For more than a year, negotiations over Mayor Rahm Emanuel’s major $8.5 billion expansion of O’Hare International Airport were heating up behind the scenes, and on Wednesday they boiled over into full public view as airline executives and city officials accused each other of not telling the truth about various aspects of the plan..
As Emanuel formally introduced to the Chicago City Council the blockbuster proposal that includes a state-of-the-art global terminal, dozens of new gates and several additional concourses, American Airlines emerged as the sole airline voicing opposition.
American said Emanuel cut a last-minute, secret deal with United Airlines to give the Chicago-based air carrier more gates and an unfair advantage.
United called that contention a “falsehood,” and said American was scurrying to make up for gates it lost because of its own business decisions.
Aviation Commissioner Ginger Evans sided with United, casting American as unreasonable throughout the final stages of the negotiations and dismissing as untrue its contention that City Hall blindsided it with a sweetheart deal for United.
Emanuel sought to portray all the feuding as exactly what has been wrong at the airport for the last several decades, contending a larger O’Hare will usher in more competition and free the city from longstanding ironclad control over the airport from hub carriers United and American.
“You’ve seen (these) kind of accusations before. You know that. This isn’t new. Nothing is new,” Emanuel told reporters at City Hall when asked about American’s opposition.
“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 said. “This agreement breaks out of that and actually allows us to be in control of our own destiny and design it.”
Despite American’s resistance, Emanuel vowed to move forward with or without the airline. And Evans said she considered it “highly unlikely” that American would not eventually sign on, portraying Wednesday’s maneuvering as public posturing in an attempt to extract more from the final deal.
American executives did not outline what steps they would take moving forward. Michael Minerva, the airline’s vice president of government and airport affairs, declined to say whether American would consider suing to block the plan.
Emanuel didn’t seem too worried by the prospect.
“Some people will look at litigation,” he said. “I’m going to look at aviation and a secure future for the city of Chicago.”
The mayor is seeking to leverage the May expiration date of the airlines’ 35-year lease to secure from the carriers higher fees and charges that would help bankroll the ambitious project.
Airline industry experts said it’s too early to tell what would happen if American doesn’t sign the new O’Hare lease.
Among the legal and financial questions are whether the city could secure the financing it needs without American’s participation, said Henry Harteveldt, a San Francisco-based travel industry analyst and president of Atmosphere Research Group.
But it’s also hard to see American backing out if it meant losing its Chicago hub, he added. The city has a large local market with lots of business travelers and is well-positioned to serve passengers connecting between other cities.
“It would be tough as well as expensive for American to walk away,” Harteveldt said. “They would essentially cede Chicago to United, and to a lesser extent Southwest.”
Southwest Airlines threatened to leave Seattle-Tacoma International Airport over a 2005 expansion. The carrier ran into problems with that approach but succeeded in reducing construction costs, said Robert Mann, a New York-based airline industry consultant.
American has too much at stake in Chicago to pull off a similar move, and their announcement is “just negotiations,” Mann said. “American wouldn’t cut off its nose to spite its face.”
Leading much of the day-to-day negotiations on O’Hare has been Evans, who laid out the details of the proposed eight-year overhaul in an exclusive interview with the Tribune published Sunday. At that time, representatives for both United and American released statements expressing optimism about a major expansion of O’Hare while declining to discuss details, citing the ongoing negotiations.
American executives told the Tribune that since then, they had been unsuccessful in getting Emanuel to sign off on a compromise they argued would create a more fair balance between O’Hare’s two hub airlines.
At the heart of the disagreement is the number of gates that would be awarded to United and American under an expansion that would grow the amount of space for planes to park at airline gates by 25 percent and increase the total number of gates at O’Hare from 185 today to roughly 220 upon the project’s completion in 2026.
Improvements and changes at O’Hare typically are paid for from fees the airlines pay at the airport, and the current lease gives United and American veto power over virtually any changes. That dynamic has resulted in sniping between the two airline giants.
Later this year, American is set to open five new gates on Concourse L in Terminal 3. Those gates will not be paid for by airline fees, but instead entirely by American. That’s because United and American didn’t reach an agreement to use airport fees to pay for the additional gates, city officials have confirmed.
Minerva said American pushed for those gates in part to make up for lost space at O’Hare after a settlement with the Department of Justice required it to sell off gates there after its 2014 merger with U.S. Airways. That lost space and other gate changes at O’Hare left United with 17 more gates than American. The gap previously had been seven, Minerva said.
Emanuel awarding United five more gates as part of the O’Hare expansion represents an effort to make up for the extra American gates, said Gavin Malloy, United’s vice president of corporate real estate and environmental affairs.
“American made its own business decisions to create the gate disparity at O’Hare. They used an agreement with the city to get five more gates to compensate for the business decisions they made themselves,” Malloy said. “We, in turn, did a deal with the city of Chicago to maintain our fair share. That’s what we believe to be equal treatment.”
In an interview Wednesday, American’s Minerva insisted that when City Hall presented its final offer at a Feb. 15 meeting, it was the first time the carrier learned that the extra gates for United, which he called a secret deal, had become part of the talks.
“That meeting is when it became clear to us that the negotiations we were in, the room we were in, was not the room,” Minerva said. “There had been this other path and this other room” where United and the city were in separate talks.
Evans, the aviaition commissioner, disputed Minerva’s version of events, citing two different dates on which she said she had negotiations with him and mentioned the prospect of more gates for United. Evans said she also offered other concessions American wanted, which the airline rejected but is now “scrambling, trying to get some of those back.”
“There was a time and a place for that,” Evans said of those offers to American. “They kind of walked away.”
An American spokeswoman later clarified Minerva’s previous statement, acknowledging that extra gates for United had, in fact, been part of negotiations but had never appeared in a formal proposal until this month.
United officials argued that its five extra gates also were part of a 2016 proposal that would have given American eight additional gates. American spokeswoman Leslie Scott said United rejected that deal, while United’s Malloy said it was American that wouldn’t go along with it.
Evans again sided with United, saying American killed that proposal.
Said Malloy: “From our perspective, this notion of playing politics around gates and when they knew about gates is both unfortunate and disingenuous. It’s not just wrong, it’s also a falsehood.”
Last year, 79.8 million passengers flew to, from or through O’Hare, according to Chicago Department of Aviation figures. About 44 percent of passengers flew with United and 37 percent with American, according to city data. The next closest airlines: Delta Air Lines and Spirit Airlines with 4 percent each.
United and American’s dominance at O’Hare is thanks in large part to the current lease that was signed in 1983, an agreement in which Evans said the city “gave away the store, gave away the farm.” From City Hall’s perspective, the stranglehold the two airlines have held over the airport prevented the city from upgrading and maintaining O’Hare because United and American vetoed projects they argued would use fees they largely paid to help competitors.
Evans said the new agreement would not grant the airlines such veto powers. Some travel experts have said it is in O’Hare’s best interest to limit American and United’s reach to free up more gate space for competitors who have long sought more access to one of the world’s busiest and best-connected airports.
Scott said American would sign off on Emanuel’s $8.5 billion plan if the city accepted a compromise to “re-level the playing field” by accelerating the construction of three more gates for American.
“To date, the city has dismissed that approach without explanation,” Scott said. “We encourage city leaders to fix the lease and ensure competition remains vibrant at O’Hare.”
But Evans said Wednesday the city can’t speed up construction of those gates because “every communication cable in O’Hare” is in that area and the wires would have to be “carefully relocated, and American knows that.”
The expansion of the 73-year-old O’Hare seeks to transform an airport long known for gridlock and delays by increasing sluggish growth in international flights and creating more room for domestic carriers. Emanuel has said no taxpayer money or federal dollars would be needed to be pay for the plan, which he said the city would bankroll by borrowing against a future increase in airport fees and revenue generated by the expansion and new airport lease.
Under the proposal, the 55-year-old Terminal 2 would be torn down to make way for a new “Global Terminal” with wider concourses and gates to accommodate large international flights. Terminals 1, 3 and 5 would be renovated, two new satellite concourses would be built and connected by a pedestrian tunnel and more than 3.1 million square feet of terminal space would be added to O’Hare — a 72 percent increase.
