Airlines, LAX dispute could mean higher fares

updated 11:26 a.m. ET Nov. 27, 2006

LOS ANGELES - A dispute between airlines and the city's airport agency over rent increases at Los Angeles International Airport terminals could hit travelers in the wallet and delay plans to renovate the aging facility.

The discord recently became public when low-cost carriers complained publicly about the proposed rent hike. The dispute reflects a nationwide conflict between airlines struggling to stay aloft with surging fuel prices and airport operators trying to fund renovations for outdated airports.

The city's airport agency is funded largely by landing and terminal fees paid by airlines and revenue from airport parking, shops and restaurants.

Bob Montgomery, Southwest Airlines' vice president of properties, told airport commissioners Monday the rate increase would make LAX the most expensive airport of those offering Southwest flights.

"This will damage our ability to offer low fares," he said.

This is not the first time the relationship between the city and airlines has been tested. Officials raised landing fees at LAX in the 1990s, leading to court battles and delayed renovations to some terminals.

The agency running LAX, Los Angeles World Airports, says it has subsidized airlines for years and must raise rent to a fair market value.

"This subsidization of this cost on behalf of the air carriers has become onerous and unfair," Patricia V. Tubert, a deputy executive director for the agency, wrote in a statement.

Landing fees paid by airlines covered less than half of LAX's $93.1 million security cost in the 2004 fiscal year, officials said.

But some airlines — including Southwest, US Airways and Alaska Air Group — said the proposed rent increase would be unfair because airlines with long-term leases would not be subject to the hike. Carriers with long-term leases, however, could be subject to increases in maintenance and other fees.

The increased rent and fees would force airlines to reduce flights and raise ticket prices, airline executives said.

An attorney representing airlines with long-term leases — which include United, American, Delta and Continental — said they would sue if the increases took effect.

The city's airport commissioners said they planned to make a decision on the rates at a Dec. 4 meeting. Both sides of the dispute said they plan to meet this week to seek an agreement before then.

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