariner (Reply 6):
You must deal with some shonky landlords.

Maybe your nation is different, but I didn't see any difference in Australia or the UK compared to the USA when it comes to upkeep of rentals. The minimum required to get the rent desired is all that is put into most properties.

This seems to be what's going on at T3. The airlines are not willing to pay more, and LAWA is not really into putting in more money. Now let's see what happens with the higher rents. Maybe there's a breaking point...



Of all the things to worry about... the Wookie has no pants.
User currently offlineCOSPN From Northern Mariana Islands, joined Oct 2001, 1643 posts, RR: 0
Reply 11, posted (7 years 10 months 2 weeks 4 days ago) and read 2711 times:

Is this a Ploy to Force LCC to ONT or PMD ????????

User currently offlineMariner From New Zealand, joined Nov 2001, 25561 posts, RR: 86
Reply 12, posted (7 years 10 months 2 weeks 4 days ago) and read 2666 times:
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Quoting Ikramerica (Reply 10):
Maybe your nation is different, but I didn't see any difference in Australia or the UK compared to the USA when it comes to upkeep of rentals.

I lived and worked in the US or many years and, on two separate occassions, rented in Los Angeles - BHPO. In both instances, the houses were "improved" by the landlord before I moved in.

I cannot speak for the UK or Australia, I have not rented there.

Quoting Laxintl (Reply 9):
For all the talk of Alaska wanting more or better facilities at LAX, they certainly dont seem to have put their money where their mouth is.

I doubt that Alaska has need of an entire terminal, and it is a curious world whereby a tenant has to buy the house in order to get it fixed up.

I also thought that LAWA was less than thrilled about the long term occupancy leases of some of the other terminals?

mariner



aeternum nauta
User currently offlineLaxintl From United States of America, joined May 2000, 26022 posts, RR: 50
Reply 13, posted (7 years 10 months 2 weeks 3 days 22 hours ago) and read 2595 times:

Quoting COSPN (Reply 11):
Is this a Ploy to Force LCC to ONT or PMD ????????

The pricing structure already favors the use of ONT for instance. Will be interesting to see what happens to LAX landing fees compared to the other LAWA airports this summer when they are due for adjustment and if the prices will be further tweaked to economically encourage service at other regional airports while discouraging LAX service.

Quoting Mariner (Reply 12):
I doubt that Alaska has need of an entire terminal, and it is a curious world whereby a tenant has to buy the house in order to get it fixed up.

By assuming the master tenancy, Alaska certainly could make monies off subleasing facilities or 3rd party handling at T-3 which is certainly allowed and can be financially worthwile as many airlines have discovered

Quoting Mariner (Reply 12):
I also thought that LAWA was less than thrilled about the long term occupancy leases of some of the other terminals?

Yes, as LAWA has been thrown into to the day to day management of larger portions of LAX, it has been seemingly become frustrated with the lack of utilization amongst some long term leased facilities while others like T-1 are bursting at the seams.
As result Delta in particular has become public enemy number one as the airport tries to evict the carrier, and most recently assume the bond debt on T-5 in an effort to shift around terminal use.

I suppose this is a sign that LAWA after having a very much laissez-faire attitude on terminal usage for many decades want to take a more active roll when it come to facility management and oversight.



From the desert to the sea, to all of Southern California
User currently offlineAaway From United States of America, joined Oct 2003, 1550 posts, RR: 14
Reply 14, posted (7 years 10 months 2 weeks 3 days 22 hours ago) and read 2585 times:

This issue of charges and fees at LAX has two facets:
(A) Terminal Rentals and, (B) Maintenance and Operating (M & O) expenses.
In short, LAWA has increased both sets of charges where able. The new M & O charges are in effect at all terminals. New terminals rental charges will take affect as terminal leases expire. Needless to say, all of the LAX air carriers are up in arms, though the immediate effect on the T-1 and T-3 carriers is greater.

This was the ATA's response:

WASHINGTON, Jan. 12, 2007 -- The Air Transport Association of America (ATA), the industry trade organization of the leading U.S. airlines, today issued the following statement in response to the Los Angeles City Council's decision to allow LAX to raise airport rental rates:

"We are extremely disappointed that LAX today was given authority to arbitrarily raise airline terminal rates and we question the legality of this unjustified action. The 'so-called' negotiations that led to this increase were not conducted with candor and in good faith. There was no sincere effort to reach agreement on fair and reasonable rental rates," said ATA President and CEO James C. May. "Unlike other airports where airlines have been able to work cooperatively on improvement programs, LAX has demonstrated that it has no interest in a long-term rational business partnership with the airlines. What now is an adversarial relationship can only negatively impact airline customers and their experience by further delaying the much needed modernization of this antiquated facility."

Quoting Laxintl (Thread starter):
I'm not sure what the DOT can or would do...

Reminiscent of the 1992-93 dust up between LAX and LAX air carriers regarding landing fees. The DOT intervened on behalf of the air carriers when the issue went to litigation. As far as what the DOT could (possibly) do, this short paragraph from the summary detailing the landing fees court case indicates the DOT has the ability to intervene:

"...The airlines challenged the fee increase pursuant to an
expedited administrative procedure in which the Department
of Transportation has authority to set aside unreasonable
fees."

I don't know what specific strategy the T-1 and T-3 carriers are taking, but the TBIT carriers are soliciting legal counsel and, perhaps, girding for litigation. As an FYI, TBIT will be the next terminal affected by the new LAWA Terminal Rental provisions as the lease there expires in March '07.



With a choice between changing one's mind & proving there's no need to do so, most everyone gets busy on the proof.
User currently offlineMariner From New Zealand, joined Nov 2001, 25561 posts, RR: 86
Reply 15, posted (7 years 10 months 2 weeks 3 days 22 hours ago) and read 2570 times:
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Quoting Laxintl (Reply 13):
By assuming the master tenancy, Alaska certainly could make monies off subleasing facilities or 3rd party handling at T-3

I guess what puzzles me is that it that would require an airline to get into the business of airport real estate.

mariner



aeternum nauta
User currently offline77411 From United States of America, joined Jul 2006, 152 posts, RR: 0
Reply 16, posted (7 years 10 months 2 weeks 3 days 22 hours ago) and read 2560 times:

My thoughts would be if the airlines arent happy with LAWA, the airlines have two options. Stop complaining and raise the fares drastically to pay the rents until the locals complain about the expense of flying at LAX and then they can turn around and point the finger at LAWA. Or, a more unlikely scenario, stop flying to LAX all together and put that dump out of business. But what are the chances of the airlines sticking together as one. Probably slim and LAWA knows it.

User currently offlineAaway From United States of America, joined Oct 2003, 1550 posts, RR: 14
Reply 17, posted (7 years 10 months 2 weeks 3 days 22 hours ago) and read 2552 times:

Quoting Laxintl (Reply 13):
I suppose this is a sign that LAWA after having a very much laissez-faire attitude on terminal usage for many decades want to take a more active role when it come to facility management and oversight.

LAWA readily admits this, as this quote illustrates from a declaration in LAWA's adversary case vs DL:

"...Pursuant to the Master Plan Settlement, among other things, if total passenger operations at LAX exceed 75M annual psgrs., then, commencing in 2010, LAX is required to eliminate two passenger gates per year until the total number of passenger gates is reduced from the current 163 to 153."

"As a result of the constraints imposed by the Master Plan Settlement, flexible and efficient gate utilization is one of the linchpins of LAX's future operations".



With a choice between changing one's mind & proving there's no need to do so, most everyone gets busy on the proof.
User currently offlineLaxintl From United States of America, joined May 2000, 26022 posts, RR: 50
Reply 18, posted (7 years 10 months 2 weeks 3 days 21 hours ago) and read 2537 times:

Quoting Aaway (Reply 14):
"...The airlines challenged the fee increase pursuant to an
expedited administrative procedure in which the Department
of Transportation has authority to set aside unreasonable
fees."

There is the crux of the issue, are the new fees "unreasonable"?

Most of the airlines involved have operated since 2000/2001 under their expired low lease rates while the city has tried to establish new rental formulas, along with fact that even under the new rates, the LAX fee structure would be lower then at other US airport such as SFO and ORD. (LA Times had a good comparison when this issue first surfaced)

While I can appreciate the grand standing and possible shock airlines are exemplifying at this large one time adjustment, the rates are far from being "unreasonable" in my view. After all LAX has long been viewed as a "cheap" airport to operate from particularly when compared to its closest West Coast rival SFO.



From the desert to the sea, to all of Southern California
User currently offlineIkramerica From United States of America, joined May 2005, 21562 posts, RR: 59
Reply 19, posted (7 years 10 months 2 weeks 3 days 21 hours ago) and read 2512 times:

Quoting Mariner (Reply 12):
In both instances, the houses were "improved" by the landlord before I moved in.

With all due respect, you are arguing a complete fallacy and not providing any proof of anything. They didn't improve your houses because they felt like doing it for no reason. They did it because that is what the market demands to rent those houses at those rates. And there is also a law regarding habitability that must be maintained or you are not required to pay rent.

Landlords do not go around making costly improvements and not charging the rent to justify it. They just don't, at least not in any country I've heard of. I've rented 4 houses in LA, and apartments around the country, and visited friends living in rentals in other countries.

As for LAX...

It sounds like at LAX, the LAWA is looking to tear down T3. How do they do that and make money at the same time?

Raise the rents, and buy back control of T2 and T5 and raise the rents there, too. Prepare to have everyone crammed in further at T1-T2-T5-T6 so T3 can be rebuilt. Raising rents might mean some airlines cut back frequencies and some to also increase jet size, and some pull out altogether.

Just a guess based on the information Laxintl and others have provided over time...



Of all the things to worry about... the Wookie has no pants.
User currently offlineMariner From New Zealand, joined Nov 2001, 25561 posts, RR: 86
Reply 20, posted (7 years 10 months 2 weeks 3 days 21 hours ago) and read 2493 times:
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Quoting Ikramerica (Reply 19):
With all due respect, you are arguing a complete fallacy and not providing any proof of anything.

I'm not sure how one would "prove" that. I can only speak from my own experience. If you prefer not to believe it, I can only shrug.

However, as to the specific case of LAX, one wonders why airports anywhere improve their facilities if they can get away with quadrupling the rent for what is - in the case of T3 - a terminal that is, at best, adequate.

mariner



aeternum nauta
User currently offlineAaway From United States of America, joined Oct 2003, 1550 posts, RR: 14
Reply 21, posted (7 years 10 months 2 weeks 3 days 21 hours ago) and read 2473 times:

Quoting Laxintl (Reply 18):
There is the crux of the issue, are the new fees "unreasonable"?

Well, fair to say that, in this case, the definition of "unreasonable" will get a thorough review. Will the defintion be based upon the amount of the increase?:

"On a consolidated basis for the entire airline industry at LAX this would have resulted in M&O fees increasing from $47.8M in 2005 to $95.6M in 2006." Since the T-1 and T-3 leases expired in 2005, how does LAWA justify a doubling of M & O expenses?

Will "unreasonable" be defined by methodology?:

LAWA proposed three changes to their methodology for calculating M&O rates
•Assessment of terminal security charges
•Assessment of charges related to airport “access”
•Increase in recovery of their administrative and overhead costs from 15% to 42%.

Or, will "unreasonable" be defined by application? As it stands, the long term lessees are excluded from immediate increases due to contract language in the leases. The LCC's complaint is that, regardless of the amount of the charges, this application of the new schedule is unequitable.

Your point of comparing SFO's costs to LAX's is well taken. However, the context of the comparison maybe somewhat misleading considering the capital improvements that have been made at SFO.

[Edited 2007-01-14 05:54:36]


With a choice between changing one's mind & proving there's no need to do so, most everyone gets busy on the proof.
User currently offlineFlyONT From , joined Dec 1969, posts, RR:
Reply 22, posted (7 years 10 months 2 weeks 3 days 20 hours ago) and read 2434 times:

Quoting COSPN (Reply 11):
Is this a Ploy to Force LCC to ONT or PMD ????????

I sure hope so. ONT is way underutilized. Every flight I have taken out of ONT, doesn't matter what month it is or day of the week, is always packed. Maybe some of the LCC's will leave T3 and come over to ONT??? Well, at least I hope they do!


User currently offlineNonfirm From United States of America, joined Sep 2005, 434 posts, RR: 0
Reply 23, posted (7 years 10 months 2 weeks 3 days 19 hours ago) and read 2390 times:

Quoting Ikramerica (Reply 5):
Airlines in T1/3 want rent controls imposed by the DOT. But it's not like SWA or AS are bankrupt airlines in need of relief...

And because of that they should pay 4 times as much.This is B.S.
 airplane   no 


User currently offlineGmcc From United States of America, joined Apr 2006, 190 posts, RR: 0
Reply 24, posted (7 years 10 months 2 weeks 3 days 8 hours ago) and read 2284 times:

Quoting FlyONT (Reply 22):
ONT is way underutilized

Because of the perception that it is too difficult to get to. No one wants to fight SR 91 or 60 to get to ONT. Until it is easier to go to ONT than it is to get to LAX from downtown Los Angeles the other business centers in the greater Los Angeles basin, LAX will continue to be the airport of choice.


User currently offlineSocalatc From United States of America, joined Jan 2004, 529 posts, RR: 1
Reply 25, posted (7 years 10 months 2 weeks 3 days 5 hours ago) and read 2234 times:

Quoting Laxintl (Reply 18):
After all LAX has long been viewed as a "cheap" airport to operate from particularly when compared to its closest West Coast rival SFO.

That may be true, but compare the two airports and their amenities. SFO has a people mover between terminals and BART that goes directly into the airport, where LAX has neither. SFO has beautiful terminals and it always seems like they are doing more. Where LAX has one or two decent terminals and the rest are junk. There is a reason why SFO charges more, its because they give more. LAX just gives headaches to passengers and airlines.


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