County of Los AngelesCHIEF EXECUTIVE OFFICE

Kenneth Hahn Hall of Administration500 West Temple Street, Room 713, Los Angeles, California 90012

(213) 974-1101http://ceo.lacounty.gov

WILLIAM T FUJIOKAChief Executive Offcer

Board of SupervisorsGLORIA MOLINAFirst District

April 10, 2009MARK RIDLEY-THOMASSecond District

ZEV YAROSLAVSKYThird District

DON KNABEFourth District

To:

From:

Supervisor Don Knabe, ChairmanSupervisor Gloria MolinaSupervisor Mark Ridley-ThomasSupervisor Zev YaroslavskySupervisor Michael D. Antonovich

William T Fujioka r . Jr_ (j '" _Chief Executive Officer ~V ~.

MICHAEL D. ANTONOVICHFifth District

UPDATE ON MEETING WITH LOS ANGELES WORLD AIRPORTS REGARDINGREGIONALIZATION OF AIR SERVICE

On February 24, 2009, this Offce informed your Board that the County, along with thePetitioners of the Los Angeles International Airport Master Plan Settlement Agreement,

requested a meeting with Los Angeles World Airports (LAWA) to discuss regionalization issues,as well as the development of a Regional Strategic Plan, as stipulated under the SettlementAgreement. The other Petitioners are the cities of EI Segundo, Inglewood, and Culver City, andthe Allance for a Regional Solution to Airport Congestion. This memorandum is an update tothat request.

On March 16, 2009, the County and the Petitioners met with LAWA Executive Director, GinaMarie Lindsey and her staff. Ms. Lindsey emphasized that LAWA continues to plan for andpromote regionalization of air services. LAWA provided a report titled, "Airport RegionalizationUpdate," which provides an overview of: 1) the current industry environment, 2) regionalizationefforts at both Palmdale and Ontario Airports, and 3) their regionalization plan. Theirregionalization plan includes establishing an Office of Regionalization, continuing air service

development and airport marketing efforts, and. supporting efforts to import groundtransportation access. LAWA also provided the Petitioners with a report titled, "Regionalization:Why Air Service at LA/Palmdale Has Not Succeeded." Both reports are attached for yourinformation.

At the request of the Petitioners, Ms. Lindsey committed to meeting on a periodic basis to keepthe lines of communication open in discussing regionalization issues. Ms. Lindsey informed thePetitioners that a Regionalization Summit is planned for fall 2009 and wil include stakeholders,as well as other jurisdictions to discuss issues and challenges related to regionalization.

"To Enrich Lives Through Effective And Caring Service"

Please Conserve Paper - This Document and Copies are Two-SidedIntra-County Correspondence Sent Electronically Only

Each SupervisorApril 10, 2009Page 2

This Office, along with County Counsel, wil continue to meet with LAWA to addressregionalization issues, and participate in the upcoming Regionalization Summit. We will keepyour Board updated and apprised of major developments as appropriate.

Please let me know if you have any questions or your staff may contact Jerry Ramirez at213.974.4282 or iramirez~ceo.lacountY.Qov.

WTF:ES:MKZFC:JRpg

Attachments

c: Executive Offcer, Board of Supervisors

County Counsel

2009-04 - 04-10-09 Update on Meeting with LA World Airports Regarding Regionalization of Air Servce

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December 3, 2008

Current Industry

Environment

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Airline Operatirlg Profit/CLoss)

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SkyWest

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$86M ¡

$60M

$27M

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($46M)

($120M)

($152M)

($216M)

($216M)

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Northwest

American

United

US Airways

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September 7Federal takeover of Fannie Mae and

Freddie Mac

September 15Lehman Failure

Dow Jones Industrial AverageLast 12 Months

September 26WaMu Failure

October 3$700B Wall Street Bailout Approved '..-----1

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LAX Share of Regional Traffic Has Dropped from 71% to 57%

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Southerri California Passenger Traffc by AirportMilions of Annual Total Passengers, 1975-2007

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Passenger Traffc Growth at Southern California Airports(in millons), 1975 - 2007

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Regionalization:What's Next?

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LA/Palmdale Regional Airport

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Five 'Years,.~:~?,:...,"". ; '.'." '." 1:1:

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LAA'City of Palrmale subnit first SCASDP proposalto USDOT(unsuccuQ

May 2002

Event DateTurbrop service by Pnrica væst and United(to La Vegas, lA Phoenix and Palm Springs)

1990-1998

Meeting wih Amrica VVst in Phoenix Spring 2003

Creation of the LAAfir Service Development Division

(fose solely on PMD and ONT until July 2007)

June 200

Meeting wih United Airlines in Chicao October 2003

Meeting wih AmricanlPmrican Eagle in Dallas Decermr 2003

Meeting wih Horizon/Alaska Airlines in Dallas January 2004

./Angeles World Airports"--:.",:Note: Blue font indicates direct participation of the City of Palmdaié,:ör-(coordination of activity with the City of Palmdale by LAWA ASD DiVision

Meeting wih Skyst firlines in St. George February 200

Meetin wih Scenic firlines in Las Vegas February 200

12

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City of Palndale/LAAsubnit second SCASDP proposalto USDOT (unsuccessul)

May 2002

Event DateMeeting with Delta Air Lines in Nlanta Februar 200

Atended JU"1ar 200 Conference in Portland(ræt wih DL, CO, UA, HP, Mand AS regarding PMD)

June 200

Scenic Airlines service to North Las Vegas Decermr 200 . 2005

Meeting with Amrican Eagle in Dallas January 2005

Atended Nètwrk 2005 Conference in Orlando

(ræt With DL, CO, UA and HP regarding PMD)

March 200

Meeting wih Delta I4r Lines in Atlanta July 2005

Atended Juß1 205 Conference in Calgary(met with AA AS, CO, UAand DL regarding PMD)

June 2005

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Note: Blue font indicates direct participation of the City of Palrr: ." ,,'. " "..".'coordination of activity with the City of Palmdale by LAWA ASbb¡"islôn 13

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Event DateMeeting wih Delta Aii' Lines in Atanta July 2005

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Meeting with United Airlines in Chicago Septermr 2005

City of Palimle/LAAsubmit third SCASDP proposalto USDOT on behalf of VVeels Up Palndale Coalition

April 2006

Meeting with US Airwys in Phoenix May 2006

USDOT awards $900,000 SCASDP grant to the VVeels UpPalndale Coalition (City of Palrrale/LAA)

August 2006

~,,:,,~ Meeting wih US Airw in Palndale Septermr 2006

Meeting wih Delta Air Lines in Atlant October 2006

Meeting with Amrican Airlines in Dallas October 2006

Meeting with United Airlines in Chicago Novermr 200

Meeting with USDOT SCASDP staf in Wahington, DC Decermr 2006C;'~gele$ World Airp Note: Blue font indicates direct participation of the City

of palmèiålé;0tå~;),lD;:"¡!~;t'

coordination of activity with the City of Palmdale by LAWA ASD Divi"sion

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~~ D~LAA& City of Palndale panel select United Airlines Decermr 2006

City of Palndale and United Airlines negotiaterevenue guarantee agreerænt

February 2007

LAA launces advertising and marketing ca"1aigns April 2007

United Airlines launches service from lAPalrrale June 2007

FirstVVeels up Palrrale coalition ræeting at PMD Novermr 2007

Meeting with U~s GPO airfare rep in Washington, DC Decermr 2007

lA& City of Palndale ræet with United in Chicago January 2008

Second \Neels up Palrrale colition ræeting at PMD February 2008

May 2008

- - ,J"'~,./"':'\;."~' -~_, -,

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City.ofRtiir1áåle:P'Orin9tlle"Påst'Fivé véárls'd(b,ôrit!å)' ,:.. ' ,. '.' . ,~'\.'m.;f,',,~:")-:i~' ,.'~;"r'::

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, Event DateLAA& City of Palndale discussion of extensionof revenue guarantee agreement with United

Sumnr 2008

Fourth V\eels up Palndale coalition meeting at PMD August 2008

United changes service at PMD from 2 daily regionaljet roundtp flight to 4 daily turboprop flights

Septermer 2008

GSA government airfes for federal agency and nilitarytravelers mae available tolfrom PMD for the first time

Septenir 2008

V\eels up Palndale colition does not receive a secondUSDOT SCASDP federal grant

Septenir 2008

United teminates PMD-San Francisc service Decermr 7, 2008

ngeles Word Airp Note: Blue font indicates direct participation of the City of Palmdãle:;'Òf~~~i;;(:' "coordination of activity with the City of Palmdale by LAWA ASD Division

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. LAWA prepared and submitted a proposal to the USDOT for a Small Community Air ServiceProgram (SCASDP) grant on behalf of the City of Palmdale

. The City of Palmdale, on behalf of the Wheels up Palmdale coalition, was awarded one of thelargest ($900,000) grants awarded in the history of the SCASDP program

. The City of Palmdale provided one of the 4 members of the panel (the other 3 panelists werefrom LAWA) that selected United over Delta

. LAWA provided 80% of the coalition's financial and in-kind support of United air service fromJune 2007 -December 2008'

LAWA

~ $1.1 milion in cash to purchase advertising from City of Palmdale (CA-14 electronic sign,utiity bils, monthly newsletters, sponsorship of local events, etc.)

~ $700,000 in cash to implement an advertising campaign to support the launch of United'sservice

~ $5 milion to operate the PMD terminal at deeply-reduced rental rates for United Airlines

City of Palmdale

~ $1.1 million in cash to fund the revenue guarantee agreement with United Airlines

County of Los Angeles

~ $50,000' in cash to fund the revenue guarantee agreement with United Airlines

~ $500,000 to provide daily bus service from San Fernando Valley and Santa Clarita to PMD

, :,'Angeles World Airprts

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,lI LAWA will participate in the process of transitioning operationalresponsibility for PMD terminal to the City of Palmdale after Uniteddiscontinues service at the Airport on December 8,2008

. The Air Service Development (ASD) Division will provide the City ofPalmdale with all research and marketing materials that it hasprepared since 2003

.. The ASO Division wil assist the City of Palmdale in its effort tomarket PMD to airlines

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.:,Angeles World Airprt

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LA/Ontario International Airport

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. LA/Ontario is located in California's fastest-growing region and is the

most convenient airport for 7M of Southern California's 17M residents

. LAWA invested $280M in infrastructure at ONT in 1998, building theregion's most modern airport terminal facilities

- LAWA has partnered with Aeroterm to build up to 1 M square feet of on-airportcargo facilities

. During the last 5 years, LAWA's advertising and marketing support of

new airline service at ONT has generated a positive return oninvestment

. LAWA's investment at LA0ntario has positioned the airport toaccommodate significant passenger and cargo traffic growth

- ONT can accommodate millons of additional passengers in its existing terminalfacilities, providing significant short-term relief for LA

- In the long term, ONT has capacity for additional facilties that would allow theairport to accommodate up to 30M annual passengers and 2M annual tons of cargo

,,;£\ngeles World Airpts

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LAWA Regionalization Plan

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Establish anOffice of Regionalization

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ContinueAir Service ~Elvelopment

and Airport Marketing Effort

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Support EffoF;s to ImportGround TranspõÇt~tion Accessti:,',,'.'

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. LA0ntario Air Service Development Goals

- Restore frequencies cut by Southwest during 2008

Increase frequency of flights to hub markets with existing service

)- Dallas, Houston, Atlanta, Denver, Salt Lake City

Re-establish lost hub service to hub markets

)- New York/N~wark, Chicago and Minneapolis

Restore service in former ExpressJet markets

)- Reno, Tucson, Colorado Springs, Monterey, Fresno, Boise

Increase trans-border flights

)- Mexico City, Vancouver, Puerto Val/arta, Cancún, Los Cabos

Assist Aeroterm in marketing its air cargo facilties

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. LA/Ontario Airport Marketing Goals

- Sponsor and host an annual Regionalization Summit

- Continue ongoing corporate travel and travel agency outreach effort

- Continue joint LAWA-LA Inc. marketing effort with tour operators, charterairlines, and travel wholesalers in Mexico and Canada

.ll, LAPalmdale Goals- Faciltate transition of terminal operations to City of Palmdale

- Assist the City of Palmdale in its future airline outreach efforts

~ Provide marketing presentations and analyses prepared for PMDduring the past 5 years

~ Provide contact information and introductions to airline routedevelopment managers

" ngeles World Airts

:~;~;c-~:r~'~::~r0'~:-i',~~d:.~ :,:,~:;~ :~~-

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25, ;.1

- -.--:--;.._------..-~_..--_._- ----,.~'_._-~-'-_.__.-, ,

~r~~t~~~~:I":::':~:"~~t,~.i:~,"" . " , " ' . " ,Æ,~~(~LJ'fF~;~~dl~1-1~?d1\.~;" ,ni ' ,-, , :" 'ueve on,.Oth~~ 'S'6\Gthél"n'ç'ãliftifhiár;~itP~rts ..' ' ".~'

;;.i ./'"c'

. Overall Goal: to minimize existing ground transportation barriers for

both passengers and air cargo at Southern California's alternateairports- LA/Ontario wil be main focus

. Identify viable locations for expansion of the FlyAway program toLAOntario

- Historical demand analysis within region, market research, etc.

. Participate on the Gold Line Light Rail Technical Advisory Committee

- Goal is connectivity of Gold Line to LA/Ontario

,lI Involvement in the California High Speed Rail Project

-GoaUs connectivity to LAPalmdale and LA/Ontario

. Increase airport connectivity for both passengers and cargo on

existing railroad lines at LAOntario

::.df.ngeles World Airprt26

'''

_.._------------- -- ----- -------_. --'---'-'--'---'-~~------'- -----.._._-~.-...--- _.~--- -~----,,-,., "

':~~~;!!'t~~t':;Tt1:F~f~:'

':WICe;:a,Reasons

. Geography

. Limited flight schedule

. Military and other federal government travelerswere unable to book flights until October 2008

. Economic and Financial Challenges in theAirline Industry and the U.S. Economy

'i'arid Airports

1

~,. ~",i;"'7

Geography

----------_..._-~---.._- --~-~------_._---.--------_._-_." '

Airports for Residents Who, do not Live in Lancaster or Palmdale

Driving Time to PMD

D~",:"":,,,~D.

30 Minutes

45 Minutes

50 Minutes

60 Minutes

309,000 pop.

486,000 pop.

o 7 14 607,336 pop.

1.57Mpop.(Includes Santa Clarita)

21

Miles

76 mi 94 mins

58 mi 74 min

77 mi 101 mins

70 mi 87 mins h, ' ',- '..) . ...

~~,.-Source: US Census 2000 and GIS

A/PalmdaleRegionaJ'SJ\ngeles World Airports

\\

\

\

\

3

~"",'".,."'''",'",,',.,,,''~r.~;~~w~\!,.~;.-

Limited Flight Schedule

~;i+.,;;~ié;f3')~;". ,........¡'.~:.:

..-. . ----c..--- __._________._._.__-c..~~_._.----.--.---n--.-----'" . . .

'l"equel1cy Handicapped Tråffic 'Development afP.M £)

. Two daily roundtrips were not enough to attract business travellers,because flying from PMD required travellers to extend trips- Single-day business trips were not possible beyond the West Coast and Mountain

West regions

- Business trips east of the Mississippi River that typically required two days oftennecessitated a third when flying to/from PMD

- Connections to cities in the Southwest were typically not attractive, as travellerspreferred not to "fly north to travel south"

- With numerous non-stop alternatives available at LAX, BUR, and ONT, fewtravellers opted for PMD

. PROOF: In September 2009, United increased its schedule from 2 dailyroundtrip RJ flights to 4 daily turboprop roundtrips, and trafficincreased by 25%

!\/PalmdaleRegiona!",Angeles V/orld Airports

LA/Palmdale's greatest challenge is providing enoughair service to immediately compete with the region's

other (very well-served) airports

5

\~'1"..".""

Inability of Military and other Federal Government Travelersto Use United's LAPalmdale Service

'(,£ì~îf'alm dal eReqi;o na i

",C:"'I'Aiigeles World Aj;Ports

Governmentand'lViHtary "..a'vel Market'

What Industry Do You Work in?

PMD AirportPassenger Survey

8%

92%

Palmdale Area HotelAir Passenger Survey /1

II Government / Miltary / Aerospace Contractor

o All Other Responses

W'oi-d Airports

/1 The hotel air passengers surveyed were primarily traveling for business purposes (90%)and mainly used other L.A. area airports (87%)

Source:

7

m",..,i~",.. ,~..,..lI'''"'~~. . .". .. .

Economic and Financial Downturn in the U.S. Economyand the U.S. Airline Industry

':~~~cn.~)~rè~;'\~ll~l~~il;~iÎi)i.~ê

PeriodofPMI)-SFOAir Service

1)~a~~fiffhi:\'~~::NtfVi:!'

U.S. Real GDP Growth WasNegative in 3 of 6 Quarters

of PMD-SFO Service6%

5%

4%

3%

II2%

111~ ...1.1%

-1-" p,'

ì

0% .... . , I,

1

-1% I

i

-2% I

-3%i

i

-4% i

1

-5% i'

I II II IV I II II IV I II III IV I II II IV

2005 2006 2008

California's UnemploymentRate Has Risen SteadilyAfter Since 1st Qtr. 2007

9% ----,

2007

8% June 2007

5.3%

7%

6%

5%

4%

~~~~~~~~~~~~~~w~~~~n~~~n~~~~~~~n2005 2006 20082007

¡VPaJmdaleRegíonal Source: Bureau of Economic Analysis and California Employment Development Department

sAngeles World Airpoits

9

'""~~~4r;1,i¡;."~f"'p ,\(;.'Ñii~£~i:';;!~ã;ì~"F1;ör'~~', . ,',', , , ..,..'. iMarkets'Sirrlllar in Size Experienced Traffic Declines During YE June 2008

Percent Change in Domestic O&D Passengers at California's Small Community Airport12 Months Ended June 2008 vs Prior Year

Santa Maria

Redding

Modesto

Carlsbad

Stockton

Chico

Oxnard

Crescent City

Inyokern

Imperial

Merced 6.7%

Visalia

A/PalmdaleRegionalWorld Airports

13.4% -----------'1i

i¡

!¡

!;j

¡

67.10f¡~

-60% -20% 0%-40%

Airports Listed inDescending Order

of Total Traffic

20% 40% 60% 80%

Note: Includes California Airports with 150,000 or fewer passengers during YE 2nd Quarter 2008,excluding Palmdale,Source: US DOT,O&D Passenger Survey

10

-~'-'~-----'-'~--_._---------'._'."-"-'-'~'---"----~.-.-_._-----'. . . .. .

i'f7~.7,~~-l.'~

. It is Critical that the Aerospace/Military Business Market Support NewService as It is an Important Generator of Air Travel in the PMD Market

- This market segment must have GSA contract fares in select key markets from PMD

. A Minimum Daily Frequency is Also Key to Gaining Traveler Loyalty andChanging Behavior, Especially Given the Competing Services at NearbyAi rports- More than two daily roundtrips are required

. Service to a Hub Carrier Airport or a Large Airport within LA/PMD's Top

Passenger Markets Will Have the Greatest Chance of Success- Network hub connections are need to effectively serve the diverse travel market

. LA/Palmdale's Air Travel Market May Develop Over a Longer Term Under

the Right Conditions, But Given the Current Economic and IndustryOutlook, Reinstatement of PMD Service is Unlikely in the Near Term- LAWA's Resources Should Focus on LAONT

IPalmdaleRegionatsAngeles W'oi'ld Airports

11

D11~~("""',

Conclusions

.-.-

. Under ideal demographic, economic, and airline industry conditions,LA/Palmdale Airport could be a viable regional airport for commercialairline service

. These ideal conditions necessary for the resumption of scheduled air

service at PMD do not exist now, and will not for several years

. If the airline industry is permanently transformed when it emerges fromthe current economic downturn, ideal conditions for the resumption of airservice at PMD might not arise for decades

/Palmdane Regional$;A.ngeles World Airports

13'~)17'"