The Long Beach City Council has approved a resolution updating the rules governing flight allocations at Long Beach Airport (LGB). The creation of the resolution was in part spurred by what LGB Director Jess Romo has referred to as the current and anticipated future failure of “some incumbent air carriers to fully utilize their slot allocations.”
In a report addressed at the November 20 city council meeting, Romo wrote that the airport was “increasingly concerned” that the current allocation provisions gave airlines with more slots the ability to hold onto unused slots and prevent their competition from using them. “The airport should not allow air carriers to operate in a manner that creates artificial advantages for any carriers,” he wrote.
The new resolution would increase the minimal use requirements for flights slots. Officials of JetBlue Airways, which holds the lion’s share of flight slots, oppose the change. Southwest Airlines, JetBlue’s chief competitor, supports it.
How Flight Slots Used To Be Allocated
At present, the city’s Airport Noise Compatibility Ordinance (ANCO) allows up to 50 daily flights to be flown from LGB. This includes 41 permanent and nine supplemental slots. Two of these slots are allocated to cargo carriers FedEx and UPS. The remainder are distributed among five commercial airlines: JetBlue, Southwest, Delta Air Lines, American Airlines and Hawaiian Airlines. JetBlue operated 35 flight slots until September of this year, when it downsized to 23.
Before the passage of the new resolution, airlines were required to operate at least four flights per slot per week over any 180-day period. In other words, an airline had to use a slot at least 57% of the time over a six-month period, or risk forfeiting the slot. Further, airlines that did not conduct at least 30 flights per slot in any 60-day period – or utilize it 50% of the time over two months – also risked forfeiting their slot.
In his report to the city council, Romo stated that this level of utilization “arguably provides for the potential to engage in anti-competitive behavior by maintaining flight slots that are underutilized,” thus restricting opportunities for their use by new or incumbent airlines.
What The New Resolution Changes
Under the new rules, a slot must now be used 60% of each month (or about four days per week), 70% each quarter (or about five days per week) and 85% each year (or about six days per week).
The rationale for this increase, Romo said, was manifold. His report explained that doing so:
- Ensures that air carriers adequately utilize their flight slots
- Reduces the potential for anti-competitive conduct
- Promotes airport operation on “fair and reasonable” terms and without “unjust discrimination”
- Reinforces the proposition that flight slots “are not, and must not be permitted to become” the property interests of commercial airlines
- Adopts an administrative penalty provision where underutilization is documented
The ordinance states that failure to comply with the minimum use requirements may incur a “reduction in the number of flight slots consistent with actual utilization” as well as “potential disqualification from receiving additional permanent or supplemental flight slots for a period of time.”
Romo noted at the November 20 meeting that flight allocation procedures “have been amended six times to date.” The passage of this latest resolution marks the seventh amendment.
“Generally, changes to the flight allocation procedures are made in response to market conditions,” Romo told the Business Journal. “Given that we have a limited number of slots, it is essential that the city actively manages these limited resources fairly and efficiently.”
When the city first began discussing changes to allocation procedures in 2017, it sent a letter to its airlines for comment. JetBlue and Southwest were the only respondents.
Southwest was supportive, writing that it had no objections to the amendments under consideration and that “there must be an effective mechanism to assure maximum usage” of allocated flight slots. JetBlue was against the proposed changes and offered counter proposals.
Nearly eight months after the initial letters were sent and the city continued with its plans for the resolution, Robert Land, the senior vice president of government affairs and associate general counsel for JetBlue, sent a follow up e-mail that criticized the proposed changes. Romo included both Land’s e-mail and the September 2017 letters from JetBlue and Southwest in his report.
“Regrettably, it appears that the city . . . has chosen to disregard all of JetBlue’s suggestions,” Land wrote in the e-mail dated May 30, 2018. “It is further regrettable that the city continues to take steps that appear specifically designed to harm JetBlue.”
As Land alludes to in his e-mail, this is not the first time JetBlue and the City of Long Beach have clashed over airport procedure. JetBlue was highly supportive of opening up LGB to international flights, a motion opposed by the city council in January 2017. JetBlue was also frustrated by the lengthy construction delay and the downsizing of the original plans for the new airport concourse that opened six years ago. And for each violation of the airport’s noise ordinance, JetBlue incurs a $6,000 fine. This figure was arrived at following several months of discussion and litigation between the city and the airline, ending a longstanding dispute over JetBlue repeatedly arriving past LGB’s 10 p.m. curfew.
In his May 2018 e-mail, Land warned that, “Any city action to unilaterally impose changes to the ordinance or allocation resolution that are more restrictive or facially discriminatory could have unintended consequences and be deemed presumptively invalid.” Land further stated that the city could risk a collapse of its grandfathered noise ordinance as a result of the amendments.
In his presentation to the city council, Romo noted that the airport’s noise ordinance would not be affected in any way by the changes proposed in his report. He emphasized that again when he spoke to the Business Journal. “The noise ordinance is not being changed,” he said.
Prior to filing his report, Romo reached out to Federal Aviation Administration (FAA) officials for their legal opinion on the matter. “FAA does not believe the proposed amendments raise ANCA issues,” he wrote. He further added that the administration “encourages the city, as the airport proprietor, to make the necessary business decisions to encourage and promote competition at the airport.”
When reached for comment, Doug McGraw, vice president of corporate communications at JetBlue Airways, said that JetBlue is “a proud member of the Long Beach community” and will continue to offer residents “the best onboard experience of any airline that flies here.” Regarding the passage of the resolution, McGraw said, “While we believe this rule change is unnecessary as evidenced by the numerous unused slots already available, we remain committed to providing a level of flying in Long Beach that the market will support.”
Romo said that the amendments are necessary. “We have an established waiting list of carriers that would like to obtain permanent slots,” he said. “However, the current process only allows for temporary use of the unused slots on a month to month basis.” That uncertainty limits the utility of those slots, he continued, when time is of the essence. It takes time to schedule aircraft and flight crews, as well as to market for additional service, he explained.
“This is a difficult proposition on a month to month basis,” Romo concluded. “We feel that some degree of certainty is best for the airport, our airline partners and our customers.”
Romo said that the airport and the city are currently working through the process of adopting the new resolution. He anticipates the new changes to be implemented January 1, 2019.