After a steady drop in flight activity in the past year, Long Beach Airport plans to increase rates and charges on airlines by 17.5 percent starting October 1, the beginning of Fiscal Year 2016, to make up for lost revenue and to meet bond covenant requirements.
Airport officials, however, said the airport remains competitive with one of the lowest cost-per-enplanement (CPE) rates – the average cost airlines pay to the airport per enplaned passenger for services – compared to other airports in California.
Long Beach Airport Director Bryant Francis told the Business Journal that the increase in rates and charges would affect landing fees, gate fees and terminal lease charges on airlines but not passenger fares, which are set by airlines. The fee increase also won’t impact general aviation, airport staff confirmed.
The airport’s CPE is estimated to increase from $8.93 to $10.47 next fiscal year based on current financial data, according to the proposed FY 2016 budget, which requires Long Beach City Council approval by September 30.
The last time airline fees at Long Beach Airport spiked was in FY 2013 when the airport increased rates and charges by 20 percent midyear as a result of a drop of 290,000 passengers from the previous year, according to airport staff.
In July, Fitch Ratings reduced the airport’s financial outlook from “stable” to “negative” in a report on $115.2 million worth of outstanding airport revenue bonds, though the agency affirmed the airport’s “A-” rating.
Following the report, airport officials said the airport was projecting a 25 percent drop in net revenue this fiscal year over FY 2014 as enplanements had dropped 11.1 percent this year as of May.
The FY 2016 budget states that the revenue decline is mainly a result of JetBlue Airways, the airport’s primary air carrier, underutilizing slots, which has diminished revenue from airline fees, parking, ground transportation and concessions.
The budget states that JetBlue has “no intentions of increasing its number of flights except for modest increases for a couple of the summer months.”
Airport officials said the airline in recent years has been shifting aircraft out of Long Beach to other markets, including those on the East Coast and in the Caribbean/Latin America. This year, JetBlue reduced its schedule for summer, which is the busiest time of the year for air travel, from about 30 to 26 daily departures out of Long Beach, Francis said.
“[JetBlue has] made decisions to increase or enhance service in markets other than Long Beach and that has come at the expense of some of the capacity that has historically operated here,” he said.
Francis noted that Horizon Air, a regional air carrier of Alaska Airlines that once offered flights to Portland and Seattle, left the Long Beach market entirely in January, eliminating approximately 64,000 enplanements. Additionally, US Airways, which offers flights to Phoenix, decided not to “upgauge” its service to larger aircraft this summer as it has in previous years, resulting in fewer passengers as well, he said.
The drop in flights, however, is not necessarily based on demand, Francis said, adding that demand for air service out of Long Beach remains “strong.”
The shift is more a function of airlines focusing on ways to “maximize profitability” on a route-by-route basis, he said. Francis added that the decline in passenger activity is likely a “temporary situation.”
In addition, Francis noted that Long Beach Airport still has one of the lowest CPE rates in the state. Airport staff added that six other airports, including Los Angeles International (LAX), in California are projecting CPE increases in coming years as well.
“Even with this increase in our rates and charges, we are still among the lowest in terms of overall CPE [in the state],” he said. Francis explained that fees airlines pay to airports are small compared to other expenses, such as fuel and personnel.