United, American Say No Resolution on O'Hare Dispute

United Continental Holdings Inc. and AMR Corp.’s American Airlines said they were unable to resolve a dispute with the city of Chicago over a $3.4 billion expansion at O’Hare airport at a meeting today with U.S. Transportation Secretary Ray LaHood.

The airlines agreed to meet again with city and federal officials to “explore the opportunity for federal funding” for the project, United and American said today in a joint statement. United Chief Executive Officer Jeff Smisek and American CEO Gerard Arpey had a “constructive discussion” with LaHood and Chicago Mayor Richard M. Daley, the carriers said.

The airlines sued Chicago last month to halt a $1 billion debt sale for part of the O’Hare expansion, which includes a new terminal and runway at the nation’s second-busiest airport. Delaying the project would also prevent competitors from expanding at O’Hare, said Robert Mann, president of aviation consultant R.W. Mann & Co. in Port Washington, New York.

“It looks like the airlines are playing the usual games, which is to say trying to keep out low-fare competition and fence out exposure to higher per-passenger charges,” Mann said. At the same time, in recent years the airlines have been “complaining bitterly about lack of runway capacity and facilities.”

Photographer: Tim Boyle/Bloomberg

A traveler pulls her suitcase and a child through O'Hare International Airport in Chicago. Close

A traveler pulls her suitcase and a child through O'Hare International Airport in Chicago.

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Photographer: Tim Boyle/Bloomberg

A traveler pulls her suitcase and a child through O'Hare International Airport in Chicago.

Virgin America Inc., the discount carrier partly owned by U.K. billionaire Richard Branson, has been stymied in efforts to fly out of O’Hare because it can’t gain access to gates.

‘Candid’ Conversation

The conversation with the airlines was a “candid” one, Daley said today in an e-mailed statement.

“The modernization of O’Hare International Airport is a project of national significance and essential to Chicago’s future,” Daley said, adding that he will continue to meet with the carriers and federal and local officials and that he looks forward to a solution benefiting everyone involved.

Jill Zuckman, a Transportation Department spokeswoman, declined to comment on the meeting.

United and American, which together account for about 80 percent of travelers passing through O’Hare, say congestion and delays have declined at the airport, and the city should move ahead with the project only when unspecified operational targets are met.

They said in the lawsuit that their agreement with the city gives them “broad and sweeping” veto power over the proposed construction, while Chicago said that contract “expressly allows the city to proceed without airline approval.”

Fewer Flight Delays

O’Hare’s airfield delays are down 60 percent since 2004 and aircraft movements have declined 5 percent, Chicago-based United and Fort Worth, Texas-based American said in a Jan. 14 letter to Daley before the suit was filed.

Daley criticized the airlines in a January interview that aired on “Conversations with Judy Woodruff” on Bloomberg Television, saying the construction work needs to progress soon because the project will take years to complete.

“They’re tenants,” Daley said in the interview. “You build for the future. You don’t build for the present.”

O’Hare is the second-busiest airport in the U.S. with 64 million passengers in 2009, behind Hartsfield-Jackson Atlanta International Airport’s 88 million travelers, according to Airports Council International, a trade group.

United fell 13 cents to $26.62 at 4 p.m. in New York Stock Exchange trading, while AMR declined 11 cents to $7.21.

The case is United Air Lines v. City of Chicago, 11CH02081, Cook County, Illinois, Circuit Court, Chancery Division (Chicago).

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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