Tenants Call For independent Audit, Privatization Study, And
Rent Freeze
Tenants at Van Nuys Airport (KVNY) have requested relief from
increasing rental rates and charges that have contributed to
unprecedented job losses at the airport and left many businesses
struggling to survive in the midst of the most severe economic
downturn in the history of private aviation.
An independent survey conducted by the Valley Industry and
Commerce Association of 15 major aviation companies at KVNY
indicates a net loss of 383 jobs since December 2007, a 41.21
percent decrease among the largest employers at the San Fernando
Valley airport. Since the survey reflects job losses mainly among
KVNY's major tenants, the actual percentage of employees lost due
to downsizing and relocation at small- and mid-size businesses is
projected to be even more alarming.
In a letter sent Wednesday to Los Angeles World Airports (LAWA)
Executive Director Gina Marie Lindsey and Board of Airport
Commission President Alan Rothenberg, the Van Nuys Airport
Association-a collaboration of tenant representatives committed to
helping businesses run successfully-requested to suspend
negotiations of five-year rental rate adjustments pending an
independent financial audit and contract management evaluation
study.
The tenants contend that although there is overwhelming data to
support a reduction in rental rates due to current economic
conditions that have depressed land values and caused vacancies to
climb, LAWA's appraisals show an increase in fair market value. The
airport authority has also taken steps to impose a mandatory
airport deficit recovery payment at KVNY, a rent adjustment
requiring tenants to compensate for airport operating losses. The
current budget projects a $2.3 million shortfall at KVNY this
fiscal year.
"Van Nuys Airport is on the verge of an economic state of
emergency," said VNAA member and Aerolease President and CEO Curt
Castagna. "We are committed to partnering with LAWA to find
solutions that will help save jobs, retain businesses and preserve
the economic vitality of the region."
The airport association's letter declares an immediate freeze on
all KVNY rental rate negotiations pending the following actions by
LAWA:
- Conduct an independent financial audit to determine the
necessity of expenditures associated with operating and managing
KVNY, including the level of staffing and overhead costs charged,
and taking into account KVNY's value as an FAA-designated reliever
airport to LAX.
- Report its findings on the recommendation that management of
KVNY be contracted to a private company as included in the 2008
Industrial, Economic and Administrative Survey of LAWA conducted by
KH Consulting Group.
"Any increase in rates and charges at Van Nuys Airport during an
overwhelming period of negative economics would result in
increasingly harmful impacts on the entire aviation community, from
master leaseholders to small aircraft owners," Castagna said. "In
fact, the Port of Los Angeles recently approved a relief package
for its terminal operators that includes rent credits and
reductions. Identifying opportunities to outsource services
traditionally performed by airport employees is also consistent
with our City leadership's efforts to reduce costs, retain and
create jobs, and achieve economic growth."
Ranked as one of the world's busiest general aviation airports,
KVNY had 28,748 aircraft movements in September 2009 compared to
41,376 in September 2002, a year in which operations were still
depressed by the events of Sept. 11, 2001. Fuel sales at KVNY are
down by 30 percent compared to a year ago.
Other factors contributing to a decrease in fair market value at
KVNY include aviation leaseholds that have remained vacant for the
past decade; the possible early phase-out of Stage II aircraft; an
increase in the airport's fuel flowage fee; and the loss of U.S.
Customs service.
Declaring the situation urgent, VNAA has requested a response from
LAWA within the next 30 days.