American Airlines Group Inc. is crying foul over an $8.5 billion renovation of Chicago’s O’Hare International Airport, claiming a “secret provision” awards additional gates to United Continental Holdings Inc.
The proposal would undermine competition and help United build on its advantage as the biggest carrier at O’Hare, American said in a statement Wednesday. The airline said the provision favoring Chicago-based United was “inserted at the last minute.”
“The United gate deal creates a clear winner, United, and clear losers,” American said. “Namely, competition, Chicago travelers and American Airlines.”
The spat between the airlines, whose competing hubs dominate the airport, threatens to disrupt a long-overdue expansion that is the biggest in O’Hare’s history. Chicago plans to issue as much as $4 billion in bonds backed by the airport’s revenue, such as terminal rents, to pay for the first major capital improvements at the hub’s terminals in more than 25 years.
“American and United hold all the marbles,” said Joe Schwieterman, transportation professor at DePaul University in Chicago. “Their objections could bring the whole project to a standstill. But expect them to play a poker game with full intensity, and I think that’s what American is doing.”
International Gateway
The city said it wasn’t concerned that Fort Worth, Texas-based American isn’t on board with the deal. Chicago Mayor Rahm Emanuel called the eight-year project “a game changer for O’Hare” and a “turning point” for the city.
The project would create two new passenger concourses for domestic flights, while a terminal would be torn down and rebuilt as an international gateway shared by United, American and their alliance partners.
“The plan being introduced to Council today ensures every airline has the chance to grow, but most importantly it ensures that O’Hare grows and that Chicago grows,” said Adam Collins, a spokesman for Emanuel. “This is about positioning Chicago to compete with Beijing, Paris and Abu Dhabi, not about positioning in the decades-old competition between two airlines.”
American said the city dismissed without explanation a request to speed the construction of three additional gates for the airline.
Chicago’s goal of overhauling the airport without raising taxes increases the importance of getting buy-in from both United and American, said Dan Solender, head of municipal bonds at Lord Abbett & Co.
“It would be an issue if the airlines don’t agree,” said Solender, whose firm manages about $20 billion of state and local securities, including O’Hare debt. “Maybe it is a negotiating tactic by American to get a lower charge but this financing cannot occur without taxpayer funds if the airlines don’t go along.”
United said it reached a deal with Chicago for five additional gates in 2016.
“This agreement is no different than the one reached by American Airlines and the city in early 2016 for five additional gates,” United said by email. “American Airlines has been aware of our agreement for over a year and has worked to block the implementation at every opportunity.”
