LAX Two Corporation Objects to Los Angeles World Airports Claim That Terminal 2 is Underutilized.

Terminal 2 has one of the highest utilization rates at LAX and LAWA's buy-out attempt would not create additional capacity

LOS ANGELES -- LAX Two Corporation, the leaseholder and entity representing the airlines serving Terminal 2 at Los Angeles International Airport (LAX), today presented objections to the Los Angeles World Airports (LAWA) Commission regarding the proposed $99 million take over of Terminal 2, which LAWA believes would increase airport capacity and the number of flights at LAX.

"LAX Two Corporation was not provided notice that LAWA was even considering this action regarding Terminal 2. We are disappointed that the LAWA Board has chosen to take this course of action," said Jim Greenwald, Northwest Airlines vice president of facilities and airport affairs. "Terminal 2 has been operated professionally and efficiently, resulting in one of the highest utilization rates of the LAX unit terminals."

Currently, 15 airlines operate 52 domestic and international flights daily out of the 10 wide-body aircraft gates at Terminal 2, making it nearly impossible to add additional capacity. The 15 airlines at Terminal 2 carry an average of 16,600 daily passengers, with more than 41 percent of the passengers traveling internationally. In addition, many airlines serving Terminal 2 are utilizing remote parking operations, where passengers are bussed to and from the aircraft, allowing more aircraft to serve the terminal at one time.

"We entered into these agreements and assumed the debt for improvements at the request of LAWA," said Dawn Arnevik, chair of LAX Two Corporation. "These radical steps by LAWA are unnecessary to meet the airport's current and future financial needs and as we've stated on numerous occasions, we can continue to work within the existing framework of our agreements to achieve the airport's goals and objectives."

LAX Two Corporation understands that LAWA is facing a cash shortage, but questions the financial merits of this proposal. In 2006, the outstanding LAX Two bonds had an average interest rate of 3.2 percent. For LAWA to use a significant amount of the purported limited LAX cash or to take out additional debt at a higher interest rate to buy out these bonds does not make financial sense. A correct cost-benefit analysis will show that this proposal will increase costs for LAWA, the airlines, and ultimately, LAX customers.

The LAWA proposal, combined with rent and fee increases are a stark contrast to efforts at other major airports to lower rates and fees in support of the business relationship between airlines and the airports they serve, which have resulted in improved service choices, increased low cost airline participation, lower fares and maximum efficiency of existing assets.

"It does not appear to be a prudent business decision or a good use of limited cash to acquire the leasehold interests in a terminal that has a low cost of debt and is efficiently and effectively managed for the sole purpose of control," said Arnevik. "An even worse business decision would be for LAWA to combine cash and higher cost debt to buy down the outstanding low cost debt."

"Ultimately, we believe this proposal will not increase utilization or the number of flights at Terminal 2," said Greenwald. "We urge LAWA to provide a full analysis and prove that the economic benefits outweigh the costs for the airlines and LAWA."