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Battle for John Wayne’s Golden Slots : With Airport Set to Ease Access, Carriers Jockey to Get Share of Lucrative Rights

Times Staff Writer

For the past decade, America’s major airlines have coveted slots at Orange County’s John Wayne Airport, one of the most lucrative regional air transport centers in the nation.

But the strict controls that have kept competition down and passenger demand way up have also kept some carriers out of John Wayne. Today, nine commercial jet carriers and five commuter airlines service the airport.

A rare reshuffling of the jealously guarded flight allocations is about to occur as Orange County officials prepare the first airport access plan in five years, part of an expansion of the perennially swamped facility.

So far, two major airlines, three commuter lines and four cargo carriers are jockeying to join the current flight roster, and some incumbent carriers are lobbying to increase their allocations at the expense of others.

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If Southwest and Braniff are allowed to enter the airport, John Wayne will be serviced by every major domestic carrier or a subsidiary except Pan Am. The existing lineup includes American, USAir, Northwest, America West, Continental, Delta, TWA, Alaska and United.

At stake in the flight allocation is an expanded schedule of more than 100 daily flights worth an estimated $50 million to $75 million a year in profits to the airlines.

The allocation plan will be drafted later this month by the airport operating staff and soon thereafter sent to the county Board of Supervisors for approval.

A likely side effect of the expansion will be a slight lessening of traffic at other Southland airports as the number of passengers allowed to use John Wayne each year nearly doubles to 8.4 million from the current 4.75 million.

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“John Wayne is one of the most profitable feeder airports around,” said Harry Lehr, vice president of planning for Alaska Airlines and an executive at AirCal before the Newport Beach carrier was folded into American Airlines in 1987.

“It was a golden pot when I was at AirCal,” he said, “and was also incredibly profitable for Frontier when I was there.”

Bruce Wetsel, American Airlines’ director of schedule analysis, said the huge demand for air transportation in Orange County is fueled largely by business travelers flying on the spur of the moment.

“Well above half of our business (at John Wayne) is from business travelers who make their plans within 24 hours of their flight,” Wetsel said. As a result, he said, most pay full fare for the convenience of flying from an airport close to their homes or businesses.

“When you deal with a market like that, with that kind of demand, and with a constraint on the supply of flights, it is very profitable,” he said.

Hard numbers are difficult to obtain, but spokesmen for several major carriers, including United, Southwest, Braniff and USAir, agreed that routes flown from John Wayne can generate substantial profits.

Airport Manager George Rebella said the average fare paid by a passenger from John Wayne is $400. That compares to a $290 average for business travelers nationally, according to a recent survey conducted by Corporate Travel magazine.

“Orange County is what we call a ‘go-show’ airport,” said Daniel Smith, director of consumer and industry affairs for the International Airline Passengers Assn. “The passengers are people who have to go, so they show up, buy a ticket and leave” immediately rather than buying tickets weeks in advance to take advantage of discount fares.

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Highly Profitable

Rebella said commercial jets flying out of John Wayne typically fill 75% of their seats, compared to a national average of 55%.

Assuming an average fare of $400, passenger capacity of 150 and profit margin of 3%--about par for airlines last year, according to Smith--an airline would realize an average yearly profit of nearly $500,000 per flight.

And that estimate is probably conservative. Profit margins from flights at John Wayne are considerably higher than systemwide averages, airline officials said.

A source close to one of the major airlines flying out of John Wayne said that each of its Orange County flights generates an average annual profit of about $750,000.

Returns like that are possible because John Wayne is the most regulated airport in the nation, the result of a noise abatement lawsuit filed against Orange County by the city of Newport Beach and a number of citizens groups.

Under a 1985 settlement agreement, the county drafted an airport access plan. The agreement not only imposed an annual ceiling on the number of passengers allowed to use the airport, it created protections for incumbent carriers by refusing admission to new airlines.

Some of that protection will be removed with the new access plan and the opening of an expanded terminal and new ground traffic and runway systems next year. But the total number of flights and passengers at John Wayne still will be restricted.

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Since 1985, the access plan has dictated that only nine commercial jet carriers operate at the airport. The number of daily jet takeoffs currently is limited to 96, and the annual passenger cap is 4.75 million.

Under the new plan, the number of airlines likely will be raised to 11, daily takeoffs will be increased to between 115 and 160, and the annual passenger cap will jump to 8.4 million.

The settlement will continue to prohibit commercial jet flights between 11 p.m. and 7 a.m. and limit aircraft noise levels, which forces airlines using John Wayne to spend millions of dollars acquiring jets with newer Stage 3 “quiet” engines. It also will continue to limit the size of the airport terminal and the number of automobile parking spaces.

Others Curb Flights

“It is the most stringent set of controls at any publicly operated airport in the country that I’m aware of,” said Art Kosatka, manager of technical services for the Airport Operators Council International in Washington, a trade group for government agencies that operate airports.

Kosatka said that until he learned of the John Wayne restrictions, he had considered the nation’s most tightly regulated airports to be Kennedy and La Guardia in New York, Washington National and Chicago O’Hare International. Those four operate under a flight allocation, or slot control, plan administered by the Federal Aviation Administration.

Other airports must adhere to state and federal noise regulations but generally don’t have to restrict the number of flights or passengers. Besides John Wayne, the only Southern California airport that limits daily flights is Long Beach, and no other airport in the area has a lid on passengers.

As the airport staff begins writing its recommendations for the new policy, Orange County’s elected supervisors--who have been through several flight allocation battles in the past decade--are bracing themselves for a new contest between longtime carriers that already have a large share of the airport’s business and newcomers who want a piece of the action.

American Airlines, for instance, currently has 35% of the commercial jet flights at John Wayne and is proposing that the new plan allow it to keep all of those and share equally in the new slots with the 10 other passenger carriers that are jockeying for position.

At the other end of the scale, United Airlines, which now has only two daily flights at John Wayne, wants the county to redistribute all of the flight allocations--new and existing--so that each of the 11 passenger carriers has an equal number.

No matter how the flights are divided, everyone involved agrees there still won’t be enough of them.

Keep Under the Limit

Even in its current state, operating with a decades-old terminal designed to handle about 400,000 passengers a year, there is a huge and growing demand for flights out of John Wayne.

In 1988, Rebella said, commercial carriers boarded and unloaded nearly 4.5 million passengers. Airport officials intentionally keep the annual passenger tally about 5% lower than the 4.75 million cap established in the settlement agreement so they do not run the danger of exceeding the limit.

Demand for flights in Orange County is much higher than the current cap. And it will continue to exceed the authorized limit under the new plan, according to Rebella, other Southland airport officials and executives at several airlines.

Michael di Girolamo, manager of Ontario Airport, said about 14% of the passengers who use his facility come from Orange County. A recent survey by the Southern California Assn. of Governments said Los Angeles International also draws about 14% of its passengers from Orange County.

“There’s obviously a great need for a second airport in Orange County,” Di Girolamo said. “So many other airports in the area are absorbing that business.”

Although 3.6 million more passengers will be able to use John Wayne next year, that’s hardly enough to make much of a dent in the outflow of Orange County residents to LAX, Ontario and Long Beach.

For example, an estimated 6.2 million Orange County residents flew out of LAX in 1988. If all of the increase in next year’s passenger count at John Wayne involved people who stopped going to Los Angeles, the net effect still would only cut the daily passenger count at LAX from about 122,000 to 112,000.

The new plan is of critical importance to the airlines because it likely will remain in effect for the next 15 years.

The primary competition pits American Airlines and USAir, the two incumbent jet carriers with the largest flight allotments, against several smaller incumbents such as United Airlines and would-be newcomers such as Southwest Airlines.

Southwest, which typically enters an airport with fares that are 40% lower than the competition’s, has joined United in asking that the incumbents be stripped of their existing allotments and that all flights be evenly divided.

If that happened and Southwest wound up with 10 or 12 flights, passengers at the airport likely would be rewarded with lower fares all around.

But aides to county supervisors said it is unlikely that requests for a complete reshuffling of flight allocations will be granted. The county traditionally has honored incumbent airlines’ existing allotments and their investments in equipment that meets John Wayne’s noise standards.

Sticking with the plan favored by American and USAir likely would negate much of the fare-cutting potential of Southwest’s entry because it would wind up with only two or three daily flights.

Several incumbent carriers with small allocations, including Alaska, Continental and Delta, have proposed complex reallocation programs that would enable them to move closer to parity with American and USAir.

The tenor of the airlines’ comments on the various access plans proposed so far has been mild compared to the bitter accusations of favoritism and discrimination that were hurled during debate on access plans in 1981, 1982 and 1985.

Feeds Entire System

Even so, Wetsel said that American “couldn’t live with” a new plan that takes any of its existing flights away or that prevents it from sharing equally in all new flights.

“With John Wayne, we are not just talking about taking someone to the (San Francisco) Bay Area, but about taking them to other parts of our system,” he said. “We carried passengers from Orange County to 223 different destinations of American Airlines last year, and we are fighting for our ability to serve those John Wayne passengers throughout our system.”

For its part, United has avoided sounding angry or threatening in its written communications to the county.

But in an interview, spokesman Alan Wayne called the current allocation policy “unfair, discriminatory and anti-competitive.”

If anyone is left out, it is likely to be the two major cargo carriers, United Parcel Service and Federal Express.

Both have enrolled themselves on the waiting list for slots at the airport, but county policy so far has been to grant precedence to passenger carriers.

UPS has just announced plans for a $68-million Western regional hub at Ontario Airport, and spokesman Bob Kenney said the cargo carrier wants to be able to fly from Orange County but won’t be terribly upset if it doesn’t get in during this round.

“Our plans are very long range, and what we are doing is reaffirming that we want a place in line for a berth at John Wayne,” he said.

Despite the conflicts between the competing airlines, representatives of several carriers said they believe that all points of view can be accommodated.

And Rebella, who has been meeting individually with the various airlines, said “it doesn’t look like we’ll end up with a bunch of lawsuits” as happened after each of the previous allocations.

“Based on discussions with all of the incumbents and with Southwest,” Rebella said, “I’m comfortable we’ll come up with something that makes all of them a little unhappy. But that’s better than having one side happy and one side mad.”

FLIGHT LIMITS AT SOUTHLAND AIRPORTS Restrictions on passenger carriers at Southern California airports

Avg. daily Flight Airline Airport Flights Limits Limits Los Angeles International 900 No No Lindbergh Field (San Diego) 235 No No Ontario 145 No No John Wayne (Orange County) 96 Yes Yes Burbank-Glendale 62 No No Long Beach 26* Yes No

* Will grow to 40 early this summer.


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