World-Class, Without The Pricing

Airport director Mario Rodriguez arrived here in early 2009 after turning around and improving a couple other regional airports. He had a different vision. “All airports look exactly the same,” he remarks. “Why? We can break that mold. We can make it simple, pleasant, and convenient. We don’t need to scale down O’Hare.” Over the airport’s design life (30 years), the airport’s flexible design allows “the ability to change on the fly, at 1/10 the price of building new.”

However, the things that could derail the cost savings were the unplanned, such as the original general contractor’s default. Work effectively stopped. Rodriguez explains, “We [airport management] in essence took on the role of general contractor during the interim period,” maintaining key subs, listening to those subs and revising the plan on the fly to make best use of completed work and avoid costly pitfalls that were yet to come. The city and airport management’s reaction to this possible tragedy was key to the project’s ultimate success and its being both early and under budget.

The airport’s new construction meets and exceeds LEED-Silver standards (the airport believes it can earn Gold certification), employing everything from lo-flow toilets to getting an eighth of its electrical power through solar technology.

Still, Costs Matter

Rodriguez notes that typically airport facilities are financed through bonds. This debt, much like a mortgage, is paid by the airlines. The airlines, in turn, pass this cost on to their customers. “We opted to be more businesslike and prudent,” he says. “Our new improvements are self-funding, which means that the cost should not be passed on to our airlines and, by default, our customers.”

Airlines got involved from the beginning, knowing they were not obligated to fund the project. “When they heard ‘free,’ they got very interested,” and were themselves free with their ideas and help, adds Rodriguez.

“LGB stands out not because we spent hundreds of millions to accomplish this task, but because we did not. We designed the building in such a way that it is easy to modify, and we have the money to do it.”

On the side of comfort, Rodriguez has only local businesses as concessions, run through The Paradies Shops. “With every [other] airport the same, we wanted to do it differently,” comments Rodriguez. “This is not a ‘big box’ airport. Over here, it looks, feels, tastes like a high-end resort. You won’t see Starbuck’s, Burger King — and no upticks. Everything is street-priced here. It elevates your experience without gouging — we’re world-class, without the pricing.”

Rodriguez, whose annual airport budget is just under $40 million, aims to make the airport at least a break-even proposition rather than a cost center for the city. He addresses areas where the airport was doing things that looked good on paper, but that weren’t working. A case in point comes from the City Auditor’s report, issued in early 2012.

With more than 3 million passenger operations, one would expect a thriving taxi and limo business. There are 26 shuttle van operators and approximately 460 luxury sedan/limousine operators authorized to access the airport, and per their contracts, such services self-report, and pay a fee of $1.75 per passenger. At the time of the report, “Underlying support for these payments, such as sales receipts or gasoline meter readings is currently not being required.” Further, the underlying basis for these payments — the number of airport pickups during the preceding month … is not independently verified.

Checking further into the revenue stream from livery, the auditor found that in a single month, “Of the 18 operators listed in the log, one accurately reported the number of passenger pick-ups. The remaining 17 operators either under-reported pick-up activity or did not submit a report.”

The auditor’s report contained several suggestions, which the airport investigated. “One option we contemplated is working with the Los Angeles International and John Wayne Airports to implement a program where all three airports use a single electronic transponder system that will record each visit to the airport and allow for electronic reconciliation and possibly billing,” explains Rodriguez. “Conversations have been promising … but [under current conditions] it does not make any business sense. The preferred option in this circumstance is to opt for a yearly permit fee in lieu of a per pick-up fee to reduce administrative overhead.”