American Airlines has joined with rival United Airlines in a suit against the City of Chicago to block expansion of O'Hare International Airport that could cost both carriers nearly $2 billion in higher landing fees and rents.
In a suit filed in the Circuit Court of Cook County, Illinois on 18 January, the plaintiffs charge that the City of Chicago, which operates O'Hare, is in the process of arranging financing for the project without the approval from the airlines. The carriers asked the court to block the city from financing or starting construction on the $3.4 billion second phase of the O'Hare Modernisation Programme (OMP), which includes completion of runways construction and a western terminal complex.
The suit states that the city is assuming a "blank check" from the airlines to fund the project, even though the airlines' contracts with the city stipulates a "check and balance" that would prohibit the city from "saddling O'Hare with new capital projects and billions of debt without airline approval".
In the court filing, the plaintiffs state: "If the City proceeds as threatened without airline approval, there will be no way to 'unring' the bell. The projects will move forward at exorbitant expense financed by unauthorised bond offerings."
The first phase of the project included construction of two runways and the extension of an existing runway, at an estimated cost of $3.2 billion, $2.5 billion of which is secured through airline commitments to the project. But the project, still uncompleted, is mired in ongoing litigation between the city and family members whose relatives are buried at a cemetery that must be relocated to accommodate construction of a new middle runway. Phase 2 is estimated to cost $3.36 billion.
The city continues to more forward to secure funding for the project and believes it has the right to do so.
"The OMP is creating jobs and stimulating the region's economy at a time when it is critically needed," the City of Chicago said in an issued statement today. "We remain willing to discuss modernising O'Hare with the airlines that serve the airport; however timing is essential."
The city declined further comment because of the litigation.
On 14 January, American and United sent a joint letter to Chicago Mayor Richard Daley warning they would "seek litigation" if the city moved forward to issue bonds for the project, saying it would make O'Hare one of the highest-cost airports in the country.
"It would burden us and our customers with costs we simply cannot afford to pay for a project we do not need and will not need for many years," say American President Thomas Horton and United executive vice president and COO Pete McDonald. "Moreover, these cost increases would inherently restrict our ability to grow and expand air service into and out of Chicago."
Over the past three years, the two carriers have been responsible for 80% of customers at O'Hare. In 2009, the two carriers jointly paid more than $248 million in landing charges, terminal use fees and fuel costs for their domestic terminals at O'Hare. In addition, they paid $49 million in fees for the use of O'Hare's international terminal. United employs 17,000, while American employs 9,700 to support O'Hare operations.
Source: Air Transport Intelligence news
