NEW FLIGHT PLAN SOUTHLAND'S REGIONAL AIRPORTS LOOK TO SUPPORT BUSINESSES AS ENGINE FOR GROWTH IN THE FUTURE.

Byline: Barbara Correa Staff Writer

With passenger airlines stuck in survival mode, Southern California's regional airports have shifted their efforts to expanding air cargo and distribution-related businesses as future sources of employment and business activity.

Cargo is at the top of the list of business sectors the airports are trying to jump-start. But they are also looking to aviation maintenance, construction of retail warehouse distribution centers, rail and ground transport, flight testing, automotive manufacturing and high-tech startups as sources of business development and job creation.

And with the former El Toro Marine Base in Orange County out of the competition, business developers looking for airports with available space to grow have shifted their focus to the Inland Empire and surrounding valleys, where regional airports - many of them former military bases - are scurrying to reinvent themselves into commercial hubs.

Air cargo movement in Southern California - Los Angeles, San Bernardino, Riverside, Orange and Ventura counties - is expected to more than triple in the next several decades, from about 3 million tons today to 9.5 million tons by 2025.

Twenty years from now, 60 percent of Southern California's cargo will pass through four regional airports: Ontario, San Bernardino, Southern California Logistics in Victorville and March Inland Port in Riverside, a joint-use facility with the Air Force. Today, these four airports account for about 22 percent of the region's cargo, with Ontario handling almost all of that, said Frank Wen, a senior economist at the Southern California Association of Governments.

Cargo-related employment will grow to nearly 100,000 jobs by 2025, to 38,000 at Ontario, 18,000 at March, 15,000 at San Bernardino and 5,500 at Victorville, Wen predicts, up from zero at some of the airports currently.

It's not going to happen overnight.

``Every military base in the country thought they would become a passenger airport. Then they realized how difficult that was, so they decided to become a cargo airport. Then they realized that was just as difficult,'' said Dennis Watson, a spokesman for Ontario International Airport.

Overhauling cargo

Indeed, transforming the Victorville, March or San Bernardino airport into a regional cargo hub like Ontario, United Parcel Service's West Coast hub, is a far-off fantasy at this point. (Space for growth is limited or nonexistent at Long Beach, Burbank and Los Angeles airports).

One reason is those airports' distances from Los Angeles International Airport and the San Pedro port complex. In today's just-in-time delivery environment, dependence on truck transport to far-flung airports seems a dicey prospect, especially after last year's port shutdown.

Another problem is none of those airports has passenger flights, making international cargo transport a nonstarter. That's because about half of international cargo travels in the belly of international flights, so cargo operations rely heavily on access to passenger flights.

A new domestic cargo operation would be an easier sell because integrated cargo carriers - they control their own supply chain with their own planes and trucks - aren't anywhere near as dependent on passenger flights to move their goods.

About 70 percent of domestic cargo moves on all-cargo freighter flights, up from around 64 percent prior to 9-11, when the federal government tightened shipping restrictions on commercial flights.

The trend of more domestic cargo moving on cargo-only flights is here to stay, meaning bullish growth prospects for the sector.

``These regional airports are ideal for third-party companies,'' said Guy Fox, president of the Los Angeles Air Cargo Association. ``We can't count these other airports out. We're very good friends with LAX. But progress has to be made somewhere.''

San Bernardino Airport, formerly Norton Air Force Base, which is inaugurating a U.S. Customs facility in October, is lobbying hard to attract integrated cargo companies like DHL and FedEx to establish a presence there. So far, cargo activity has been limited to a few sporadic charter shipments - FedEx delivered $70 million worth of race cars from Australia for Fontana's California Speedway in November.

Until the airport lands a big cargo company, though, it must focus on shorter-term development, such as warehouse distribution and logistics businesses.

The biggest shot in the arm for such support businesses came in 2001, when San Bernardino persuaded discount department store chain Kohl's Corp. to build a 650,000-square-foot distribution facility there to serve a 70-store expansion in Southern California. The warehouse, operating with 300 employees now, will eventually support up to 1,000 jobs, said David Pelletier, communications director at Dallas-based Hillwood Investments, developer of the Kohl's project. Hillwood is also behind AllianceCalifornia, a 2,000-acre business park located between the airport and the area's major intermodal rail complex. The development is now wooing Build-to-Order, a Santa Monica auto manufacturing company, with a $30 million incentive package, though the company hasn't committed anything yet, said Pelletier.

Waiting for the train

San Bernardino's biggest challenge is to beat out its rival, the Southern California Logistics Airport in Victorville, for a new Burlington Northern and Santa Fe Railway intermodal facility, which links truck to rail transport.

``That's the huge if,'' said John Husing, an Inland Empire economist in Highland. If BNSF decides to build the facility in Victorville, he said, the Hillwood development at San Bernardino will lose its competitive advantage, which will slow down development there, particularly of distribution infrastructure, meaning fewer jobs.

San Bernardino Airport is still the front-runner for the project, partly because the railroad's existing 400,000-container-a-year facility is nearby in San Bernardino, said Lena Kent, a spokeswoman for BNSF.

Still, the railroad is keeping its options open and hasn't made any decision yet, she said.

Meantime, Victorville's former George Air Force Base, which has been doing business as the Southern California Logistics Airport since 1998, is touting its 5,000 acres of development space to supply chain logistics and aircraft maintenance concerns.

General Electric's aircraft engines division is slated to begin testing jet engines within a year in a hangar being built there, said Keith Metzler, deputy director of redevelopment for the city of Victorville. In addition, High Desert Power Partners is building a 750-megawatt power plant at Victorville, and Socal Aviation has partnered with Pratt and Whitney to manage and maintain more than 200 grounded commercial airplanes there.

The airport's master developer, Stirling Airports International, has more ambitious plans. It is in talks with several big-box retailers to establish a distribution warehouse and is counting on a major buildup of intermodal transport, whether or not it snags BNSF's planned rail complex.

Stirling has signed an agreement with The Pasha Group, an automotive logistics company based in Corte Madera, Calif., to develop a 700-acre logistics and distribution complex to handle some of the container storage activity now located at the Ports of Long Beach and Los Angeles, said Dougall Agan, principal partner at Stirling. He said the project should be realized within three years.

Victorville also has had a U.S. customs presence for a year and is counting on air cargo traffic as another engine for growth, even though there are no scheduled cargo deliveries to the airport currently.

``We need to expand one runway for cargo ... that will be done by thethird quarter of this year. Then you'll see a greater interest in moving cargo operations from LAX and SFO,'' said Metzler, who adds that all this activity forecasts development at the airport of least 5,000 jobs in five years.

If you build it ...

Ontario Airport, a passenger facility and the region's second-largest cargo hub after Los Angeles International, holds the most leverage in the competition for future growth.

Late last year, Taiwan-based Eva Airways signed a letter of intent with Los Angeles World Airports, which manages Ontario Airport, to start cargo flights to Ontario, which would build a new 110-acre cargo facility to accommodate Eva, and eventually other tenants.

Groundbreaking on the project is at minimum a year away, said Dennis Watson, a spokesman for the airport. Since Ontario is under Los Angeles World Airports management, the facility could get bogged down in the approval process of the airport authority's latest airport master plan. Still, Eva's commitment is great news for the airport and for the region. ``It's the business story of the year for the Inland Empire,'' said John Husing.

On top of that, Ontario still has an additional 215 acres open for development, and Hillwood, the master developer at San Bernardino Airport, has committed to developing 100 acres adjacent to Ontario Airport. ``It will likely be cargo-related, but there is good street access for distribution centers too,'' said David Pelletier, a spokesman for Hillwood.

At first glance, March Inland Port seems the furthest away from booming development. Philipps Electronics established a distribution center there several years ago, but remains the airport's only current tenant. But March is expecting a charter flight company to station seven executive jets there ``any day now,'' said Philip Rizzo, executive director of the March Joint Powers Authority. He says cargo is the airport's focus, and it's working on getting U.S. customs agents.

For now, however, the anticipated growth and development at all the region's alternative airports, besides Ontario, is still in the embryonic stages. But everyone connected with the industry says it will happen.

``They're all after the holy grail ... the utopia at their airport,'' said Guy Fox, the cargo association executive. ``They will have their day in the sun.''

CAPTION(S):

photo, box, chart, map

Photo:

(color) Cargo containers are loaded onto a Hawaii-bound plane as another United Parcel Service jet arrives with more cargo at Ontario International Airport. Cargo is at the top of the list of business sectors the airports are trying to jump-start.

Will Lester/Staff Photographer

Box

AIR CARGO EMPLOYMENT

Chart:

AIR CARGO ACTIVITY

Map:

REGIONAL AIRPORT DEVELOPMENT

SOURCES: Southern California Association of Governments; airports authorities

Warren Huskey/Staff Artist