Published: Fri, March 02, 2018
Business | By Kate Woods

American's Spat With United Threatens $8.5 Billion O'Hare Revamp

American's Spat With United Threatens $8.5 Billion O'Hare Revamp

American Airlines said Wednesday that it's opposed to Chicago Mayor Rahm Emanuel's $8.5 billion O'Hare International Airport expansion plan because of what American called a "secret provision" to award more gates to United Airlines. After introducing the expansion plan to the City Council, the mayor disagreed with American's take, and said the deal is about securing Chicago's future.

American, the country's largest air carrier, said on Wednesday it believes the provision gives United Airlines an unfair advantage. Ahead of the sale, Fitch Ratings and S&P Global Ratings affirmed O'Hare's single-A level ratings on both its $7.28 billion of general airport revenue bonds and $560 million of passenger facility charge debt. And, after 18 months of multi-lateral, transparent negotiations, we were looking forward to supporting the new lease. The airport had 184 gates as of January, according to its website. O'Hare would become the first so-called "global alliance hub" in the nation that allows domestic airlines and the worldwide carriers with which those domestic airlines partner to all be located in the same terminal. The airline, the world's largest, said it urged Chicago officials to build three additional gates for American to "re-level playing field".

American said it would compromise: It would sign the lease without the provision.

"The truth is, the way the agreements have been cast over the years, decades upon decades, it was seen more as an airport the two major airlines controlled and we did not", the mayor told The Chicago Tribune.

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According to the plan, the air hub's Terminal 5 will undergo an upgrade and expansion, with Terminal 2 to be largely demolished and rebuilt to include a brand new worldwide arrivals facility, and renovations made to Terminals 1 and 3.

Ginger S Evans, Chicago department of aviation commissioner, said, "This agreement is a win for O'Hare and our customers, thanks to the investments the city and our airline partners are making to ensure our top connected airport is positioned to grow for the future".

It calls the carrier's objections "disingenuous".

"United's last-minute secret deal with the city raises a number of questions and undermines competition and consumer choice", the company said in a statement.

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United Airlines said that it reached an agreement with the city for five additional gates in 2016 and that "American Airlines has been aware of our agreement for over a year and has worked to block the implementation at every opportunity". "It would be economically irrational to refuse to sign a lease and fly to O'Hare as non-signatory airline", the Emanuel adviser said.

The plan marks the biggest terminal expansion in O'Hare's history, which dates back to the mid-1940s.

To support infrastructure improvements, the city is seeking authority to issue up to 4 billion USA dollars in bonds to help facilitate the start of the project. Airlines would contribute to the project through landing fees, terminal rent and other fees.

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