Fewer passengers mean more troubles for L.A. World Airports. (On the HomeFront--Impact of War).

Passenger counts at Los Angeles International Airport, still reeling from the travel downturn following the Sept. 11, 2001 terrorist attacks, have sunk further due to the war in Iraq and fears over Severe Acute Respiratory Syndrome.

Ailing airlines have cut flights and traffic at airport concessions is either down slightly or holding steady at already depressed levels, forcing airport officials to accept lower lease payments.

So far, though, Los Angeles World Airports has been able to dodge lease troubles on the airline front.

While American Airlines skirted bankruptcy last week as it reached a last-minute agreement to cut labor costs with some of its unions, Air Canada filed for bankruptcy protection in Toronto, raising concern that its 10,000 flights a year out of LAX would be sharply curtailed, although no cuts have yet been announced. The airline accounts for less than 2 percent of the traffic at the airport.

United Airlines, whose parent UAL Corp. filed for Chapter 11 bankruptcy in December, has missed a scheduled bond payment for upgrades to its LAX terminal. The airline is arguing in bankruptcy court that interest payments on this and other bonds are pre-bankruptcy bills and thus do not need to be made; a ruling is not expected on this until later this spring.

United's move to suspend interest payments on a $51 million bond issue from 20 years ago for the renovation of its terminal at LAX has not impacted airport operations.

That's because LAWA didn't actually sell the bonds; a consortium of local and state agencies sold the bonds on behalf of LAWA. If United is excused from making its bond payments, those agencies could be on the hook for the tens of millions of dollars left on the bonds.

These financial ills trace their origins to events prior to the March 19 start of the war against Iraq. The full impact of the war and the outbreak of the SARS has yet to be felt in the airline industry or at LAX itself.

"It truly is the perfect storm of events," said Alan Wayne, Western region spokesman for United Airlines. "Just when you think you've seen it all, along comes something else."

The immediate impact of the war and the SARS outbreak can be seen in the drop in numbers of passengers going through the airport.

"The average load factor is now down around 50 percent for international flights," said Tom Winfrey, a LAWA spokesman. "Load factors on domestic flights are averaging between 40 percent and 60 percent."

Winfrey said the total number of flights has held relatively steady over the past couple of weeks--at between 1,675 arrivals and departures per day and 1,775 arrivals and departures. However, if load factors don't improve soon, it's only a matter of time before flights are cut by airlines across the board as each flight bleeds red ink.

As it stands, the airlines in or near bankruptcy will have to reduce the numbers of flights just to remain solvent. While fewer flights may be cut at LAX than at other airports because Los Angeles remains a comparatively lucrative market, even a slight reduction in flights will lower gate fees.

Meanwhile, the long-hoped for rebound in concession revenues has receded further off into the distance. The only good news was that sales haven't plunged recently; anecdotally, stores reported either a slight drop in traffic or held steady at low levels.

Still, the LAWA Board of Commissioners last week approved a restructuring and a lowering of the lease payments for concessionaire DFS Inc. Instead of having to make an annual guaranteed lease payment of $37 million to LAWA, DFS will now have to turn over only 23 percent of its revenues to LAWA this year.

Sales for DFS at its LAX operations were $72 million last year, according to figures submitted to LAWA, down from a high of $124 million in 2000.

Cutting deals here and there doesn't mean LAWA can breathe easy. If United were to liquidate, LAWA would be left holding the bag on its lease payments. And a court ruling in favor of United could impact the way future airport improvement projects are funded.

Despite these looming revenue troubles, no layoffs of airport staff are planned in the near future, according to Winfrey. He said LAWA was operating under a hiring freeze instituted shortly after the Sept. 11 terrorist attacks.