Settlement will allow LAX to regain control of Terminal 2

The Airport Commission approved today a settlement that would let Los Angeles World Airports regain control of Terminal 2 at Los Angeles International Airport from a private consortium of airlines.

Under the terms of the settlement, LAX would pay $117.7 million to terminate a 40-year lease signed in 1985 with LAX Two Corp., whose shareholders are Air Canada, Hawaiian Airlines and Delta Airlines.

Ending the lease 15 years early will bring both financial and operational benefits to LAWA that will more than offset the cost of the settlement, LAX Public Relations Director Nancy Castles said.

"We have increased costs in terms of maintaining and operating Terminal 2, and we would like to fully recover those costs which have gone up over the course of the first 25 years of this lease,'' Castles said. "As you can imagine, something that was signed 40 years ago was based on costs established 40 years ago.''

"We believe that we will be able to recover the settlement cost through charges to the airlines that use that terminal in the future because we'll be able to charge them today's market rates as opposed to rates that were established 40 years ago.''

Under the settlement, LAWA will pay LAX Two Corp. $29 million, and refund $88.7 million that the consortium will use to pay off outstanding principal on bonds that were issued when it constructed Terminal 2 decades ago.

The money for the settlement has been in escrow since 2007, Castles said.

Both parties also agreed to dismiss litigation.

Castles described Terminal 2 as LAX's secondary international terminal, because 10 of the 13 airlines operating there are international carriers.

With the settlement, Castles said, LAWA will be able to establish a direct relationship with those airlines; allow other airlines to use Terminal 2; and assume control over certain aircraft gates and customs and border protection areas.

"All of that will help us establish a more even playing field for all of the airlines so that they all compete on a more standard or more uniform level because (currently) some airlines are paying 40-year old rates while some have newer leases and are paying rates based on more recent appraisals,'' Castles said.

The Airport Commission today also approved new leases with Air Canada and Hawaiian Airlines. If approved by the Los Angeles City Council, the increased costs will be gradually phased in.