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TheStreet Open House

No Airline Dominates LAX but American Has Hopes

Stocks in this article: AAMRQ.PKDALLCCLUVUAL

Bradley's ongoing $1.5 billion expansion project will add 18 new gates at Bradley, some with dual loading bridges, and secured corridors between Bradley, Terminal Three and American's Terminal Four. The expansion "will provide two unique opportunities -- we and our partners can co-locate, and there will be more room to expand operations out of our own terminal." Vahidi said. "Unlike New York, Los Angeles is not slot-constrained, but it is gate-constrained. The most valuable asset to have there is enough gates and terminal space, so we are very uniquely positioned. We will be able to move some operations to Tom Bradley International Terminal."

United's hub at LAX has about 200 daily departures to 55 U.S. destinations and 10 international destinations, including three in Asia. United already operates the only major airline hub in California at San Francisco International Airport, where it offers 286 daily departures to 70 domestic destinations and 19 international cities, including seven in Asia.

Besides the Bradley expansion, LAX also plans a $229 million construction project at Terminal Five, which Delta occupies. The project, set for completion in 2015, includes expanding the ticket lobby and screening checkpoints and improved facilities for Delta premium passengers and club members. This summer Delta will operate 118 peak day departures to 40 destinations including Sydney and Tokyo. Like its two principal rivals, Delta offers frequent service to the New York area.

As American expands at LAX, a wild card is the pending merger with US Airways. Vahidi noted that American is so far prohibited from discussing its LAX plans with US Airways, since regulators have not yet approved the merger. LAX is obviously a good place to be, not only the largest gateway to Asia but also the third-largest U.S. international gateway, trailing only Kennedy and Miami International Airport. Yet the philosophy that has enabled US Airways to succeed has been to operate at airports it dominates -- today, 99% of all US Airways flights involve its hubs in Charlotte, Philadelphia, Phoenix and Washington. It does not seem that any clear path to LAX domination exists.

Aviation consultant Robert Mann said LAX has historically been relatively underserved because it lacks sufficient gates. Encroachment by other Los Angeles area airports has also diminished service, as has difficulty in driving to LAX. Also, the absence of a significant hub at LAX has meant that service to smaller cities, which might benefit from connecting traffic, has been limited. Mann said LAX resembles JFK, "a coastal gateway with very fragmented shares by airlines."

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