American, United Agree to Smaller O'Hare Plan With Chicago

American Airlines and United Airlines agreed with Chicago on a scaled-back $1.17 billion expansion plan for O’Hare International, ending a legal battle over growth at the nation’s second-busiest airport.

The agreement will allow work to begin on a new runway and other airfield improvements, preventing an escalation of flight delays at O’Hare, according to a statement today by Chicago Mayor Richard Daley, the airlines and the U.S. Transportation Department. It is the largest airfield modernization program in the U.S., federal officials said.

American and United sued the city in January to block the sale of bonds for the original $3.4 billion expansion, arguing demand didn’t justify the buildup and that Chicago didn’t receive their required approval before proceeding. The city said the airlines had no veto power and that the project was important for economic growth and jobs in the Chicago area.

“This is a landmark achievement that will benefit air travelers throughout the entire nation,” Transportation Secretary Ray LaHood said in the statement. “It will ensure one of our busiest airports continues to thrive economically in the future.”

Chicago delayed the planned February sale of about $1 billion of debt to help fund construction after the airlines sued. The legal action will be dropped, said Michael Trevino, a United spokesman, in an e-mail. The city hasn’t determined when the airport bonds will be sold, Pete Scales, a spokesman for the city’s chief financial officer, said in an e-mail.

Remaining Portions

The airlines and Chicago officials agreed to meet no later than March 1, 2013, to negotiate terms and timing for the remaining portions of the original $3.4 billion plan.

The scaled-back plan “carefully balances the legitimate concerns of all the parties, allows us to move forward in a deliberate and prudent way and resolves our legal disputes,” American Chief Executive Officer Gerard Arpey said in the statement.

American, a unit of Fort Worth, Texas-based AMR Corp. (AMR), and Chicago-based United, a division of United Continental Holdings Inc. (UAL), are responsible for more than 80 percent of the passenger traffic at O’Hare.

The airlines argued that the prolonged U.S. economic decline removed the immediate need for the expansion, and said the project would increase operating costs. Today’s agreement allows the carriers to participate in growth “in a fiscally responsible manner,” United Chief Executive Jeff Smisek said today at a news conference at the airport.

O’Hare, one of Chicago’s two commercial airfields, is managed by the Department of Aviation. The original $3.4 billion expansion, the second phase of a broader O’Hare Modernization Program, included the creation of two new runways, extension of a third and construction of a new terminal.

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

To contact the reporters on this story: To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

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