Deal reached with airlines on O’Hare Airport expansion
A $155 million infusion of federal funding and 11th-hour concessions by a lame-duck mayor eager to cement his legacy sealed the deal that will pave the way for $1.17 billion worth of new construction at O’Hare Airport, including a new south runway.
After months of acrimony culminating in an unprecedented lawsuit, United and American Airlines have reached an agreement with Mayor Daley that will allow construction to continue on Daley’s signature project.
U.S. Transportation Secretary Ray LaHood not only brokered the deal at the request of Illinois’ bi-partisan team of U.S. Senators Dick Durbin (D-Il.) and Mark Kirk (R-Il.) but also put $155 million in new federal money on the table to make the numbers work for airlines squeezed by skyrocketing fuel prices.
“We decided on the runway that we thought was most important. We tried to figure out the financial impact. Through the Department of Transportation, we offered to put some more money on the table. And through that process of developing a timetable for the south runway, what it would cost, what each party would have to pay and . . . some additional [federal] money we could provide, we finally reached an agreement,” LaHood told a news conference at O’Hare.
Daley did his part by agreeing to divide the $3.4 billion in remaining O’Hare expansion projects into two parts instead of just one.
The $1.17 billion portion that will go forward includes: construction of a far south runway that was originally scheduled to be completed last; a new south air traffic control tower; completion of runway 10-center that includes a disputed cemetery; relocation of Irving Park Road; a series of taxiways and facility buildings.
The $2.23 billion in remaining projects will be the subject of a new round of negotiations slated to begin no later than March 1, 2013.
For the first time, the city has agreed that a new western terminal the airlines don’t want will be developed only if demand requires it. The city has also agreed to negotiate — not try to dictate — construction of a north runway and other projects.
Under the compromise, the city will kick in $365 million from passenger facility charges, and the airlines will contribute $300 million through their landing and rental fees. The city will use this revenue stream to support general aviation revenue bonds.
“Everybody gave a little to reach a compromise. . . . In 2013, we will sit down again and discuss the triggers … for the next phase,” said United CEO Jeff Smisek.
Reiterating his contention that O’Hare expansion should be “demand driven,” Smisek said, “A lot changes in the airline business with time. Right now, we have exceedingly high fuel prices, a difficult time for the industry, but that could change again. The economy is recovering from a recession. . . . Demand will recover over time. And I see a point in time when the entire O’Hare modernization plan will be completed. We’ve always supported [it]. It’s just a matter of the timing.”
Pressed to describe “who gave what” in negotiations he described as “hard-fought,” Daley said, “Everybody gave what … In other words, everybody gave in…There were a lot of compromises here… I did [too], but I’m not gonna mention it.”
The job of bringing the O’Hare expansion project over the finish line will now fall to Mayor-elect Rahm Emanuel, who e-mailed LaHood every day to keep the pressure on to reach an agreement.
“By allowing the modernization of O’Hare International Airport to move forward, the agreement will create new jobs in the short term and help secure Chicago’s economic competitiveness in the long term,” Emanuel said in a statement.
Joe Schwieterman, a transportation expert at DePaul University, credited the city for “showing some flexibility”, adding, “Had the momentum been lost, it could have taken years to bring it back. So, the stakes were high.”
But, he warned, “If we don’t get relief on $100[-a-barrel] fuel, the mood of the airline industry a year from now is gonna be pretty tough to predict.”