Airport Revenue Continues to Decline as JetBlue Summer Flight Cuts Approach

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The Long Beach Airport is currently on a trajectory that will see it serve the fewest number of passengers in nearly 13 years, and as a result, the release of its March budget performance showed a drop in projected year-end revenue for a second straight month.

The airport’s March numbers revealed that for the 2015 fiscal year, projected revenue was down another three percentage points from its February numbers, reflecting a projected year-end revenue loss of over $2.6 million. The airport’s activity report also showed a decline in enplaned passengers—the number of people flying in and out of the airport—which was nearly nine percent lower than the numbers from March 2014.

Airport Director Bryant Francis said these declines are due in part to JetBlue Airways' release of their summer schedule, which includes fewer flights than previously estimated last year in combination with the continued impact of the airport’s loss of the Alaska Airlines’ Horizon service at the beginning of 2015. While Francis said that the airport remains fiscally stable, if the trend of decreased passenger activity continues the loss in revenue could start to have impacts on the airport’s other tenants.

“The airport is currently in a strong fiscal position, and has more than a year’s worth of cash reserves, an important metric in the industry,” Francis said. “Over the long term, however, the declines in revenue can affect the airport and the businesses that aviation supports, including tenants such as airport concessions, valet, public parking and other support services.”

Francis first reported the possibility of a decrease in flights offered by JetBlue at the March 19 Airport Advisory Commission (AAC) meeting, where he disclosed that the airline said it would be dropping some flights in 2015 that were previously offered during the summer of 2014, in addition to completely phasing out a red-eye flight to Washington, D.C..

“There was no specific reason given other than there were needs in other parts of the network that were stronger than those in Long Beach, in terms of domestic performance, so they’re shifting some of their mobile assets to other markets,” Francis said at the meeting.

The idea that JetBlue might be decreasing its flight load in response to the Long Beach City Council’s decision to postpone action on the airline’s request to build a federal customs facility at the airport— which could eventually allow for JetBlue to operate international flights out of Long Beach—until 60 days after the April 14 special election was raised by members of the AAC. One member went so far as to ask if JetBlue was merely straddling the line of its requirement to operate a minimum number of flights per month.

The airline holds 32 of the 41 slots at Long Beach and is required to fly four flights per week over a 180 day period, or 30 flights over a 60 day period in order to honor their contract with the airport.

Morgan Johnston, a manager of communications with JetBlue’s corporate office, quickly dismissed the notion that the decrease in flights is in any way associated with the council’s stay of action on the customs facility.

“They’re not related,” Johnston said. “We’d certainly like the customs facility and we’re disappointed that the city is not able to work on it as soon as we would like, but our schedules are done well in advance. We drew out this schedule well before we submitted our letter to the city council in February and certainly before the council made their vote for the stay for 60 days.”

He described the cuts in service to Long Beach as less of a "reduction" and more of a "redistribution." For instance, one of the flights cut originating from Long Beach flying to Las Vegas was moved to San Francisco, a move that Johnston said was the result of market pressure. He pointed out that redistribution wasn’t something unique to Long Beach, as the company will be rerouting flights this winter that would normally land at LAX but will now fly from New York City to Barbados and Aruba.

“We’re trying to put the planes where they’re going to give us the bigger bang for our buck,” Johnston said. “It’s really about market demand.”

While the airline has slowly decreased service at Long Beach through the first three months of this year, its market share of passengers enplaned at LAX has risen to 1.71%, making it the ninth biggest operator in LA and its largest share of the market in the past three years at LAX. JetBlue has not operated any international flights out of LAX during the first quarter of 2015.

Overall, enplaned passengers at the airport are down 10.7 percent from last year despite load factor—the figure that represents the capacity utilized on a flight—remaining static at 85%. During last year’s summer flight season, one in which JetBlue offered 30 daily flights compared to the 26 scheduled for this year, the airline averaged over 109,000 enplaned passengers with a load factor of nearly 87 percent.

Eighth District Councilman Al Austin, one of the most outspoken defenders of protecting the airport’s noise ordinance and one of the members of council that placed the stay of action on the agenda, wouldn’t speculate on any connection in the rise of service in LA, the decreases in Long Beach and if the council’s decision influenced the two. Austin did say that when the time comes to vote on the customs facility, his decision won't be based on pressure, but on maintaining the quality of life for the city’s residents while at the same time balancing new economic development opportunities.

“I'm going to make informed decisions that are best for Long Beach,” Austin said. “As a reminder, I work for those who elected me, not for the board of directors of any airline.”

The council’s first opportunity to vote on the customs facility will be in mid-June, which marks the beginning of the summer travel period as well as the 60 day mark in office for newly elected Fourth District Councilman Daryl Supernaw, whose wife was part of the committee that got the airport noise ordinance instituted in the city.

Johnston maintained that while market pressure might force the hand of the airline to fluctuate flight volume to and from certain cities, it doesn’t change the relationship the airline has shared with the City since the early 2000s.

“There’s still demand in Long Beach, absolutely,” Johnston said. “And we’re still committed to Long Beach as a community. We see that there is a great deal of utility on specific routes and we do see demand, even for long-haul flights. But there is a large segment of the population in the LA Basin that’s looking to go LAX.”



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