Major expansion plans in holding pattern at LAX.

Carriers, airport commission in dogfight over control

A new policy on lease agreements at Los Angeles International Airport has sparked another controvery between airlines and the city, with the carriers claiming the rule is a serious threat to further development of the sprawling facility.

The carriers assert the new policy will make it more difficult for them to grow at the airport, and at least one airline official said the new rule has already stopped all private expansion at LAX.

Specifically, officials of a growing number of airlines have expressed concern over a new policy that limits facility leases and rental agreements at LAX to five years. Previously, leases on passenger and cargo facilities at LAX typically ran for between 20 and 30 years.

"The short-term leases don't make good business sense. Airlines aren't going to make any kind of major financial commitment unless they can get a long-term commitment from the airport," said Brian Anderson, chairman of the LAX Airline-Airport Affairs Committee. The committee represents all of the 90 or so passenger and cargo airline users of LAX.

Officials at the Air Transport Association, the Washington, D.C.-based trade group for the nation's airlines, are also worried about the new policy, said spokesman Chris Chiames.

"The airlines have expressed concern about these short-term leases and the impact they could have on future projects and operations. They're not going to be too willing to make major investments at the airport if they can't get long-term leases," said Chiames.

One airline source said all development at the airport has stopped because of the new policy. "There are probably $250 million in projects that aren't going forward because of this," said the source, who did not want to be named because it might jeopardize his relations with the airport.

Members of the Los Angeles Board of Airport Commissioners, a five-person citizens' body appointed by Mayor Richard Riordan, have said they will no longer give long-term leases to airport users. Instead, the commission has specified leases will be for five years.

The airport is owned and operated by the City of Los Angeles under the Department of Airports. As owner of the airport, the city grants ground leases to build new facilities or rental agreements to use airport facilities such as passenger terminals and cargo facilities.

The commission has said the short-term leases are part of a new attitude by the body to take control of the airport away from the airlines and restore it to the city.

Last year, when the city tripled airline user, or landing, fees at the airport, a four month-long public debate ensued that gained national attention. The city eventually won the dispute when the new higher fees were upheld in federal court.

On a larger issue, airlines officials have also been expressing dissatisfaction with the Riordan administration -- which took office last July and included a new airport commission -- because of the mayor's so-far unsuccessful attempts to divert LAX revenue to the city's general fund.

Ted Stein, president of the airport commission, repeated last week what he has said on numerous occasions -- the airlines are upset because they are losing control of LAX.

"Look, the whole thing revolves around who operates the airport," he said. "The airlines have to realize that the mayor views the airport as a precious resource to be run for the benefit of its shareholders and the shareholders are the citizens of the Los Angeles."

Stein said the commission is not entirely inflexible about the length of facility leases but is standing by a new requirement that all leases have so-called cross default provisions. These provisions say that all contracts between the commission and an airport user would be invalid if the user failed to live up to the terms of any single agreement.

Stein said the commission wants to work with the airlines, and he predicted the disagreement will be resolved and the projects will go ahead.

"They're just having a hard time accepting the changes," he said. "If the projects don't go ahead, it will be for different reasons than this (the new policies)."

According to airline industry sources, several planned projects so far have been put on hold because of the conflict.

The largest one being delayed is a planned $66 million parcel-sorting facility by Federal Express, the parcel carrier. The company has said the facility would create 400 permanent jobs.

Officials at Federal Express Corp. in Memphis, Tenn., did not return a phone call for comment last week but a source said that Riordan has talked to company representatives about the matter.

Other carriers that have pending plans to expand facilities at LAX but have not moved forward on the projects include Nippon Cargo Airlines, Qantas, Japan Air Lines, Singapore, and Continental airlines. All of the planned projects are for new or expanded cargo facilities at the airport.

Last September, Dallas-based American Airlines dropped a planned $77 million renovation of its passenger terminal facilities at LAX. The airline canceled the plans after the new commission said it wanted to reconsider terms of the project.

A spokesman for Atlanta-based Delta Airlines, another major user of LAX, said the carrier is not planning any immediate facility expansion but is nonetheless concerned about short-term lease provisions.

"What bothers us is that a short-term lease creates problems issuing long-term bonds to finance a project," said the spokesman, Clay McConnell. "It is an issue that concerns us greatly."