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.

FMI: www.fly2vny.org/