Big Airlines Will Land at L.A., But Dispute Is Still Up in the Air
A key question: Can airport revenues pay for local services?
WHAT fees airlines pay to land at airports is one of those arcane issues usually worked out by faceless bureaucrats, mercifully behind closed doors. It is not the stuff of a David Letterman Top Ten list.
But a dispute between major air carriers and the city of Los Angeles over higher landing rates at Los Angeles International Airport (LAX) has moved the issue dramatically forward in the cabin of concerns - with important implications for the industry and municipalities across the country.
While the two sides were able to resolve their immediate differences this week with the help of federal mediators, averting a virtual shutdown of the nation's third-busiest airport, broader questions remain.
They include how much local governments can reasonably charge airlines to maintain public airports, and whether airport revenue should be used to fund other local services, such as putting more cops on the beat.
US Transportation Secretary Federico Pena, whose agency oversaw the two days of marathon talks between the city and more than 70 air carriers, promises to issue new guidelines next week on airport-airline relations. The aim is to avoid the type of brinkmanship that occurred here and threatened to disrupt the nation's transportation system.
But even with a more activist role by Uncle Sam, analysts say that conflicts over airport management and money are likely to continue at a time when the finances of both local governments and many airlines are as thin as a tail fin.
``I think the issues will only be magnified,'' says Lee Howard, president of Airline Economics International Inc., a Washington, D.C., consulting firm. Both sides defiant
The dispute here centered on a move last June by the Los Angeles Airport Commission and City Council to triple the fees charged for landing at LAX. Seventy-five airlines that account for 90 percent of the flights at the airport had refused to pay the higher charges and went to federal court to protect their access to LAX.
The city, equally defiant, set a Saturday deadline for airlines to pay up - or else be banned from landing.
Under the agreement hammered out this week, the air carriers will pay the higher fees ``under protest.'' That amounts to $16 million to $18 million retroactive to last July. The airlines, though, will continue to press their lawsuit over the fairness of the hikes. A hearing in the case is set for Monday. The city has agreed not to raise rates any more until at least next July.
Air carriers argue that the new fees are higher than needed to pay airport operating expenses. They rose from 51 cents to $1.56 per 1,000 pounds, making the landing costs of a Boeing 747 about $900.
City officials contend that the fees, which hadn't been raised for decades, were too low. They point out that even with the increases, LAX's landing charges will remain lower than eight other major airports - including Denver, Dallas, and Chicago's O'Hare.
Comparing charges, though, can be tricky. Some airports have older facilities, which means lower operating costs, while others have special needs, such as snow-removal equipment.
Behind the hikes lie deeper concerns. Airlines worry that a big increase here will spur other money-strapped cities to do the same. Northwest Airlines is already protesting higher landing fees assessed by Kent County, Mich., for its Grand Rapids airport. The US Supreme Court heard arguments in the case Monday. Honolulu has proposed a six-fold increase in landing fees.
Though the charges account for less than 5 percent of an airline's total operating expenses, carrier officials say the fees represent one of the industry's fastest-rising costs. They are clearly banking on the US Department of Transportation (DOT) for some relief. ``Secretary Pena will give us an indication next week whether DOT is going to get highly involved in these disputes,'' says Chris Chiames of the Air Transport Association of America, a trade group. Paying for police
Even more worrisome to airline officials is the prospect of cities using airport revenues to buttress general treasuries. They believe this would open the floodgates to fee increases. In the dispute with Los Angeles, airline officials charged that Los Angeles Mayor Richard Riordan (R) was really interested in diverting the money to pay for more police.
Using airport revenues for anything other than airport operations, though, is against the law - and Mr. Riordan has been adamant that the city has no plans to do so. His administration has, however, been open about the fact that it would like to see a change in federal statutes to allow diversions.
Indeed, it has made improving the management and capturing a return on three of the city's big, semi-autonomous departments - water and power, the harbor, the airport - a central thrust.
Critics, however, worry that diverting money from these moneymaking enterprises could undermine long-term investment in the vital facilities.
``The minute you begin to siphon off money from the L.A. airport or harbor, you make it harder for them to expand their facilities,'' says Steve Erie, a professor at the University of California at San Diego who is writing a book on the agencies.