International Air Carriers Await Crucial Upgrades to Bradley Terminal, LAX Runways

The Tom Bradley International Terminal is about to undergo its first major renovation since it opened for the 1984 Olympics. How do you explain letting Bradley Terminal deteriorate in the last 20 years?

The Bradley terminal has been a topic of discussion and planning since 1998, when Leo Daly was originally contracted for the upgrade and redevelopment of the building. When this facility opened we were operating with only 16 airlines. Today we accommodate roughly 10 million passengers a year served by 34 airlines. Under the old master plan, though, there was little we could do, because it prevented us from doing any work outside the footprint of the existing building. So, all of the debate that has continued within the political community for the past ten years to some degree impacted what ultimately could be done to the facility.

And then a number of events between 1998 and 2003 impacted the terminal within its footprint. Obviously 9/11 changed the way we process passengers and handle the security aspects of our business, so many of the ideas and design concepts that had been developed between 1998 and 2001 had to be drastically changed. After that, other conditions, such as the downturn of the economy with SARS made the airlines hesitant to go forward with a major refurbishment. But by late 2003 the airlines and LAWA began discussing the refurbishment and upgrade of the facility, that's what is taking place now and is currently out to bid. We hope to start construction this summer.

In MIR's December interview with El Segundo Mayor Kelly McDowell and our January interview with LAWA Board President Alan Rothenberg, we've been covering the successful negotiation with litigants over LAX. Give us the LAXTEC's shareholders' views of that settlement.

The timing of the settlement and its provisions are great accomplishments for the city, for all parties involved, and certainly a great success for Lydia Kennard and her team. I think the terms of the settlement agreement turned out to be fair for all parties.

The outcome is important for our airline constituents for two reasons. Most important for us was the ability to go forward with the south runway relocation. Albeit not directly a result of the Airbus A380, it certainly helps facilitate A380 operations not only for the carriers that are going to operate the A380, but also for everybody else as the A380 is taxiing between the terminal and runway. The other is that it allows us to go forward with the west side development of the Bradley terminal. It means the relocation of 11 gates on the west side of the airport, bringing those on to the back of the Bradley Building and updating the facility so that it is comparable to other international terminals that we compete with here in the U.S. such as San Francisco, Chicago, Atlanta, New York and other international gateway airports around the world.

Let's focus even more in depth on the Bradley Terminal investments. Last month LA Inc.'s Michael Collins told The Planning Report about the importance of attracting international visitors. What's at stake for the region and the city of L.A. with respect to Bradley Terminal's renovations?

Tourism as a whole is a vital part of the Los Angeles Basin economy. Roughly one third of the revenues and jobs within this metropolitan area can be attributed to the tourism industry. Studies by LA INC. and by LAEDC indicate that the average international visitor spends three times the amount of money in hotels, restaurants, and travel related expenditures in the area compared to a domestic visitor to Los Angeles. In that regard, the international travelers represent an even greater asset to the city of Los Angeles.

It's very important that we continue to be the international gateway. Other airports have gone through design development improvements in recent years and have terminal buildings that can accommodate the next generation of aircraft. They can accommodate a high number of those aircraft simultaneously, and have terminal buildings that give a warm, positive welcome to the United States. That's important to attract the continuing growth of foreign visitors to our community, and to serve the business needs of this community with a large number of diverse population and business centers located in the Los Angeles Basin.

A recent Wall Street Journal article implied that some carriers may be choosing San Francisco over LAX in part because SFO seems more ready to handle the A380. What's the truth of that claim and what does LAX need to do to better compete with other cities on the West Coast?

I think up until the recent settlement involving the master plan issues, there have been many question marks. Now, as a result of the settlement agreement I think that the answer to the question is twofold. In the short-term, I think the airlines that have ordered the A380 and have the first deliveries and plan on serving Los Angeles, will find that the facility will be ready. The runway project, although not critical for the A380, will be completed by the start of service for the A380, and we will have two of the end gates at the Bradley Building modified and equipped to handle the planes when the start of service begins.

The longer-term issue, however, is that as you take a look at the delivery schedule of the aircraft to the various airline customers in 2009 and beyond, there will be more aircraft than gate capacity at the Bradley building or other terminals. Mayor Villaraigosa has recently indicated that the city will be ready to handle those future requirements, and the airlines are looking for that commitment to turn into plans. In the meantime, the airlines have invested hundreds of millions of dollars in that aircraft, and, as with any new product, they want to make sure that it gets into the market place with a positive image and experience. They don't want to jeopardize the perception of that aircraft, or their service by having that aircraft serve a facility or market where it's not ready and the customers have a poor experience. For instance, the airlines have said that a remote facility is not an option – the aircraft needs to be handled at a terminal gate. Looking towards 2009, the airlines would prefer to serve the Los Angeles market, but they don't want to jeopardize the reputation of either their airline or that aircraft, and they are indeed looking at other cities where they might reallocate that resource.

The convenience of having the international flights connect to the domestic flights is one of the premier advantages of the LAX airport. With all the discussion of regionalization, what's going to change over the next couple of years?

The topic of regionalization is certainly very hot these days. I think everybody agrees that it must take place. The manner, timing, and extent to which it takes place now need to be debated, and Mayor Villaraigosa has taken the charge in trying to get the necessary parties together at the table to have those discussions. Approximately 40 percent of the passengers who arrive at the Bradley International Terminal make connections, and that's a very important service. One of the advantages that Los Angeles has, particularly over San Francisco, is not only the number of domestic flights that our passengers can make connections to, but the diversity of cities that are served which is very important as people look at what city they come into the United States through, and that helps to make LA the premier international gateway to the Pacific.

How do you conceive of "regionalization," as it applies to both the distribution of passengers and the governance of airports? What should we expect in the next five to ten years to realize the goals articulated by our elected leaders?

As I said, we agree that regionalization must occur. The market demand by international visitors and population growth means that we will have insufficient airport capacity in the future with existing airport resources. It just becomes a question, depending on whose research and what economic forecasts that you look at, whether that happens sooner or later – whether that happens in 2015, 2020 or whenever. I think that the issue of how we get from where we are today to increased usage of regional airports warrants discussion with all of the various stakeholders.

As an industry we would suggest that regionalization is already taking place. Last year, traffic at LAX was up by one percent while traffic at Ontario was up four percent. Market demand will drive regionalization by itself. Others would suggest that takes too long to accomplish. On the other hand, I would point out that with an airline industry that's lost billions of dollars over the past several years, the ability to serve markets that are unprofitable, or not supported by market need, is not a realistic expectation, and we need to find out a way to balance those two requirements.

Let's close with cargo and goods movement, as opposed to passengers. The focus of the infrastructure bonds being proposed at the state level rightfully focuses on our harbors and ports in the region. What needs to be done to improve the infrastructure around the airports to meet the demands of cargo?

There are two areas to focus on in terms of cargo. The airlines count on a significant amount of cargo revenue that can be carried on passenger flights, and we accommodate a great deal of cargo on those aircraft, particularly to the Asian marketplace. In addition to that there are a number of carriers that have all cargo flights, again mostly to Asia. That has to be taken into account as we look at the future modernization plans for LAX. At the same time, we need to keep in mind the concerns of our neighboring communities – El Segundo, Westchester, Inglewood, and Hawthorne – when we talk about congestion, trucking traffic, hours of operation and so forth. It's a delicate balance, but one that the city, LAWA, the surrounding communities and the airline community work can work together on as cargo will continue to be an important element of the LAX market At the same time, there are other important growth opportunities under the concept of regionalization for cargo at other airports in the area. It already exists at Ontario, and development at some of the former military bases within the region can potentially offer opportunities to accommodate cargo growth at those existing facilities without a significant amount of investment.