Guest Commentary By Mario Rodriguez
January 21st, 2014 – From several perspectives, it is clear that the horizon is brightening for the U.S. economy; 2013 was one of the nation’s best years in decades. But the business of airports is one of caution and change – and our narrative for the economic outlook is: steady as she goes.
Nationally, anticipated passenger traffic is expected to be lower this year, and Long Beach Airport is no exception. There may be a marginal drop in passengers, but regardless, LGB will be ready. We have prepared ourselves for several unexpected occurrences, such as a sudden rise in the cost of fuel, consolidation of the airlines, winter storms in the northeast, and more. Legacy carriers and Southwest Airlines will continue to consolidate and at some point, they will own 80 to 85 percent of the U.S. market share. We at LGB, ensure our financial safety and that of the community’s by making plans to mitigate for future problems. In the fiscal year of 2013, revenues were fantastic even exceeding our projections. For the last five years, Long Beach Airport increased net revenue by more than 50 percent and increased operating reserve by over 30 percent. Projections are very good because we set a high financial bar for your airport and we meet it every year.
You’ll notice when you travel through LGB, your plane is full and rarely is there an empty seat. Load factors are still at maximum capacity which matches the national trend. Since an empty seat is a perishable commodity, the airlines make sure every seat is utilized.
Nationally, there is much less capacity in the system, which gives airlines the freedom to increase the cost of travel from point A to B. LGB is affected because your airport makes up to 74 percent of its revenue directly and indirectly from the airlines. Even as airfares are going up all over the nation, the good news is that LGB continues to have the lowest prices in California according to the United States Department of Transportation.
LGB is always bustling with new activity and this year will be no different. Those of us at the airport are extremely proud that the FAA awarded the airport a record $15.1 million grant that will be used to refurbish Runway 7L-25R at the northern end of the airport. Work to this area is expected to bring additional construction jobs and should be completed in the next 18 months.
Tenants should enjoy a nice 2014 given the projections for an increase in business activity in the region. We are hoping that our Fixed Base Operators have a bright, positive year with an uptick in business aviation. Gulfstream still has a strong manufacturing base in Long Beach. Meanwhile, LGB is anticipating great changes to the Douglas Park area as Mercedes-Benz USA signed a long-term lease with Boeing for use of nearly 1.1 million square feet at the plant, located on Conant Street.
The result is that your airport is run similar to any private sector business. With total revenue of $35 million, your airport is in good financial shape to weather any storm and we take great care in safeguarding those assets. Since our first concern is to make sure that we have a reserve, your airport is solid. Solid as a rock.