Recession Reverses California Airport’s Growth

The greatest inconvenience awaits those who head to the taxi stand: sometimes there are no cabs. One has to be called.

“Truthfully, I love this,” Annette Long said as she prepared to check her bags for a recent flight, thrilled to be missing the freeway traffic and crowds she encounters flying out of Los Angeles International Airport. “It’s so easy.”

But what makes traveling so pleasant for passengers like Ms. Long also underscores the problem facing this regional airport, which, like the Inland Empire region that it serves, is still reeling from the devastating impact of the recession.

As airports show slow but steady signs of recovery, with passenger traffic nearing pre-recession levels nationally, the passenger traffic at Ontario has plummeted 40 percent since its 2007 peak of 6.9 million, according to Federal Aviation Administration figures. The decline, fed by a confluence of economic misfortune, a change in airline business practices and local political turf wars, is projected to continue through the end of the year. It has left Ontario with traffic levels around four million, about what they were in the mid-1980s, a decade before construction of two modern terminals that were supposed to make this airport a linchpin of the region’s economic growth.

But like the housing booms and busts that have driven the economic prospects of the area over the last 25 years, the airport’s plight has left some to wonder if such ideas were too speculative.

Ontario’s experience mirrors that of other smaller airports in large markets — like Islip and Newburgh in New York — which expanded to handle added traffic only to see airlines pull back. The Inland Empire, which includes San Bernardino and Riverside Counties, continues to be one of the fastest-growing regions in California, with more than four million residents, but the lure is affordable housing, not high-paying jobs. The region is projected to have a double-digit unemployment rate through 2015. And last week, a judge cleared the way for the city of San Bernardino to declare bankruptcy.

“With the benefit of hindsight, it might have been overreaching when they expanded,” said Sampath Rajagopala, a professor of data sciences and operations at the University of Southern California’s business school. “Airlines can never operate at a profit if they rely on consumer business. They need business passengers. Yes, there are a lot of people living there, but they are a lot more price-sensitive.”

It is not just the economy that has crippled the Ontario airport. There has been a change in the way airlines operate, analysts say, prizing profitability now more than market share, which has driven airlines away from smaller airports to larger ones nearby.

Southwest Airlines, the main tenant at Ontario, began there in 1985 with five daily flights to Phoenix. It once flew 64 flights a day from Ontario in the late ’90s, but is now down to 35 flights a day. An additional reduction of 12 percent has been announced for January. At the same time, it has expanded service at Los Angeles International.

Brad Hawkins, a Southwest spokesman, said that cost “is by far the most important determinant in how we operate.” The company’s service to Ontario, he said, “is where it should be.”

This has left Ontario with a conundrum: declining flights mean that airports must charge airlines higher fees per passenger to recoup expenses, and Ontario’s fee of $11.12 per passenger was close to the $12.18 that Los Angeles International charged in the 2012-13 fiscal year, according to airport officials who set the fees.

Square Feet: Idled City Airports Get a Second Life as Housing

Stapleton’s journey from in-town airport to one of the city’s newest planned residential communities began more than a decade ago when it was replaced by Denver International Airport, which was built 12 miles out of town in the middle of a vast prairie with no residential neighbors to be bothered by its noise. Repurposing a large civilian airfield like Stapleton had not been done before in the United States.

But over the last decade the mixed-use community that has been developed there and one like it in Austin, Tex., are seen as examples of how problematic properties can be successfully converted. And these developments are being closely watched, as growing demand for air travel puts pressure on other urban airports with little space to grow.

“Airport repurposing is a rare event driven by unique local circumstances,” said Chris Oswald, vice president for safety and regulatory affairs for Airports Council International.

In Malmo, Sweden, the Bulltofta Airport built in 1923 was used for commercial passenger service until the 1970s, when Sturup Airport was built and the Bulltofta site was turned into a shopping and entertainment complex. Hong Kong’s downtown Kai Tak, made obsolete in 1998 with the opening of the new Hong Kong International Airport, will soon be turned into a cruise ship port, stadium and residential community.

With the development less than halfway complete at Stapleton, 4,000 residences have already been sold and 13,000 people now call the community home.

The common thread for all these projects, Mr. Oswald said, is the availability of an alternative airport with greater capability. “The availability of such sites is very rare, and the combined political and financial will to make use of them is even rarer,” he said.

The land developers behind the Denver and Austin projects agree. For all the unique problems with turning highly specialized industrial property into a place people can call home, they could not have succeeded without cooperation from a multitude of entities, including politicians, bureaucrats and residents.

“It’s very important to have an alignment with all the interests in the very beginning,” said James Chrisman, senior vice president of Forest City Stapleton Inc. which is in year 12 of its 25-year development in Denver. “Projects go different directions, cities turn over. We’ve worked with three mayors, the economy changes,” he said. “You need a strong foundation of a plan and a vision that everyone is committed to, to survive all those ups and downs that occur.”

Forest City Enterprises agreed to buy nearly 4,700 acres from the city of Denver as the development proceeded. When complete it will include 8,000 single-family homes, 4,000 apartments, 12 million square feet of office and retail space and 1,100 acres of parks. Significantly for the city of Denver, the new community has helped to reverse declining property around Stapleton.

“You have to remember there were planes that were 15-20 feet above the houses,” Mr. Chrisman said during an interview in the developer’s office located not far from the site of the landing area he was describing.

“There was a landing strip on the other side. They were coming right over those houses and landing.”

In giving Stapleton a new purpose, Forest City joins with just a few other real estate companies. When the Robert Mueller Municipal Airport in Austin, Tex., closed in 1999, the California-based Catellus was hired to turn 700 acres of runway, terminal and parking into a similar mixed-use community called Mueller.