Joshua H Silavent Long Beach Business Joural
Under the Radar: The Aviation and Aerospace Industry in Long Beach Flies On Despite Weak Economy
October 23, 2012
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  • By Joshua H Silavent

    Construction of the Long Beach Airport’s new passenger concourse is running ahead of schedule, and that’s good news for a local economy badly in need of a boost.

    The $45 million concourse – now scheduled to open in December – provides a needed injection of growth to a city with an unemployment rate of 12.3 percent (August), more than four points higher than the national average. Indeed, 110 new jobs were filled recently in retail and food service thanks to the concessionaires moving into the new 35,000-square-foot concourse.
    Like the Port of Long Beach and the Long Beach Area Convention and Visitors Bureau, the Long Beach Airport is a vital player in the city’s economic development portfolio.

    For example, the airport is responsible for 18,000 direct jobs in Long Beach, or 9 percent of the city’s total workforce. Moreover, the airport supports jobs in administration, commercial air travel, security, flight schools, retail, restaurants, manufacturing, transportation and lodging, just to name a few. Commercial, corporate, general and fixed-base operators all do business at the airport, which helps to accentuate the differences that make flying in and out of Long Beach unique.

    “We are much more diverse than any other airport in the region,” Long Beach Airport Director Mario Rodriguez told the Business Journal.

    And it is this diversity that helps explain why the airport’s annual economic impact exceeds $6 billion and 2011 revenues total almost $32.6 million, all without a single penny of taxpayers’ money.

    “We’re running this place like a business,” Rodriguez said.

    The new concourse and terminal modernization investment epitomizes the success the airport has had in recent years, even as commercial and general aviation traffic has slowed nationwide since the onset of the economic recession.

    “[The new concourse] wasn’t designed like an airport,” Rodriguez said. “This was designed like a resort. We want to treat customers like we’d want to be treated.”

    To this end, the concourse was constructed with a kind of boutique approach in mind, with customer service front and center. For example, restaurant concessionaires will provide local flavors and have committed to street pricing, rather than the typical mark-ups airline passengers encounter at airports.

    Great detail also was paid to the look and feel of the concourse, with an eye toward making air travel less stressful. This is evident in the open air space between either end of the concourse, which has been transformed into a kind of desert garden, replete with palm trees and fire pits.

    Rodriguez said he wanted the design of the concourse to avoid the trappings commonly seen at larger airports like LAX. For instance, security checkpoints have been consolidated and boarding counters for airlines have been streamlined to improve efficiency and wait times.

    “We believe in developing things to a human scale,” Rodriguez said.

    Of course, all the positive impacts trickling out of the airport into the greater Long Beach community don’t come free of challenges, especially given the weak economic recovery of the last few years and potential federal funding cuts in 2013.

    A particularly heavy blow hit the airport last year when Boeing announced hundreds of layoffs in Long Beach as its C-17 program slowed production.

    Rodriguez said commercial and fixed-base operators would, in time, step in to fill this employment hole.

    “[The airport is] so diversified that others will step in,” he added.

    It also helps that the airport’s revenue streams have risen between 17 and 20 percent over the last three years while keeping costs one-third to one-half cheaper than comparable airports in the region like John Wayne in Orange County or Bob Hope in Burbank.

    “So airlines really have a competitive pricing advantage here,” Rodriguez said.

    Though Long Beach is a slot-regulated airport, which caps the number of planes that can fly in and out, many commercial airliners are still finding ways to increase service. In fact, the airport broke its passenger record last year, with more than three million commercial passengers passing through its gates.

    “What actually is changing a lot is that airlines – US Airways and Delta – are opting to bring in bigger airplanes because people want to come here,” Rodriguez said.

    And bigger airplanes mean more people. And more people mean more revenues for all parties involved, including businesses throughout the City of Long Beach. In 2011, airport officials report that overnight visitors associated with the airport spent an estimated $53 million in the local economy.

    Good news never lasts forever, though, and substantial funding cuts to the Federal Aviation Administration as part of the colloquially known “fiscal cliff” are coming in 2013 if Congress does not act during a lame-duck session between Election Day and the first of the year.
    “They’re going to hit the FAA extremely hard,” Rodriguez said.

    According to an August report from the Aerospace Industries Association, mandated cuts to the FAA, also known as sequestration, would total $1 billion annually, or more than 6 percent of its nearly $16 billion budget. Moreover, reduced funding could cost upward of 132,000 jobs, such as air traffic controllers and security screening personnel, at airports across the nation.

    Rodriguez said he has been tracking potential cuts to the FAA closely and taking precautions in the event that they come down the pipe.

    “To some degree, I’m paid to be paranoid,” he said. “We’re prepared here. We have an extremely large (cash) reserve. We’re going to weather the storm, because it is a storm.”

    Rodriguez, however, is concerned about how cuts to the FAA might negatively impact federal support for maintenance projects on the tarmac and runway, for example. That’s because the Long Beach Airport receives between $8 million and $10 million annually in federal funding to support these kinds of improvements.

    Given the unenviable task of choosing what should be cut first, Rodriguez said the FAA should look at slashing funds for general airport support rather than risk losses in front-line safety personnel, such as air traffic controllers.

    Despite the fiscal uncertainty that lies ahead for the FAA, the Long Beach Airport remains well positioned for a strong 2013.

    Rodriguez said he is working harder than ever with city officials and business leaders to promote Long Beach as a hub for both destination and business travelers.

    “This is a wonderful city and it’s very easy to market such a wonderful city,” Rodriguez said.

    As the airport continues to grow and expand, Rodriguez said he is more committed than ever to making sure it remains a responsible business to the people and city on which it depends.

    “We are aiming to become one of the greenest airports in the United States,” he said.

    Wherever possible, Rodriguez likes to quantify the effects of going green. For example, LED lights now dot the taxiway, saving the airport about $170,000 per year in maintenance and energy costs.

    “This is a financially intelligent green,” Rodriguez said. “We’re not doing green for the sake of doing green. We’re doing green because it’s a positive effect on the bottom line.”

    Furthermore, the new passenger concourse will be LEED-gold certified and the airport is implementing ground power service for idle airplanes so that diesel generators can be switched off.

    “Call it cold ironing for airplanes,” Rodriguez said, referring to a similar practice used with shipping vessels at the Port of Long Beach.

    The Long Beach Airport has proven to be a stable home for a number of commercial, general, corporate and fixed-base operators. Modernization projects and other investments will continue this trend, even as businesses wade through the economic morass imposed by a weak and tenuous recovery.

    In many ways, air travel – be it charter or commercial flights – reveals a lot about consumer spending habits and general confidence in the economy. And this seems especially true in Long Beach as the airport continues to serve Southern California residents, as well as business and vacation travelers.

    “This is the community’s airport,” Rodriguez said. “This is the city’s airport.”

    Commercial Aviation: New Concourse Likely To Improve Business

    The commercial air travel sector has taken a good beating in recent years as discretionary spending slowed and Americans looked closer to home for vacations. And as fuel and other costs to do business increased, major airliners looked to pass the buck to consumers with checked-bag fees and reduced in-flight amenities.

    The recession took a particularly heavy toll on American Airlines, which filed for Chapter 11 bankruptcy last year and is currently exploring a merger with both US Airways and British Airways.

    Moreover, many major airliners have cut back flight service to certain destinations as revenues have dried up. And this, in turn, has hurt many regional airports across the country.
    But outliers tend to exist in any industry. And the Long Beach Airport is proving to be a case in point.

    The new passenger concourse set to open in December has the major players at the airport – JetBlue, Delta, US Airways, Alaska Airlines – excited about the prospects for increased business.

    “The airport has been extremely engaging with us and has been very accommodating,” said Thomas Berg, JetBlue general manager in Long Beach. “Our customers are going to be extremely excited to see the amenities that are offered.”

    Berg said he thinks the new concourse will encourage passengers to arrive earlier, and improved efficiency at the security checkpoint, ticketing counter and boarding counter will eliminate many of the headaches and hassles that turn off so many airline travelers.

    The Long Beach Airport has proven to be a winner for JetBlue in the 11 years the airliner has operated there. And that success continues despite the recession and slow recovery.

    Berg said load factors have been good all year and that while the airport is slot-regulated, JetBlue has committed to trying out new destinations and increasing flight frequencies to favorite hotspots for local residents. For example, the company now operates a seasonal flight to and from Anchorage, Alaska, which has proven popular, Berg said.

    JetBlue averages 30 flights per day at the airport servicing 12 destinations, from San Francisco to New York. The carrier brings upward of 4,000 people into Long Beach each day, which helps drive spending to local businesses.

    Berg said JetBlue works hard to keep prices low, particularly as fuel costs continue to rise. And, indeed, the cost to fly out of Long Beach is typically cheaper than comparable airports in the region, like John Wayne in Orange County or Bob Hope in Burbank.

    “It’s probably been our biggest struggle, to make sure we keep prices good,” Berg said.

    JetBlue has benefited from the fact that airport officials work in close partnership with city officials and the wider community. For example, the work of the Long Beach Area Convention and Visitors Bureau to bring both business and vacation travelers to the city has a trickle down affect on JetBlue and other commercial airliners.

    “It pays off to be connected to this community,” Berg said.
    Alaska Airlines knows it pays off, too.

    “Long Beach has been important to us for a long time,” said spokesperson Marianne Lindsey, “way back to our roots working with Jet America.”

    The airliner added Portland as a service destination last year, and Lindsey reports that the flight is popular.

    The airliner also operates three non-stop, daily flights between Long Beach and Seattle, an important hub for travelers headed to the Last Frontier.

    Lindsey said that Alaska passengers consistently give high marks to the Long Beach Airport because of its ease of access and proximity to Los Angeles and Orange County.

    “I know a lot of our travelers that are flying down, for example, to go to Disneyland or some of the attractions in Southern California, really like the Long Beach Airport for its convenience,” she added.

    General Aviation: It Can Only Go Up From Here

    General aviation is the largest sector of the industry, with more than 6,000 airports across the country exclusively serving this kind of personal aircraft, flight schools, ground support and charter flights.

    Airserv, which provides ground support primarily for charter flight services, has been a player in the general aviation market for 40 years at the Long Beach Airport.

    Founder Kevin McAchren has seen a lot of ups and downs in that time, but nothing like the economic recession and slow recovery experienced in the last few years.
    “In a lot of ways, we’re still skimming the bottom,” McAchren said, adding that business has remained flat for Airserv this year.

    As Americans have pulled back on their discretionary spending, the charter flight business has suffered in proportion. McAchren said that many charter companies have folded since 2008. But the general economic climate of the nation isn’t the only factor that can derail business.

    McAchren said he often services the charter flights of professional sports teams. He expected to provide ground support for three National Hockey League teams already this fall, but the NHL’s current lockout has scuttled these plans.

    “Strange things can hurt your business,” McAchren said.

    McAchren remains upbeat about the prospects for a solid 2013. Perhaps that’s just his nature, or perhaps it’s the only prudent mentality when things can’t get any worse.
    “Somehow, things muddle through,” McAchren said.

    If there is one aspect of the general aviation sector that remains strong, flight schools and training centers are it. No matter the economic climate, Americans’ love for flight never seems to subside.

    This is evident at Embry-Riddle Aeronautical University, which has 150 locations worldwide teaching the science, practice and business of the aviation and aerospace industry.

    Patrick Ross, director of academics at the Long Beach Airport campus, has seen thousands of students pass through his classes since he began teaching at the university in 1999.

    Embry-Riddle graduates become air traffic controllers, pilots, maintenance technicians, or learn to work in aircraft sales or airport administration. About 270 students are enrolled each semester at the Long Beach campus, Ross said.

    “It’s very diverse,” Ross said. “We have everything from mid-level management at Boeing looking for a master’s degree and, on the other end, we have people just out of the service using their GI benefits.”

    Fixed-Base Operators: Making Adjustments Key To Weathering Slow Recovery
    Wherever there is general aviation, fixed-base operators (FBOs) are close by. That’s because FBOs provide fueling, hangar space, maintenance and other services to private flights, be it corporate, business or personal use. FBOs are critical to these sectors, and vice versa.
    But times are tough across the aviation industry. FBOs are no exception.

    “It’s been a lot of hit and miss,” said John Tary, general manager of Airflite, which provides private aircraft services and storage at the Long Beach Airport through its own terminal. “Business aviation is very unpredictable by its nature.”

    Tary said business is down 15 percent year over year. He described the last five years as “sitting in the lifeboat waiting for the next wave.” In many ways, he added, the loss of business in recent years is simply indicative of the nation’s economy.

    Airflite, however, meets suppressed demand head on, always finding ways to improve service, right down to the little things like providing fresh fruit and hot towels for clients, Tary said.
    Moreover, Tary remains “cautiously optimistic” that the only way to go from here is up. “It does seem to be getting more positive in many aspects,” he said.

    JFI Jets is another FBO at the Long Beach Airport, but its many other services make it much more than that.

    In addition to providing hangar space and fuel for personal aircraft, JFI also is a certified air carrier offering charter services as well as a certified repair station for large-cabin aircraft. The repair station is JFI’s newest service, launched less than a year ago.

    “We realized that to be competitive in the managed aircraft space, as well as being credible in a fixed-base space . . . that that was just going to add to our portfolio of offerings,” said Fred Cei, executive vice president of sales. “For us, we really feel like we’re here to stay. And so if we’re going to be a player that’s really looked upon as a leader in the local space, we needed to have the approvals and the designations from the FAA to show everybody that we’re completely legit.”

    Finding different ways to expand business is nothing new to JFI. The company actively works with movie and television producers from Hollywood to provide hangar space, personnel and equipment for shoots at the Long Beach Airport. The HBO series “Dexter” and CBS hit “CSI: Miami” are just two examples of production that have taken place at the airport with JFI’s assistance.

    Cei credits the airport administration with helping facilitate this added revenue stream.
    “We cannot do that without a very open line of communication with the airport and the staff members,” he said.

    Moreover, Cei said the airport administration is very pro-business, which makes JFI happy that it has chosen Long Beach as its corporate headquarters. The company also has operations in New York and Moscow.

    Like many businesses in the aviation industry, JFI is watching Washington closely. The upcoming elections and the “fiscal cliff,” which could send the FAA’s budget into a tailspin, spell doubt about what 2013 holds for the company.

    “The uncertainty of the elections . . . is causing a general slowdown in our customers’ willingness to spend money,” Cei said. “As an organization, we have taken measures, internally, to make sure we can survive.”

    Corporate Aviation: Business Travel Slows

    Business travel is a key component of the aviation industry, especially so in Long Beach, which markets itself as a destination for corporate conventions. And though the commercial sector supports business travel, it is corporate aviation that does it best.

    Many companies justify the expense of flying privately by pointing to the efficiency and convenience it provides. Perhaps this explains why deliveries of private jets are expected to increase slightly this year, according to a forecast from the Honeywell firm.

    Curt Castagna, president and CEO of Aeroplex, which provides hangar and office space for the corporate and business sector, is beginning to see more activity at airports throughout the region.
    Van Nuys, one of the more dominant corporate and business aviation airports in the country, is doing better than most – Long Beach included.

    “We’re still seeing kind of a slower recovery here in Long Beach,” Castagna said.
    But Castagna sees an opening for Long Beach in this sector because of its central location between Los Angeles and Orange County.

    “What we really try to do is work in conjunction . . . with the city to kind of put Long Beach on the map as a corporate destination or a business destination,” Castagna said.

    Working with city officials to promote the Long Beach Airport as part of a larger economic development plan for the area is crucial to remaining competitive in this sector, Castagna added.
    “It’s putting some focus on the business aviation side of it and linking up that connection between our facilities here at the airport . . . to the rest of what’s going on downtown,” he said.
    Though the new passenger concourse will service commercial airliners only, its existence will benefit all airport businesses, Castagna said. It is one additional asset that makes the Long Beach Airport unique and primed for continued growth.

    “We have such a blended mix of uses between commercial, business aviation, private aircraft ownership, training, helicopters, police, fire, some manufacturing, Gulfstream . . .,” Castagna said. “That blend of activity, including blimps, you never see at any other airport in the region.”
    Gulfstream has long been one of the major players in the corporate aviation sector and Long Beach has facilitated its business for years.

    “Our Long Beach facility has been in operation since 1986, offering one-stop service for all Gulfstream aircraft and completions on Gulfstream’s G550 large-cabin, ultra-long-range business jet,” spokesperson Heidi Fedak said in an e-mail. “Service capabilities . . . include complete airframe maintenance, routine maintenance, refurbishment, major repairs and modifications.”

    Fedak said that while the company does not publicly discuss site-specific sales, Gulfstream’s Long Beach Airport location handled more than 500 aircraft visits in 2011. Moreover, its services business is up five percent so far this year. Gulfstream has hired about 700 new employees worldwide in 2012.

    The company is currently prepping for launch of new aircraft, which promises to make 2013 an exciting year, even if the economy remains sluggish.

    “We expect to deliver our two new aircraft, the Gulfstream G650 and the Gulfstream G280, to customers later this year,” Fedak said. “We’ll spend 2013 showcasing these aircraft to the world and supporting our operators as they take delivery of their new aircraft.”

    In addition, “Long Beach will serve as one of the company’s sites capable of providing line service and heavy maintenance” on the new G650 aircraft, Fedak said.

    Aerospace: C-17 Program Continuing

    When Boeing announced in January 2011 that it was slowing production of its C-17 program, the impact was immediately felt in Long Beach.

    The company announced that it would shed about 1,100 jobs, with the vast majority hitting the Long Beach workforce. Moreover, Boeing completed the sale of its Douglas Park home in October with the purchase of the 717 facility by the Sares-Regis Group.

    Though domestic orders for C-17s have decreased, the program still supports 20,000 jobs in 44 states, including 4,000 direct jobs within Boeing in Long Beach, St. Louis, Macon, Georgia, and Mesa, Arizona.

    But the program remains particularly viable in the international market.

    “We have delivered 247 C-17s, including 29 to international customers,” Bob Ciesla, C-17 program manager, said in an e-mail to the Business Journal. “We have an undelivered firm backlog of 17 aircraft, including 5 to the U.S. Air Force, 10 to India, 1 to Australia and 1 to an unnamed international customer. We continue to see strong international interest, especially in the Middle East and Asia/Pacific region, in the capabilities only the C-17 can deliver.”

    Ciesla said that Boeing also has seen repeat customers, like the United Kingdom and Australia, in recent years, which helps prolong the life of the program.

    “Based on current, confirmed orders, C-17 production will continue through third quarter 2014,” Ciesla said. “Additional sales to new and existing international customers, as well as future domestic opportunities, have the potential to extend the line for years beyond this timeframe.”