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Ontario Airport economic impact study reveals an 'economic engine' for Southern California

Analysis

A previous CAPA report on Hamilton Airport in Ontario province in Canada earlier in 2022 pointed out the advantages to airports of having independent economic impact surveys undertaken to substantiate their benefit to the community...if there is a genuine story to tell, of course.

In the case of Ontario International Airport in southern California there is such a story.

Since ownership changed from Los Angeles World Airports to a consortium of local municipalities six years ago it has become one of North America's leading cargo airports, and its roster of passenger airlines includes many top US carriers, with a network that covers most of the major population areas.

Importantly, it is helping support a heavily populated industrial catchment area where median earnings are below the national level, but nevertheless one growing while neighbouring Los Angeles contracts.

There is further room for improvement, by expanding international services, for example, while it must also prepare itself for the next challenge – which is likely to be another recession.

Summary

  • An economic impact study has found that California’s Ontario International Airport (ONT) generates USD3.8 billion in activity each year.
  • The airport has grown since it was unshackled from Los Angeles World Airports six years ago and is ditching the effects of the COVID-19 pandemic.
  • But a recession is likely to follow.
  • Ontario is one of the Top 10 cargo airports in North America.
  • Four of the six major US airlines have a passenger service presence.
  • But it is still a domestic airport mainly, and there is plenty of scope to develop international passenger services to a region that is expanding while Los Angeles shrinks.
  • CAPA’s Americas Aviation & LCC Summit will be held there, in Apr-2023.

Economic impact studies in favour as airports find themselves under continuing pressure

Numbers of airports across the world are commissioning economic impact studies (EIS) in the wake of a coronavirus pandemic which may be over, or could yet still return, and facing the potential for a global recession while airports are experiencing attack from environmentalists.

The point is to prove their value to communities.

In Mar-2022 CAPA published Hamilton Airport issues economic impact study – others should follow suit, a report on such an EIS by the John C Munro International Airport in Ontario province, Canada – an airport which is in competition with nearby Toronto Pearson airport and has established its value as a low cost airline and cargo base. The recommendation was that other airports should follow suit.

Now it is the turn of another Ontario, this time the one in California, where the local airport was taken out of the control of Los Angeles World Airports six years ago by local municipalities under the umbrella of the Ontario International Airport Authority (OIAA).

There is no private sector participation.

Ontario International Airport generates USD3.8 billion in activity each year

In this case the study was carried out by Oxford Economics and shows that the airport generates USD3.8 billion in activity per annum: approximately 80 cents for each person in the 4.6 million population ‘Inland Empire’ east of Los Angeles where it is located, supporting 27,800 jobs and serving as the hub of a global logistics network that produces USD17.8 billion in economic output, or USD4.5 per person.

The report was released as part of a celebration commemorating the airport's sixth anniversary under local ownership.

Population in the Los Angeles area continuing to fall

The report describes Ontario International Airport as an “economic engine” for Southern California as a whole, which is something it needs badly – because companies and inhabitants continue to leave the area on account of high accommodation prices and taxes, worsening crime and deteriorating living conditions.

Of the country’s 56 major metropolitan areas, Los Angeles (LA) had the second greatest numeric population loss between 01-Jul-2020, and 01-Jul- 2021.

The net domestic migration – the number of people moving out compared with those moving in – was 204,776 in L.A. That’s nearly double the population loss the city experienced between 2019 and 2020, when it lost 128,803 residents. (Source: Brookings Institute/US Census Bureau).

And it is getting worse, with the number of people leaving Los Angeles doubling between 2Q2021 and 2Q2022.

The Los Angeles Times says “California as a whole is at a risk for becoming a state for very, very wealthy people and very, very low earners who receive state and local and federal aid that allows them to be able to live here”.

The middle income earners, on a USD78,000 household median income, are vanishing, and they are the ones that the distribution centre that the Inland Empire is, together with the contribution of the airport, should be able to help.  

Ontario International one of the Top 10 cargo airports in North America

Ontario International Airport has emerged as one of the Top 10 cargo airports in North America, supporting its role as an economic driver across the Inland Empire and Southern California.

That hypothesis is at least partly supported by the airport's cargo volume statistics from 2010 to 2022 (YTD).

Ontario International Airport: annual traffic, cargo volume/growth, 2010-2022 YTD

Before the takeover by OIAA cargo volume was increasing steadily, with the exception of one year, and picked up even more from 2016, although it plateaued in 2019.

In 2020, the first pandemic year, there was a resurgence, with 18% growth to almost one million tonnes carried.

That year there were nine freight and parcel carriers in situ: freight airlines (with number of destinations) included Aloha Air Cargo (1); Alpine Air Express (1); Amazon Air (17); Amenflight (13); Asia Pacific Airlines (2 – seasonal); FedEx Express (11); FedEx Feeder (9); Kalitta Air (3 – seasonal); and UPS Airlines (31 including 3 seasonal).

And that level of growth was almost sustained in 2021, whereas in 2022 so far the volume carried is down by 4% (Jan-Aug).

Despite that slight downturn, cargo volume capacity is back up to 2019 levels already in 2022, and exactly so, at 107.5 million kilos.

Demand for consumer goods, household supplies and other daily necessities skyrocketed among consumers, says Oxford Economics, although that demand has slowed considerably this year and will probably continue to do so. Shipments of commercial freight and mail still total approximately 75 tons a month, which is 57% more than 2016.

A public treasure that is 'more than an airport'

The President of the OIAA Board of Commissioners and Mayor pro tem of the City of Ontario, Alan D Wapner, insists that Ontario International "...is more than an airport. It is the heart of one of the fastest-growing population and economic centres in the US, providing a foundation for solid economic growth for years to come. And it is the public treasure we envisioned for the City of Ontario and San Bernardino County.”

While the part about “growing population” may appear a little strange in the light of the remarks made earlier about population loss, it is indeed true that while the City and County of Los Angeles is shedding inhabitants, that is not the case in the Inland Empire.

A growing number of families have moved inland over the past few years, data show, but the migratory shift grew even more pronounced amid the COVID-19 pandemic.

In several adjacent counties there was a population gain, including Riverside and San Bernardino, which are at the heart of Ontario International's catchment area, along with the eastern part of Los Angeles County, which is more of a working class area.

Location of ONT, California, US

The Oxford Economics study incorporated nearly a year’s worth of research, concluding that the overall impact of economic activity at Ontario International – from airport operations, airlines and their suppliers, government workers, airport concessions and logistics companies – totals USD3.8 billion as of 2022, which includes USD2.7 billion in visitor spending.

The airport is also responsible for generating over USD570 million a year in local, state and federal taxes; another necessity as corporate pull-outs reduce the tax take for the state.

Oxford Economics also looked at Ontario International's role as a supply chain hub, analysing logistics activity in the eight zip (post) codes adjacent to the airport. The results placed it at the centre of a global network that accounts for USD17.8 billion in economic output, USD9.9 billion of GDP, and 122,200 jobs.

Building a gateway of choice

OIAA’s CEO Atif Elkadi has said, “The economic impact of Ontario International Airport is felt across the region and around the world. We’re excited to be able to share our story with the communities and shareholders we serve, and look forward to building on our position as the gateway of choice for millions of Southern Californians”.

A ‘gateway of choice’ is quite an aspiration when the previous owner is operating Los Angeles International (LAX), some 80km (50 miles) away and the world’s fifth busiest airport in 2021.

But Ontario International has made some strides in that direction since the OIAA takeover in Nov-2016, after which passenger volumes increased by nearly 33% overall, despite the impact that the COVID-19 pandemic had on global air travel. LAX’s cumulative growth figure 2016-2019 inclusive was 16.6%.

This year’s passenger totals at Ontario International are expected to reach 5.8 million, and that is the highest level since 2008. As of the end of Sep-2022 the total stood at 4.2 million.

Ontario International Airport: annual traffic, passenger numbers/growth, 2010-2022 YTD

That makes Ontario International currently the third busiest Los Angeles region airport – behind LAX and John Wayne Orange County airport, but ahead of Hollywood-Burbank and Long Beach airports.

Ontario International’s 11 domestic and international airlines in Nov-2022 offer 479 weekly departures and more than 75,000 airline seats to more than two dozen nonstop destinations.

That is an increase of 18.9% in departures and 43.4% in seats since 2016.

The major US airlines are well represented

Passenger capacity is split between low cost (58%) and full service (42%), and Southwest Airlines accounts for the majority of the low cost capacity, with 43% of the total.

The largest FSC is American Airlines (14%), and four of the ‘big six’ US airlines are represented there.

Ontario International Airport: system seats for all airlines, week commencing 07-Nov-2022

On the other hand, there is little penetration by foreign airlines, which account for only 4% of capacity, which is the same as international capacity generally.

Ontario International has little in the way of an international reputation so far.

Utilisation is high. The chart below, for Wednesday 09-Nov-2022, is representative of the week and reveals only four of the 24 hours in which there is no arriving or departing activity.

Ontario International Airport: system seats per hour for 09-Nov-2022

Supply chain activities at the core of the local economy, but another recession beckons

As indicated earlier, warehousing, distribution and supply chain activities are at the heart of commercial activity in the Inland Empire.

Curt Hagman, OIAA Commissioner and Chair of the San Bernardino County Board of Supervisors, believes that “the Inland Empire is home to one of the most important supply chain networks in the world, and Ontario International is at the heart of that”.

It is unknown how the area will be impacted by a likely recession in the US (technically, it is in one already), and it was badly affected by the global economic downturn in 2008 and 2009.

What is certain is that the airport is better prepared now to handle another such downturn. 

See previous CAPA report on Ontario Airport (Dec-2020): California’s Ontario Airport thrives, thanks to freight business

Ontario International Airport to host the CAPA Americas Aviation & LCC Summit in Apr-2023

The next edition of the CAPA Americas Aviation & LCC Summit will be hosted in Ontario, California, in Apr-2023.

A part of CAPA’s benchmark 2023 regional summit series, the two-day Americas Aviation Summit will gather executives from hundreds of airlines, airports and travel industry suppliers from North America and key international markets.

It will also feature a stream dedicated to the fast-changing LCC sector, which grew rapidly thanks to pandemic period travel trends and is now undergoing a new round of consolidation. 

Offering high level analysis, thought leadership, valuable networking opportunities, and in-depth insight across the issues and trends that shape the local and global airline industry, the CAPA Americas Aviation & LCC Summit is a vital event for staying informed about North American aviation.

https://amas23.capaevents.com/

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